2011 EXECUTIVE REPORT

The Data Center Build-or-Buy Decision: 6 Key Factors You Should Consider

The Data Center Build-or-Buy Decision: 6 Key Factors You Should Consider
Executive Summary
Even through challenging economic times, the need for physical data center capacity continues to grow. For some businesses, the driver is expansion into new markets or geographies. For others, it s the need to deal with growing amounts of data generated by applications with high-capacity demands, evolving end-user abilities, or regulatory bodies that demand ever-increasing quantities of meticulous documentation. If your data center is running out of space constraint or power, which is increasingly an important

you have two options. You can build and operate a new facility, or you can lease the

capacity you need from one of a growing number of colocation providers who can solve your problem immediately. Colocation, often referred to as colo, differs from traditional hosting, where the hosting company provides the hardware and some or all of the software required to run your applications. In a colocation arrangement, you own all the hardware, and you typically provide the technicians to support it as well. What you don t have to worry about is floor space, cooling, power (and its distribution), cabling, fire suppression and physical security. The build-or-buy decision between construction and colocation should be weighed carefully, as the choice will affect your company and your bottom line quite literally for decades. This paper will review six key factors that affect that choice, some of which extend beyond a basic TCO analysis.

1. Strategic Considerations: Do you really want to get into the construction business?
Before beginning a formal total cost of ownership (TCO) analysis, you need to make the more fundamental decision of whether or not you want to take on the responsibility of building a data center from the ground up. Given the cost more on this subject below a new data center is Page 2

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going to be at the top of your priority list, which means that other priorities may not receive the attention they deserve. If you decide to move ahead, your first concern will be location, and it s unlikely that the best choice will be in close proximity to your existing facility. In most cases, the optimal location for a new data center is an area where the cost of electricity is low. A second consideration is the cost of land and construction. A third is the availability of a labor pool for staffing the data center once it has been built. Balancing these factors isn t always easy. The same is

true of design and construction. You re not personally going to configure AutoCad to lay out the data center or visit the site on a daily basis to supervise its construction, but you ll be involved constantly. And once construction is complete, you will be required to keep the lights on for years to come. Use of capital is a second strategic consideration. By building a data center, you are choosing to fund infrastructure at the expense of other initiatives that may reduce costs or deliver competitive advantage, a decision that shouldn t be taken lightly.
Cost of electricity is just one of several factors that must be weighed prior to choosing the site for a new data center. (Source: http://sites.nppd.com/images/imageprojects/power1.asp

2. Timing: Do you need capacity yesterday?

Building a data center from the ground up is a complicated process with a time frame of eight to twelve months at minimum, often extending beyond two years. With the colocation option, you can typically be up and running in a few weeks. For this reason, colocation offers a big advantage

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if your need for capacity is urgent. The importance of getting up and running in a hurry will be determined by business drivers. For example, if the need for more capacity is driven by slow but steady business growth, you may be comfortable with a time frame of a year or more. On the other hand, if it s driven by rapid expansion or the acquisition of a new business, you will need to act quickly. In fact, the costs of delay can be calculated. Lost sales or penalties for non-compliance with a myriad of regulations can be tremendously expensive. Calculating these costs with your sales and compliance teams aids the decision-making process and helps build the business case.

3. How much is too much?

One of the big problems in building a data center is determining the appropriate capacity. In many cases, the amount of white space needed is determined by a careful analysis of your current environment. However this is often a poor indicator of what your footprint will resemble in a new facility, as your space and hardware requirements may evolve in unpredictable ways. Relocating your data center environment presents opportunities to reduce your current footprint by completing a technology refresh, consolidating equipment in your racks, or expanding your environment vertically instead of over more floor space. To ensure flexibility moving forward, users will often elect to reserve right of first refusal space adjacent to their data center cage or data hall. This allows them to grow contiguously, retaining control over a seamless footprint.

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4. Have you brushed up on your fluid dynamics?

The design of a modern data center can be extremely challenging, in part due to the complex cooling requirements, which often reach beyond traditional hot and cold aisles. In low density environments, a shared cooling approach can be taken, where under-utilized cooling resources can be diverted to handle hot spots. In high density environments, a zoning approach is preferred, where high density servers are segregated and cooled separately using dedicated equipment. Either approach typically involves computerized modeling of the fluid dynamics to determine optimal placement of infrastructure across the data center floor.

5. Environmental Issues
As such large consumers of electricity, data centers are often the target of environmental scrutiny. But because they are widely acknowledged as the backbone of our now digital economy, even environmental activist groups have come to understand their necessity and have focused their efforts on efficiency. The most efficient data centers are often the newest, most technologically advanced, which can require a significant upfront capital outlay. Utilizing colocation allows you to operate within a very efficient data center while reallocating that otherwise used capital towards your core business drivers.

6. Where will you get the money?

All the decisions already outlined related to location, capacity, and design will be reflected in the total cost of construction (and therefore the TCO), but the decision to build or lease may ultimately hinge on more complex financial issues, as the build choice will be a capital expenditure (CAPEX) while leasing will be an operating expense (OPEX). It is beyond the scope of this paper to discuss all the implications of CAPEX vs. OPEX funding, which include interest costs, depreciation, the impact of inflation over time and more. What s important to bear in mind is that the CAPEX approach involves different interpretations and often debate. It s a board-level decision that typically involves intense preparation. In many cases, it s Page 5

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politically much simpler to take the OPEX route and lease. An OPEX choice has two other financial advantages: The up-front costs are very low, and you avoid any commitment to long-term operating costs.

Colocation is a must-consider option

For all the reasons cited in this paper, colocation is gaining favor as an option. According to a Frost & Sullivan survey conducted in 2010, enterprises will increase data center floor space 15 percent per year through 2013, but the percentage of that space they actually own will decrease 6 percent. In other words, a large number of companies are utilizing colocation platforms. Whether you choose to go colo will depend on your unique requirements and concerns. But without question, colocation should be one of the options you explore.

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CyrusOne
CyrusOne specializes in enterprise data center colocation, offering the highest power redundancy (2N architecture) and highest power-density infrastructure, supporting 250+ watts per square foot across the entire data center floor. Headquartered in Houston, Texas and with 18 facilities across the United States and London, CyrusOne is renowned for exemplary customer service. The company s customers include 15 of the Top Global 100 Companies, five of the top 10. CyrusOne is a wholly owned subsidiary of Cincinnati Bell (NYSE: CBB). For more information, visit www.cyrusone.com.

Mike Stevens - author

Mike Stevens began his career as technical writer in semiconductor manufacturing, and then switched to marketing. At his own Silicon Valley-based agency, he worked with an impressive list of clients, including HP, EMC, Amazon.com, Microsoft and Oracle. His primary focus for the last seven years has been enterprise software. He is also the author of Fortuna, a high tech thriller published by Oceanview Press and available on amazon.com.

IT Business Edge
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