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Leasing vs. Building a Data Center

So your company is expanding and growing at a rapid rate, and the demand requires more space, power and cooling - what do you do? Build a new data center, or buy (lease, or outsource your IT needs to a different provider).

Research firm Forrester conducted interviews of IT professionals to analyze the economics of data centers and the classic build vs. buy conundrum that arises when it comes time to provision for additional capacity, IT infrastructure and operations.

Leasing a Data Center (Colocation)

What kind of advantages are associated with colocation that you don’t get with building a data center? Forrester reports that there are very few upfront costs, and most of the expenditure is operational, not capital.

  • More predictable expenditure model with costs that increase consistently over the life of the data center
  • Flexible - additional capacity can be scaled up as needed, no wasted extra capacity or build outs needed
  • More accessible to space and power through a provider’s purchasing power
  • Experienced and certified professionals lend their expertise of running a data center with high efficiency and high availability.

Building a Data Center

What kind of advantages are associated with building your own data center that you can’t get when you choose colocation? Mainly control:

  • Complete control over an operating environment, including access, temperature, etc.
  • Low risk of losing your lease
  • Ability to leverage and share existing space

What kind of upfront costs are associated with building your own data center?

The detailed and practical costs of building your own data center include a fair amount of capital and upfront costs. But there are other often overlooked costs that add up quickly:

  • Upfront planning, design and commissioning - ranging from 20-25 percent of total upfront construction cost.
  • Base building shell and property - only applicable if you’re not starting with an existing building. According to the Forrester report, the estimated cost of building the data center shell plus physical security $200 per square foot.
  • Fire suppression and detection - ranging from $20-60,000 to purchase agents, equipment and to install systems - including early smoke detection systems, FM-200, inert gas blends, etc.
  • Building permits and local taxes - while these costs vary from region to region, a moderate national estimate is $70 per square foot in building permits and taxes.
  • Data center infrastructure - includes purchasing and installing mechanical equipment and electrical equipment, ranging from $7-20,000 per kW of IT load.
  • Network connection cost - you’ll have to pay for fiber on-site, which could run you $10,000 per mile, varying by many other factors.
  • Power - this expense accounts for 70-80 percent of the total costs of running a data center, and is also highly variable by region.
  • Data center staffing - around-the-clock monitoring, on-site maintenance and equipment optimization requires a dedicated and responsive operations staff, and accounts as the second largest expense after power.
  • Annual facility and infrastructure maintenance - a more unpredictable cost of a data center ranging from 3-5 percent of the initial construction cost. Repairs and additions are expected around the third year of operation.

Find out more about Online Tech's newest Michigan data center, offering Michigan colocation and other IT services.

Source: Build or Buy? The Economics of Data Center Facilities

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