Build or Lease: Eight Key Considerations for Data Centers

Steve Smith is Senior VP of Sales and Marketing for CoreSite.

Outsourcing data requirements to a third party for the first time can be nerve-racking. Endless requirements paired with an increased expectation for data performance puts IT in the hot seat. Below is a list of key considerations when deciding whether to build vs. buy, along with some guidance on how to address each.

Control

Control is the most common factor driving organizations to a “build” decision. Enterprises have an intimate familiarity with their unique data requirements and want to retain control of operations, economics, location and design. The right provider, however, should be able to address each of these concerns individually to provide a holistic solution, as well as provide secure access to equipment for approved staff members. Treat your data center decision as an interview process. Come with a list of your top priorities and make sure the provider in question has an answer that sits well with you and meets all of your requirements.

Scalability

Server workloads continue to spike, which has seriously impacted IT operations. A 35 percent data growth rate per year is not uncommon, and this sort of spike requires an organization to double on-premises storage over a three-year period. It is nearly impossible to forecast data center needs over a five- to ten-year period. This leads to over-builds that result in wasted capital across infrastructure, power, and staffing costs. Leasing is often an attractive solution because it allows organizations to grow into a solution without extensive upfront costs. Talk about the future with your potential provider - project your data growth over the longevity of the contract, and make sure the data center you choose is able provide the scale and flexibility required by your business model.

Financing

CAPex budgets continue to tighten, and in a period of illiquidity, outsourcing provides implicit financing. It's a simple concept, but one that shouldn't be overlooked. Off-balance sheet financing may be very attractive for your company. Consider bringing up the discussion to shift CAPex to OPex with your finance group. Look at long-term costs of leasing versus the upfront cost of building as well as ongoing power costs. Build a financial case for both building and leasing to see what makes most economic sense.

Economies of Scale

For requirements less than 6 megawatts of critical load, the economies of scale that colocation and wholesale data centers can leverage for your company are significant. Not only do organizations share in the largely fixed costs of security and management, but they also save money through shared infrastructure and on-going utility and maintenance costs.

Expertise

Most organizations don't have the experience or the resources to have a staff of dedicated data center professionals available 24/7/365. An in-house data center often becomes a burden to IT staff tasked with other core business functions in their job descriptions. If you do decide to build, ensure you have a staff dedicated to preventing outages and protecting critical data.

Time to Market

While data migration may sound overwhelming, it is almost always a faster solution than a dedicated build. Deadlines under 12 months will rarely be met if an organization must build a solution in-house. Leasing allows data to move into a ready environment. Even if the full migration needs to happen gradually, the initial expansion requirements can be addressed in near real time.

End-of-Life Responsibility

Dealing with the capital and management of upgrading an in-house data center is costly to resources and staff. Leasing data center space not only prevents this, it can also mitigate your financial risk if your business downsizes. If you have an overbuilt data center at your headquarters, the alternative uses are somewhat nonexistent. Your opportunity to unload unwanted space in an outsourced environment is real.

Ecosystem and Location

A healthy network and cloud ecosystem within a data center can offer significant savings for two reasons. The first is that access to multiple service providers creates a healthy marketplace with more competitive pricing than you may be able to access in a self-built data center. Additionally, interconnection services within the building are a cost-effective, high-performance alternative to connecting to those providers over the public internet.

Summary

Outsourcing data requirements to a third party for the first time can be nerve-racking. Endless requirements paired with an increased expectation for data performance puts IT in the hot seat. Make sure to evaluate the solution from all angles before moving to a decision.

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