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Why not build your own data center?

Often IT professionals responsible for rapidly expanding businesses and organizations find themselves facing the question of "to build or to lease." And, there are advantages and disadvantages to both.

There are three factors that determine the economics of data center facilities. And, according to Forrester, "it's imperative that I & O professionals objectively evaluate the financial impact on business when considering leasing versus building a data center."

  1. Benefits. How will the your company benefit from leasing versus owning a data center?
  2. Costs. How will your company pay for your data center (hard and soft costs as well as resources.)
  3. Risks. How do uncertainties change the total impact of a data center on your business?

Benefits of Leasing Space

For most organizations, the benefits of leasing are greater than the benefits of building a data center. There are very few upfront costs with most expenditure being operational.

  • A more predictable and operational expenditure model.
  • Additional capacity can be brought on rapidly, inexpensively, and as needed.
  • Better access to space and power through the provider's purchasing power.
  • Those experienced in data center operations have ore expertise to run the facility.

Benefits of Building Your Own Data Center

While it does require a great deal of risk and an enormous about of expertise and capital, there are advantages to building your own data center.

  • Complete control over the operating environment of your facility.
  • Low risk of losing your lease or being forced to leave the facility.
  • Ability to leverage the construction to build out additional office space for IT professionals.

What are the costs of building your own?

For those who are set on building your own facility, according to Forrester, here are a few of the major cost categories:

  • Upfront planning, design and commissioning. These cots account for a significant portion of the upfront costs of building a data center, expect 20 to 25% of the total upfront construction cost.
  • Base building, shell and property. Forrester estimates that the cost of building the data center shell, including the physical security is $200 per square foot. (Note: Property cots are greatly variable by region.)
  • Fire suppression and detection. The complex and specialized fire suppression systems cost between $20,000 and $60,000 for a several thousand square foot data center.
  • Building permits and taxes. While the costs will vary significantly across the U.S., Forrester estimates $70 per square foot in building permits and local taxes.
  • Data Center Infrastructure. The bulk of the cost is in the purchase and installation of mechanical equipment (computer room air conditioning units, refrigerant loops, condenser plant or chiller, etc.) and electrical equipment (power distribution costs, transformers, patch panels, UPSes, auto transfer switches, generators. Depending upon your desired level of resiliency, the cost for the mechanical and electrical can range from $7K to $20K per kW of IT load.
  • Network connection cost. Forrester estimates the fibre cost to be around $10,000 per mile upfront.
  • Power. The greatest expense of a data center is power, which accounts for 70% to 80% of the overall cost of running a data center facility. Again, highly variable, Forrester estimates the average industrial power rate of $00677 per kWh in the United States.
  • Data center staffing. After power, 24x7x365 staffing of a data center is the largest expense and will cost in the hundreds of thousands of dollars per year.
  • Annual facility and infrastructure maintenance. On average, Forrester suggests companies should expect a base cost of 3% to 5% of the initial construction cost.

Source: Build or Buy" The Economics of Data Center Facilities by Rachel A. Dines. June 27, 2011. Updated July 29, 2011.