Data Center Build vs. Data Center Buy: How to Decide

Eventually, whether it is space, power, cooling, or hardware that needs to be refreshed, enterprise data centers reach capacity. And because not every workload is suited to the cloud, IT managers must decide whether to lease data center space in a colocation facility or build out a new data center in-house.

The ROI, risk, and core competencies must be judged by each individual organization. Here are some considerations when deciding whether to build or buy your new data center.

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Primary Expenses of Colocation vs. Building a Data Center*


  Colocation Build
Initial Costs Setup and racking fees vary by provider Planning, design, and commissioning can be up to 25% of total cost
Building Shell Included in rent $200 per square foot
Building Permits and Taxes Included in rent Varies
Security & Fire Suppression Included in rent $100,000 or more depending on size
Data Center Equipment Included in rent $7,000 - $20,000 per kW
Power Local commercial rate plus multiplier; or flat rate of $15 - $50 per amp per month 70% - 80% of operational expenses—the average commercial rate in the USA is $0.112 per kWh
Staff Green House Data includes several hours per month; providers charge $100-$250 per hour Varies but salaries range from $35,000 for security personnel to $65,000 and up for technical employees
Annual Maintenance Included in rent 3% - 5% of total construction cost annually

*Sources: Forrester Research and Gartner Inc.

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Evaluating a Data Center Build

empty data center spaceBefore building or colocating, you’ll need to evaluate your current and future infrastructure requirements.  If they are variable, cloud could be an attractive option. If you foresee the need for a fixed or steady growth, or must own your hardware for other reasons, a data center build or lease is worthwhile. 

The main benefit of owning a data center is control. This includes the access, maintenance, and future improvements. That can also be a drawback—hardware refreshes are required every 3-5 years. Data center operation may not be a primary competency of your IT department, requiring additional staff or at least additional OpEx. In addition, to satisfy auditors, you may also require an additional facility for disaster recovery.

Building a data center requires significant upfront investment, but depending on the size and Tier rating it could have an ROI of 5 years or less. Gartner recommends leasing colocation space for Tier 2 or 3 deployments if leasing costs are $1,500 or less per month. Consider the upfront costs of building a data center:

Even beyond raw costs, you'll need to think about the daily operation of a highly-available data center. Does your team have the experience and qualifications to keep infrastructure available 99% or more of the year? Is someone available at all hours to tackle emergencies? What about maintaining and updating the facility and equipment? Maintenance costs can add up to as much as 5% of your initial building expenses annually.

Colocation Advantages

the advantages of colocationEven if you decide building a data center will return your investment in an acceptable time frame, colocation can still be advantageous. A company dedicated to data center design and operation can arguably run your IT equipment more efficiently (at a lower PUE) and in a more controlled environment, extending hardware life.

Remote hands services (a portion of which are included in every Green House Data colocation contract) allow you to accomplish mundane tasks like racking servers or rebooting without using the time of your IT team. With dedicated NOC staffing and the latest monitoring tools and software, threats and maintenance are all handled as part of the contract. 

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