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How to Determine the Data Center Cost for Your Enterprise Customers

October 26, 2017

How to Determine the Data Center Cost for Your Enterprise Customers

When 451 Research surveyed data center operators, 87% reported spending would stay steady or increase. More than a third are increasing spending due to retrofit and upgrade projects. Eighteen percent expect to build a data center in the next two years, although most would prefer to consolidate versus building a new data center.

The surveyed organizations name reliability, performance, and security as their top considerations, but that doesn't mean cost isn't important to them.

Good data-center cost estimates are key to helping companies understand the total cost of ownership and the return on their investment. They can also help companies make the decision between building their own facility or relying on a cloud provider.

Construction Costs

If a new data center is being built, construction costs are significant. The costs need to include land surrounding the building to accommodate infrastructure, parking, and security. The costs of obtaining building permits and architectural designs should be included. These costs, as well as labor costs, are sensitive to the geographic location. You can find estimated regional data center construction costs here.

For data centers, square footage is not the most important factor; building space is not the same as usable white space and rack space. Estimated space requirements should account for increased use of virtualization and high-density servers consolidating more capacity into less space. Another design decision with a significant impact on costs is the specified data center tier. Higher tiers require independent, redundant power and cooling systems.

Total Cost of Ownership

The total cost of ownership includes capital and operating expenses. The costs need to be amortized properly to get the correct annual expenditure; for servers, this is usually a three- to five-year lifetime, versus the data center's 10- to 20-year depreciation period.

Data center costs include costs of facilities, power, cooling, servers, network, software, and personnel. A complication in estimating data center costs is that the systems that contribute costs to data centers are not independent; for example, better power density means more equipment can be placed in a rack, reducing the needed white space and rack space. For estimating, choose a target power density level and let that drive the rest of the calculations.

  • Facilities costs include the depreciation and ongoing maintenance expenditures. Security and safety, such as fire control systems, also need to be accounted for here.
  • Energy costs account for building power, energy utilized by cooling systems, and energy used by servers. Server energy usage can be estimated on a per-rack basis.
  • Network costs count all intra-data-center network equipment, including switches and cables.
  • Server and storage costs include the amortized purchase price plus annual maintenance charges.
  • Software costs include the licenses for all software needed to run and manage the data center, but not the costs of end-user applications. Annual maintenance and upgrade fees should be included.
  • Personnel costs include the 24/7 staff at the data center. It isn't just the technical team, but also building security staff.

Buy or Rent?

Many customers will want to compare the cost of building their own data center to the cost of colocation or cloud servers. Estimating these expenses is easier, as colocation sites and cloud providers can provide a clear statement of charges based solely on estimates of memory and storage required.

The results of the cost comparison may be surprising. Some larger customers experience economies of scale by owning their own facility. Smaller customers may not have enough equipment and dedicated staff to see benefits from cloud computing.

Weighing Cost and Other Factors

Businesses shouldn't make the buy-or-rent decision solely on a cost comparison, though. Even if there are cost savings, there are other implications that companies should consider.

Using cloud computing means companies give up control over not just their equipment, but also their data. Companies need to make sure that a colocation or cloud provider can provide the level of security that their information needs. Not all cloud providers can achieve the compliance certifications needed for handling sensitive financial or medical information.

Another factor is the flexibility of the cloud provider’s offering. While clouds have great flexibility as far as adding capacity quickly, the configuration choices they offer may not meet the customer’s needs; cloud architectures are meant for general-purpose computing, while customers can have special requirements. Companies with concerns about their future options may find that investing in a data center today will position them better for growth tomorrow.