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Which Data Processing Center Is Right for Your Customer?

September 30, 2017

Which Data Processing Center Is Right for Your Customer?

Companies deciding where to house their data centers today have three alternatives: in-house, colocation, or cloud. The trends show companies moving away from in-house data centers; the number of internal data centers is expected to decline beginning in 2017, even as the world's total data-center space continues to increase.

Investing in a data center is expensive, which is one reason for that downward trend, but deciding which data processing center is right requires reviewing the alternatives from multiple perspectives. An analysis of costs alone may point to an option that isn't appropriate when other considerations are taken into account.

In-House, Colocation, and Cloud Alternatives

With an in-house data center, the company owns the physical facilities and the computing infrastructure. The business is responsible for all aspects of operations, including connectivity, power, and support. Colocation takes advantage of established racks, power, and connectivity, but the company provides its own servers and support. In a cloud deployment, the company accesses applications via Internet-connected servers owned by a cloud provider. The servers may be dedicated to the company or shared with multiple businesses.

Decision Factors

When your customers need help deciding which data processing center is right for them, help them think through these factors.


Maintaining an in-house data center requires leasing adequate space, though defining "adequate" is challenging; as equipment continues to shrink in size, data centers become physically larger than necessary over time.

In-house data centers also require companies to have their own operations and support staff. Owned equipment requires capital expenditures that experience depreciation. An in-house data center can have unpredictable costs due to hardware and other problems that occur.

When a colocation facility or cloud environment is used, facility costs, including power, environmental controls, and connectivity, are fixed as per contract. Cloud environments also eliminate costs related to hardware upgrades and replacements. Depreciation isn't relevant, and the full amount of the data-center expenses may be tax-deductible.

Time to Set Up

Building an in-house data center from scratch can take a year or longer. Colocation lets environments be set up much more quickly. Cloud environments can be spun up almost immediately.


Companies that build their own data centers have complete control over the facility, its environment, and operations. Companies give up some of that control with colocated and cloud environments.


Companies that build their own data centers need to provide their own network connectivity. They may need to build fiber to their location and will have to pay the network provider. With colocation, the colocation vendor ensures the network connectivity at the site. Some sites require using a specified carrier while others offer multiple providers. Using the cloud means connectivity will be via the Internet. It's important to determine the bandwidth needed and ensure your network will provide the necessary capacity.


Both information security and data security of the environments need to be considered. While there is great emphasis on cybersecurity measures such as firewalls, physical security of the premises is also necessary. Colocation and cloud providers may provide more physical security than a data center that's located in an office building. However, the shared facilities that come with colocation and cloud may increase the risk of data being exposed. Industries such as health and finance need to ensure that colocated or cloud data centers satisfy all legal and compliance requirements. For some businesses in industries with specific requirements, using a colocation data center with compliant environments will be easier than creating an internally compliant environment.

Expertise Required

Running a data center requires a high level of expertise, from both facilities and technology staff; training is a constant need. Letting vendors that have expertise in data-center operations lets companies focus on their core competencies and obtain more value from their technology.

On the other hand, for businesses that use highly specialized technology, colocation and cloud providers may not be able to provide the necessary configurations or manage the environment adequately.


Colocation and cloud environments provide businesses with greater flexibility. Capacity can be added quickly; some cloud providers can literally spin up environments within minutes. Businesses can add and remove capacity as needed, allowing them to adjust to seasonal variations in processing demands. In-house data centers must be built to support the maximum processing and storage required and usually are unable to rapidly adapt to changes.


Companies with in-house data centers need to make their own provisions for backup power. Redundant network connections are also needed to prevent a single point of failure. Colocation and cloud providers are built to accommodate many customers so these requirements are addressed. In addition, colocation and cloud providers can often provide data-center services in multiple locations, providing disaster recovery capability.

Crunch the Numbers

To help your customer decide which data processing center is right for them, consider building a spreadsheet that takes all the factors into consideration. Two engineers at Google built a spreadsheet that can help with the calculations, but it's important to start by considering the customer's needs before reviewing the numbers. A data center is a long-term commitment, and the impact of switching is significant. By considering all factors, companies can make the decision that works best for them.