Is outsourcing the new norm in the land of data centers?

As the world becomes more and more global, organizations are constantly working to improve their performance while their budgets keep being cut. What should they invest in, and where should they make cuts, to ensure they can still grow? Following recent scandals involving the NSA, data security and privacy are now higher on the agenda than ever before. Should organizations invest in their own server rooms or data centers, or are they better off using an external data center?

Generally speaking, organizations that handle matters in-house have to contend with higher setup costs and make greater investments, but they expect to have lower operating costs in subsequent years. Given the ever-growing threats to security and privacy, organizations need to take every precaution to protect their data, and so there should be no economizing when it comes to data centers. But with money being tight, funding difficult to obtain, and the economy in poor shape, the setup costs present a challenge for many organizations. And that’s not all.

Our extensive research into the cost of in-house and external data centers and server rooms shows that for larger organizations the operating costs of an in-house data center are as high as those of an external data center. For smaller organizations, with only 7-8 racks, operating costs are somewhat lower if they have an in-house data center than if they have an external partner. Given that the investment they make lasts for about 10 years, this means there is a large question mark. It is also important to remember that, in addition to a quality server room or data center, there also needs to be a disaster fall-back solution, in other words a second server room or data center, in order to be really safe.

We presented our research to some larger companies, which confirmed the numbers. They felt the numbers might even have underestimated the true situation: the operating expenses of an in-house data center are probably higher than those associated with an external partner, rather than being comparable, given the lack of economies of scale. Moreover, one IT manager of a listed company admitted that in these difficult economic times he had trouble convincing his CEO of the need for certain investments in their in-house data center. He felt that data protection at their organization was not up to scratch. A quality external data center has data protection and privacy as its core business, and so I can imagine that outsourcing reduces stress levels for some IT managers, because they know for sure that their data is secure and will remain so, no matter what new threats appear on the horizon. Plus there is, as always, the issue of politics, when it comes to insourcing or outsourcing.

This is all food for thought. I wish all IT managers peaceful days and restful nights. Do you want to double-check our numbers for yourself? If so, contact me at laurens.van.reijen@lcl.be.