Many factors come into play when comparing the price of an in-house IT infrastructure with that of an external data center. Certain cost contingencies are regularly overlooked. If you consider all possible costs, would it be less expensive to set up your own data center or to outsource this activity altogether? In other words: should you build or buy?
The costs and benefits of internal versus external data infrastructure go far beyond the tangible costs and benefits. Considerations such as risk management, retaining control over data, particularly when it is privacy sensitive, connectivity, necessary investments, and in-house expertise all play a part in the decision-making process. Ultimately, the price tag is often the deciding factor. So which cost items should you take into account to fully capture the financial outsourcing picture?
The full picture
If, for whatever reason, you decide to store your data in-house – maybe you have specific requirements that make it hard to place an IT infrastructure off-premise ‒ you will have to make substantial initial investments. Costs of construction, permits, physical infrastructure, cooling, ventilation, and physical security can run high. On top of that, there are property costs, including costs associated with land and building leases, facility and site management as well as property taxes.
Building a data center is one thing, maintaining it another. The latter is a recurring cost item with exact expenses that are hard to budget for. Of course, structural costs of energy usage and connectivity are easy to predict. Even the fees for replacing or updating outdated technology for security and quality reasons can be calculated relatively easily. However, overhead expenses related to the data center, such as administrative and certification costs, utilities, insurance, rent and taxes, personnel are often underestimated.
Furthermore, the maintenance of a data center will also create some unforeseen costs. Suppose your generator breaks down. This could easily set you back over a hundred thousand euros, depending on the capacity. In the long run, extra investments are needed to operate in line with the EU Green Initiative and its goal of moving towards a climate-neutral economy by 2030. For example, diesel generators will no longer be allowed, meaning you have to find alternative energy resources, such as solar, wind or CPA, which all have their related cost. Data center providers are on top of these developments and commit considerable resources to R&D to ensure that their facilities are as efficient and up-to-date as possible.
And what about connectivity? This is perhaps the most critical point of all because when your premises are not in range of several connectivity points, you risk your business continuity. And this could cost you dearly. In a commercial data center this would not be a problem since you have the advantage that you can ‘shop’ between a broad selection of operators.
Doing the maths
Taking the above factors and expenses into account, LCL has calculated the costs over ten years for an in-house data center measuring 50 m². with a maximum capacity of 20 racks. Comparing this result to a commercial data center’s price tag for the same period and area, the answer to the question ‘build or buy?’ becomes a no-brainer.
The total ten-year cost for in-house management amounts to approximately 4.2 million euros as opposed to 2.4 million euros in the case of data outsourcing. That is an extra 1,8 million you could be investing in your company’s business. Even companies with a small server room of 35 m² for 14 racks pay more than they would if they outsourced their data storage, with a difference of about 40 per cent.
Commercial data centers also have to make large initial investments and technological update investments and face maintenance and overhead costs, but they have the advantage of economies of scale. They get better deals and can spread their costs and investments over a large customer base. That is why, in terms of the financial aspect, they almost always draw the longest straw. The scale at which you have to build a data center to ensure its economic viability has become increasingly more extensive over the years. That is why, nowadays, even for relatively large enterprises, it almost always makes sense financially to outsource data storage.
Calculate it yourself
Data outsourcing will not only save you money in the long run but present you many more options for connectivity, as well as a direct and safe connection to the public cloud. It will allow your business to focus on its core activities. And most importantly, it will give you peace of mind. Are you curious about whether you should build or buy your data center? Do the Quick Scan and find out.
If you decide to outsource your data, the next step is to compare providers and the uptimes, speeds, temperatures and prices they offer. At LCL, we find a fitting solution for all our clients. Initially, this solution may not always seem like the cheapest option, but you will reap the financial benefits in the long run ‒ benefits you can plough back into your company.