June 2014

In-house data centre versus data outsourcing: a financial brainteaser


Where do you store your data? In your own server room or data centre? If so, it might be a good idea to make a financial comparison with an external commercial data centre, such as LCL. And find out which option could save you money. In-house data centre versus data outsourcing: a financial comparison.
Companies who outsource the storage and management of their data to an external data centre can save themselves a lot of time... and money. This was the conclusion of Laurens van Reijen, LCL's Managing Director, following a financial comparison between internal and external data centres. 

LCL calculated the initial investment costs (infrastructure, equipment, etc.) and the additional costs (maintenance, upgrades, etc.) over a 10-year period for a professional in-house 100 m² data centre with a maximum capacity of 33 racks. They then compared this figure with the cost of external data management for 100 m² in a commercial data centre such as LCL over the same period.
"The numbers speak for themselves", van Reijen says. "A company that organises its own data management ends up paying more than a company that outsources its data to a commercial data centre. Taking the above criteria into account, the total cost for in-house data management over 10 years would be around €3.5 million, as opposed to €2.5 million in case of outsourcing. Apart from the initial investment of course, there is also a difference in operating costs. The outsourcing of data in this example would therefore be no less than 30% cheaper."

Even companies with a small server room of 45 m² for 7 or 8 racks pay more when they handle their own data management instead of outsourcing it to a commercial data centre. "Although the financial difference between the two solutions is much smaller in this case", says van Reijen. "The initial investment for a server room is much higher, but the operating costs are lower. Over a period of 10 years, a small in-house server room of this size would cost around €570,000, while data storage at a commercial data centre would amount to about €514,000. But that is still a saving of almost 12%."

Pros and cons of outsourcing
Data outsourcing is not only cheaper, it also allows companies to focus more on their core business. "The benefits should not be underestimated", according to van Reijen. "You don't have to hire specialists to run your data centre. In external data centres your data is protected by several layers of security. And an external data centre offers more flexibility in terms of growth in size and available capacity. In addition, connectivity and redundancy (extra data backup at a second data centre in a different location) are guaranteed."

Nonetheless, there are also arguments for the installation of an in-house data centre or server room. "Some companies have specific IT equipment that cannot be easily outsourced. In other cases, the data is so confidential that it has to stay within the company walls. So there are arguments for both options. But if you look at it purely in financial terms, it's an easy decision to make,", van Reijen concludes.

Trends in data management
"Commercial data centres will continue to grow", Laurens van Reijen predicts. "More and more major companies are choosing to outsource their data or to store it in hybrid clouds. These companies often have two data centers on the same site, which naturally means that the accessibility and security of the data is not totally guaranteed, for example in the case of a fire or a network outage. The solution for this is to set up a second data centre at a different location. Small and medium-sized businesses tend to keep their own data centres, but many are switching to a combination of cloud solutions and data management outsourcing." "

Would you like a financial comparison for your own situation, and find out how much you could save on your data management costs? Call us on 02 709 70 20 or e-mail us at infor@lcl.be

 

LCL, your partner in data center outsourcing