Leasing data centre services from a colocation provider immediately provides organisations with a predictable operational expenditure based model, which helps with financial planning and budgeting processes, writes BEN UZOR.
The contemporary CEO typically has to answer challenging questions, such as the “build versus buy” decision, among others, when addressing various operational requirements, especially with regards to increasing business requirements for IT infrastructure. At what point is the trade-off between building a data centre and outsourcing the data center to a third party provider? What is required to build and manage a facility that is typically not a core competency for most companies? In essence, when does it make sense to build your own data centre and when does it make sense to outsource it?
From a high-level perspective, building a data center provides an organisation with total control over its facility, operations and manpower.
Buying or leasing space from a shared data center can on the other hand provide an attractive business model that focuses costs on operational expenditures only and gives them the flexibility to scale operations at their own pace. Since either approach has its own benefits, businesses need to make more informed decisions regarding the decision to build or buy data centre services by putting into perspective the total cost of data centre ownership and the variables that impact this cost. Building a data center provides organizations with total control over every aspect of their operating environment ranging from operational policies to maintenance activities and the absence of a subscribed rental or lease agreement. One major advantage of this is the freedom to build out space for various functions as needs arise by either retrofitting or embarking on an expansion to fit perceived needs.
Even low-end, non-Tiered data centres will require both an immediate capital outlay and recurring operations costs. The construction project itself requires months or years of planning and execution, and organisations must take into consideration the full CAPEX required for building costs. The cost of land and its associated expenses such as environmental impact assessments, building permits and government approvals are a significant investment required to kick start a data center build out. Furthermore, professional fees will be incurred to engage design, architectural, structural and project management services on site. These costs are usually 20-25 percent of total construction cost and determine the level of quality of the finished facility.
The facility needs to be fitted with specialized electrical, mechanical and building management systems that are basic requirements for the operation of a data centre. Installations comprise of closed circuit television cameras, electronic access control, fire suppression and detection, precision cooling, and specialised water and fuel supply systems. These systems also require sufficient redundancy to ensure that services are not disrupted during operation and all critical equipment in the data centre have effective backup. The power to support all of the installed systems accounts for 70-80 percent of the operating expenditure required to run the data centre. Typical power to the facility will be via high capacity diesel generators with inverter systems, UPS installations and battery arrays to provide backup power in the event of failure from the primary source. In addition, an investment needs to be made towards network connectivity for the facility.
The preferred mode of connectivity will be via fiber with redundant routes to the facility by a good number of network providers to ensure that the organisation can fulfill its diverse connectivity requirements. To support all of these installations, the organisation has to incur additional operating expenditures for staffing, spare parts, training, insurance, diesel costs, facility and infrastructure maintenance. There is a risk associated with not building out enough capacity and facing expensive retrofits to expand, or overbuilding the data centre and being faced with inefficiency issues arising from running an almost empty facility for the Day 0 requirements. Unlike building a data centre, buying or leasing data center services from a colocation provider immediately provides organisation with a predictable operational expenditure based model which helps with financial planning and budgeting processes.
The need and risk involved in spending a large upfront amount of CAPEX during construction is eliminated in favor of operational expenditures spread over a number of years. Buying also gives businesses the ability to add capacity quickly and only when needed without significant financial implications, which is much faster than retrofitting or embarking on an expansion for an internally owned data centre. This also highlights the fact that outsourcing data center services provides better access to power and space managed by professionals who have data center operations management as their core competence. In its 2014 Data Centre Industry Survey, The Uptime Institute, the global authority of data centers, estimates of 20 percent of servers in data centers are obsolete, outdated, or unused.
Yet, these servers generate huge power and cooling costs! Businesses can also leverage on network cross connection opportunities available in a shared data center environment. These opportunities include connecting to other network providers, application hosting platforms, financial trading platforms and co-tenants in the same business sector. This provide collocated organizations with the ability to enhance performance and achieve business goals which might have been impossible or capital intensive due to distance limitations. Typical costs for buying data centre services are non-recurring costs for equipment setup and monthly recurring costs covering allocated space and metered power.
Value added services such as cross connects, office space and remote hands services are usually paid for per use or determined at a pre-negotiated price point. As Nigerian businesses expand their participation in the global digital and online economy, in areas such as electronic banking, electronic commerce, online content distribution, e-learning and online testing, investment in ICT platforms will need to grow, and cost control while acquiring access to new technologies will be a major concern for many CEOs, not only now, but for the future. Company IT infrastructure will need to be reliable and effectively networked to handle complex transactions and at the same time have the scalability to meet demand effortlessly as more consumers transact or obtain services online.
To meet this growing need in Nigeria, MainOne, a leading connectivity solutions company recently launched its MDX-i Lekki Data Centre, an 18 month project costing N7 billion. Apart from being the premier Tier III certified Data Centre in West Africa, it is the most connected Data Centre facility in the region, with access to fibre connectivity from all the major ISPs and Telcos in the region. By providing data center services to the open market, MDX-i has reduced the entry barrier for businesses and government agencies seeking to scale up their ICT operations, as well as technology startups and SME’s. By having the option to subscribe to such services locally, these companies can focus on their core businesses, improve productivity and focus on their business imperatives.
BEN UZOR
