Build or buy Data Center Improvement

In-house data centers vs. colocation, managed services and cloud computing: five factors to consider. It’s time for a data center refresh…should you build or buy, invest or partner? Companies facing this complex decision generally have two options: continue with on premise operations or work with a partner to migrate to a colocation, managed services or cloud computing based operational model.

There are a myriad of factors to consider including business considerations, financial impacts, operational procedures, facilities and infrastructure impacts, resource issues, timing and conversion planning, testing and compliance. Of course, there is also a huge shift in mindset from do-it-yourself (DIY) to working with a partner.

Even with these challenges, the benefits and increased operational efficiencies companies can realize from using a colocation strategy or a full managed services approach are significant and noteworthy. There are a number of factors to consider when contemplating having a third party manage your data center.

Command and Control

It’s personal—one of the more difficult factors that come into play is the perception of loss of control. The incumbent operators always have the immutable thought of “What does this mean for me?” and “How can I maintain operational control with an off-site location?”

This is often a major obstacle when deciding whether a third party partner makes good business sense for such a critical business function. If there is not a clear migration plan that delineates roles and responsibilities before, during and after implementation, IT staff may find it difficult to recommend an off-premise option to their company executives.

Considering the fact that no two-business scenarios are ever the same, if a business has made the decision to reduce head count, they’ll do it one way or another. However, if an organization wants to refocus core resources on more value-add activities such as software development or process improvements, then the incumbent data center operators can take a more objective stance in analyzing what is in the long-term benefit for the business.

High-level Financial Considerations

It is important to review the primary financial business drivers that a company should consider when comparing on-premise hosting to third party services.

If you are looking at a data center refresh, or even building out a new in-house data center, it will take a high Capital Expenditure (CAPEX) investment. Purchasing new servers, switches, routers, storage, cabling, monitoring, power components, telecommunications components, HVAC (Heating, Ventilation and Air Conditioning) equipment, software and a myriad of other components can preclude the initiative altogether, or impose a financial strain on your business.

Using a third party provider for these systems and components eliminates your CAPEX investment, not only shifting the costs for your new data center to an operational expense (OPEX) category but also—usually—reducing your overall spend.

Additionally, in-house data centers incur depreciation and overhead expenses. Overhead expenses are directly related to the size and complexity of the data center for rent and repairs. The overhead for using a third party provider may include variable bandwidth costs, depending on the specific plan you select.

Once a business has decided to operate an on-premise data center, they are also typically locked into long-term commitments including hardware, vendors and maintenance contracts. This can restrict a business from leveraging new technologies (without additional CAPEX investments) and possibly limit their ability to address new market opportunities.

Human resource costs can also prove very high with the on-premise model, and are typically nominal using a third party provider, depending on the plan selected. When a business converts from an on-premise model to a third party model, the technical human resources may be redirected to work on more value-add activities like developing revenue-generating applications and providing enhanced support for business units.

Core Business Focus

Is the core competency of your business to efficiently and optimally operate a data center? If not, it makes business sense to partner with a third-party provider.

Does your in-house data center provide the level of services, capabilities and capacity that makes your department stand out within your organization? Has your in-house data center ever experienced a significant outage or extended downtime?

Although many organizations have a high level of IT system maturity, established business processes and an atmosphere of operational security, it remains important to keep an open mind and re-assess your business needs periodically.

Benefits and Advantages

Several of the key benefits and advantages of using a third party provider to run and manage your data center include:

  • lower capital investment
  •  leveraging skills and expertise of a dedicated professional IT network
  • greater flexibility in deployment options
  • more scalability in expanding computing resources newer systems, equipment and software
  • lower human resource costs

When a business’s core competency is owning and operating a data center, they have invested in the facilities, infrastructure, power, water, HVAC, network, systems, storage, firewalls, software, communications, fire protection, monitoring, management, security and associated redundancy and replacements for every system. It also means that the business has invested in training, certifications, compliance, and technical staff to maximize efficiency.

Another important factor to consider are service level agreements or SLAs. They are oftentimes discussed at great length and can be thoroughly defined within the contract so that your business will know exactly what to expect from a third party provider. Risk mitigation and management can also provide a significant advantage to utilizing a third party provider as companies that maintain an on premise facility do not always have the capability of moving their computing load to another facility or geographic location during a natural disaster.

Disaster Recovery – Disruptive Events

Events that disrupt normal business operations come in all shapes and sizes, and can happen to any on-premise or third party provider business.

However, there is one standout differentiator when looking at these two models. When you use a professionally managed data center, oftentimes ,this includes a full network of data centers to fall back on .A localized event, such as a flood or power outage, may take out one local self-hosted data center, but would have a minimal impact, if any, on a distributed network of data centers.

By utilizing a third party network of data centers, you significantly minimize the risk of your business operations being impacted from a localized disaster. Below is a prioritized list of the most common causes of disruptive events:

  • Power Outage 
  • Network Failure
  • Hardware Error 
  • Contamination
  • Fire 
  • Burst Pipe
  • Flood 
  • Forced Evacuation
  • Earthquake
  • HVAC Failure
  • Hurricane
  • Delayed Relocation
  • Software Error 
  • Riots
  • Bombing
  • Disaster Recovery
  • Snow/Wind storm 
  • Test Gone Wrong

The flexibility and security of having a non-local backup network can significantly mitigate the risk of losing your company’s ability to conduct business should a disastrous event occur. 


Every company has unique business objectives and constraints impacting how they deliver IT to their organization. Only your company can decide what the best, or most cost-effective approach is to delivering systems and operational services to your organization.

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