Ten Benefits of Outsourcing a Data Center
By Tim Huffman
Data center outsourcing is a growing trend, with many large enterprises embracing the financial and operational benefits associated with wholesale co-location solutions. The resulting demand has created U.S. data center hubs in Silicon Valley, New York / New Jersey, Northern Virginia, Chicago, Dallas, Los Angeles, Atlanta and Phoenix.
There are millions of square feet of available data center space in these centers, providing Fortune companies with a variety of benefits. The following is a best-practices guide that highlights the key elements that differentiate an outsourced data center solution from an in-house operation.
Outsourced data center operators are required to offer service level agreements related to all the key environmental and infrastructure elements of the building. When an SLA is missed, the operator is required to compensate the tenant. Consequently, the building design and systems are generally state-of-the-art and maintained at the highest level to avoid downtime and subsequent financial penalties.
According to a Ponemon Institute study, the average recovery time for a total data center outage is 134 minutes, with costs averaging approximately $680,000. Corporate owned and operated data centers might not be built or operated to the standards of third-party data centers, since many were built more than 10—or even 20—years ago.
The Uptime Institute has created a tier rating system to grade the resiliency of data centers. Here are the basic requirements for the system.
Tier1: Basic site infrastructure with expected availability of 99.671%
Tier 2: Redundant site infrastructure capacity components with expected availability of 99.741%
Tier 3: Concurrently maintainable site infrastructure with expected availability of 99.982%
Tier 4: Fault-tolerant site infrastructure with electrical power storage and distribution facilities with expected availability of 99.995%
2. Risk Mitigation
Creating distance between a company’s corporate headquarters and its production data center eliminates the risk of a single event—such as a utility blackout or a natural disaster—taking out both facilities. Having a 25- to 500-mile distance between the headquarters and the data center is ideal, as this allows the team reasonable access to the data center, as well as a buffer of distance from the main hub.
The distance between facilities must take into account the latency tolerance of the applications that are running in both locations. Today, many companies are mitigating that risk by setting up data center hubs and co-location facilities in key markets where outsourced data center operators offer high-quality inventory.
3. Tax Incentives
The leading data center markets offer tax incentives that include relief from personal property taxes on IT gear, sales tax breaks, tax benefits for job creation and a variety of additional elements that are not available in secondary markets.
4. Speed of Delivery
Building a new data center or upgrading an existing one can take up to two years. Today’s data center operators provide an available inventory of space and power, offering the flexibility for expansion and a scalable growth platform that can reduce the time to occupancy by two to four months.
5. Discounted Power Costs
Power is one of the largest cost components in a data center. Large-scale data center operators typically consume 100 to 200 watts per square foot of space, which enables them to negotiate very favorable rates with public utilities. In a data center hub market, power can cost 40 to 60 percent less than the national average.
6. Operational Expense vs. Capital Expense
Reducing IT costs is one of the leading goals CIOs are asked to reach every year. On average, it takes about $15 million dollars to build a 10,000-square-foot, 1 megawatt data center. Excluding the cost of power, the operating and capital expenditures to run and maintain the data center systems can add another $10 million to $15 million over 10 years. An outsourced data center provider will absorb the entire infrastructure operating and capital expenditures—savings that can be used for IT gear and talent.
Connectivity and latency are two essential elements of any data center strategy. Most top-tier service providers allow multiple carriers to provide service into their buildings. This diversity offers a tenant tremendous leverage in negotiating its telecom spending by opening up a variety of carrier choices with minimal provisioning timeframes.
CIOs with in-house data centers have to require key IT team members to spend a significant amount of time keeping their data centers running. These efforts siphon away time that could be spent enabling IT to develop strategies for higher-powered rack densities, virtualization and ever-changing data storage needs. In an outsourced data center model, the operator bears the burden of upgrading the infrastructure and building systems, which enables the CIO and IT team to focus on their highest goals and best activities to support the business.
9. Regulatory Compliance/Audits
In today’s business climate, more and more data falls under government or industry protection and retention regulations. Maintaining these compliance standards is difficult without dedicated staff and resources. The outsourced data center model comes with compliance and audit capabilities to satisfy SSAE 16 standards, the Health Insurance Portability and Accountability Act, the Payment Card Industry Data Security Standard, and many other requirements that challenge corporate data.
The mixed-tenancy data center model provides an environment that is rich from an ecosystem perspective. Along with a wide variety of telephony options, tenants benefit from the ability to cross-connect in the same building with other companies that may be part of their supply chain, customer base or financial transaction functionality. This ecosystem benefit improves latency-sensitive interactions.
Due to the unique requirements of data center facilities and the growing need for data center infrastructure management, the selection of the outsourced data center site is essential to maintain uptime, mitigate risk, and achieve maximum availability and operating efficiency.
Tim Huffman is executive vice president and global director of Colliers International Technology Solutions Group. He has extensive experience in structuring complex data center and technology solutions, and is an expert in cloud and managed services applications.