I’m sure at one time or another you have been confronted with the data center “Build vs. Buy” debate. The capital costs of building a Tier 3 (plus) data center have typically weighted the scales heavily in favor of retail colocation providers. Economies of scale ensure that spreading the cost of a $40-$70 Million building across multiple tenants is more economical than building in-house. Last year Equinix, the largest retail colocation provider in the world, invested almost $1Billion in new builds, so clearly the model has been working. But is the data center market facing a dramatic shift? Many believe so.
This article will highlight the benefits of traditional colocation, some of the pit falls in terms of what you give up and explore the alternatives in the evolving colocation market space. It will illustrate how Enterprises are able to leverage the many high performing real-estate assets in existence combined with the customer-centric philosophy of the commercial real-estate expert to build a data center to their exact specifications and performance criteria, neutralizing the advantages of building internally.

Colocation is primarily a transferal of risk. While data center initiatives typically fall into the responsibility of the IT department, what quickly becomes apparent is the prerequisite skill-set associated with the physical management and operation of very sophisticated real-estate. Colocation customers enjoy the benefit of transferring the responsibility of the acquisition, financial planning and forecasting, critical capacity planning, operational procedures, annual maintenance, full-time security and expansion to the colocation provider. Most colocation companies are beyond reproach in managing these elements, with the certifications to back up their service (SSAE 16, PCI, HIPAA, FISMA etc.) In the unlikely event of a breach, the provider has as much to lose as the client, not only in monetary fines (couched in “SLA credits”) but brand and reputation damage (which can be much worse). This reality deflates the common argument in favor of in-sourcing that “Nobody has our best interests at heart more than we do.”

But what do you give up in return? On a practical level, outsourcing inherently leverages personnel and systems to manage hundreds of applications with wildly varying requirements. This dilemma is effectively solved by standardization and uniformity. While this approach ensures repeatability, clients are constrained to one or two types of cabinets, limited power configurations within their racks and paying for space based on the data center’s “watt/square foot rating,” forcing customers to consume the associated “white space” corresponding to their power usage in an effort to avoid hot spots in the data center. These restrictions penalize the use of innovative, high density compute systems. Customers have patiently and begrudgingly complied. But for how much longer?

In the last 12-18 months we are seeing an exponential rise in the adoption of compute/storage with unique cooling and power needs. Companies are beginning to examine whether they can cool these systems better than the typical colocation provider.

Advocating the use of super-compute is a scary proposition for most retail colocation providers whose financial projections are based on revenue/square foot and capacity projections on watts/square foot. Colocation providers struggle with the adoption of blades as they strand thousands of square foot of raised floor and face the challenge of how to cool all the heat confined is a much smaller space than the facility is designed to support.
This is a challenge that is solved at the real-estate level. As a result, the solution negates the “build versus buy” dilemma. Here’s why.

When the dot com bubble burst in 2000, smart commercial real-estate experts entered the equation. Those that quickly understood what these facilities represented, saw the opportunity to purchase low and sell high.
Brilliant real-estate moguls made it their business to master the critical infrastructure they had purchased (redundant power feeds, multiple UPS plants, massive generators, chiller systems etc.) and were well qualified to do so. They viewed the customers as “tenants” and applied the same logic to servicing those tenants as they did in the commercial real estate space.

Customized break rooms, building signage, conference facilities, training rooms and office space in addition to the data center space were second nature to the commercial real estate operator. Managing a building with power, cooling, life safety and a security force is what commercial real estate companies have done for over a hundred years. Customizing a tenant build-out is how the commercial real estate industry has always worked and now the most advanced colocation data centers are customizing the raised floor, power and cooling environments to fit exactly to what each tenant requires for their IT computing resources. Customers are now able to leverage an existing purpose-built data center environment customized to their exact specifications and financially structured as a lease with no upfront capital outlay.

This has several major advantages. The first and most obvious is scaling into additional capacity in lock-step with demand or the ability to“give back” surplus space that is no longer need.
The more subtle advantages are that every inch of space is customized to its usage, all the way to the cabinet level - which the real-estate operators in some ways view as people.

“Mr. Cabinet 127 uses a lot of power and is very hot all the time. If Mr. Cabinet 224 shows up to work 15 minutes late, no big deal, but Mrs. Cabinets 375-379 are critical to our survival and need to be operating around the clock.”
This mindset translates to providing each server the level of cooling/power and back-end redundancy that is suited specifically to their level of criticality and power usage.

In a retail data center environment, customers are committed to a structure that treats all applications as “critical 1” systems and paying for the redundancy associated with that.

Customized colocation designed and engineered from the outside of the building in, will allow a client to Tier the data center on an application by application basis. If 2N is required on the UPS and Chillers for heart-beat applications, it is possible to attain a Tier 4 configuration. If N+1 is the preference or there is no urgency and no redundancy is needed, then that too is available. Furthermore, dedicated critical infrastructure (HVAC, UPS, PDU’s & Generators) is happily provided to the discriminating user who must retain all assurances that other clients will not over utilize shared resources thus impacting uptime.

Additionally, as a real estate operators’ success is measured by the tenancy of the building, they are heavily incented to solve specialized cooling challenges posed by innovative clients rather than applying a standard watt/square foot allocation to all end users. This optimizes the efficiency of the client environment. Clients realize the value of the model very readily, thus ensuring long-term lease terms and renewals.

So the “build versus buy” argument is abolished by the bridge that now exists between real-estate and IT. Customers transfer the operating responsibilities and associated risk to the owner/operators who have as much at stake as any tenant to maintain availability of the site and in this model, not only can you build a Tier 3 (plus) data center (and associated office environment if you so choose) to a granular specification and change it with no penalty as requirements flux. But, you can also buy it as an operational lease cost while taking advantage of wholesale pricing metered power billing which is a pass-through charge from the utility. All in all, this new age of wholesale colocation provides the financial structure, customization and scalability that once was the justification for building and operating a corporate data center.