Build Versus Buy: Why Colocation Is the Least Expensive Option

As a business grows, so does its need for IT infrastructure. Once demand outstrips the capacity and scaling potential of limited on-site infrastructure or a leased server deployment, the question arises of where to go next: build or buy?

For rapidly growing companies, the temptation may be to build. Owning the data center and the infrastructure it supports gives the business total control over reliability, performance, and flexibility. But building a data center that is the equal of a Tier 3 enterprise facility is massively expensive. For most businesses, buying and colocating hardware is the sweet spot.

The path from cloud to owned hardware is a familiar one to established companies that prize control, flexibility, performance, and reliability. Startups of this type start with the cloud for its cost benefits, and discover that, as they grow, owned hardware has a lower total cost of ownership and affords them the ability to build exactly the IT infrastructure they need to service their customers. Dropbox is just one recent example of a company that moved from cloud to owned hardware.

But owned hardware needn’t entail an owned data center. For companies operating at the scale of Dropbox — 500 million users — it makes sense to invest in data center construction, but the costs are onerous compared to the cost of colocation, which brings many of the same benefits without the massive price tag.

Why is building a data center so expensive?

Construction

The data center building must be designed, engineered, project managed, and built. If the company moves into an existing space, it is likely to need considerable renovation or refitting.

Power

Tier 3 data centers are required to have multiple power and cooling paths with redundant components. Bringing in multiple power connections from external utilities — and redundant generators in case of failure — is a significant undertaking. Cooling and power are often the largest cost when building a data center. They’re also the largest cost of running a data center.

Bandwidth

Just as with power, bandwidth has to be multiply redundant, with connections to a number of major bandwidth providers to ensure continuity and quality of service.

Staffing

Even a small data center requires a number of highly qualified and expensive infrastructure, network, and server experts to be available around the clock.

Certifications

If sensitive data is to be stored in the data center, it must be certified and audited to ensure that systems and processes adhere to relevant regulatory frameworks, including SSAE 16 and HIPAA.

Colocation shares those costs between many colocation clients. Each client has all the benefits of an enterprise-class data center, while maintaining complete control of hardware and system architecture, but they don’t have to build the data center or pay for it.

Owned IT infrastructure makes sense for scenarios where control, reliability, and performance matter. But building a data center would be an expensive mistake for most businesses.

About the Author

Chris Schwarz is the CEO of Cyber Wurx, a premium colocation services provider with a world-class Data Center in Atlanta, Georgia that also specializes in Dedicated Server Hosting and VPS Hosting. Check out their hosting blog here.