August 28, 2013
Technology and business leaders don’t always fully understand the true costs and risks associated with both building and operating a data center. Data center facilities are one of the largest line items in an IT infrastructure budget, and these costs can run into the tens or even hundreds of millions over a data center’s lifetime. If you’re currently looking for more data center capacity, before you make a decision, it’s important to understand the cost and risk implications of your choice and justify the business case to your executives and budget holders.
Using Forrester’s Total Economic ImpactTM (TEI) methodology, we built an ROI calculator to help infrastructure & operations professionals evaluate three approaches to greenfield data center implementations: traditional builds, modular builds, and colocation. In this model, we quantify the costs, risks, and benefits associated with each scenario and calculate the net present value (NPV) of this investment over 15 years.
Rachel Dines published the first generation of this model back in 2011 comparing just traditional builds versus colocation. Early this year, I began the task of updating this research and investigating any and all changes or disruptions in this market. I was most surprised to witness the recent proliferation of modular solutions available. Over the last few years, this market has accelerated rapidly with many established vendors expanding their offerings to include a ‘modular-like approach’. Even colocation providers have embraced this approach, expanding their facilities in modular phases and realizing the benefits of spreading out capital investments, minimizing risk and mitigating the dependency on rigorous capacity planning exercises. So we officially added a modular implementation to the study this year.
When evaluated in our TEI model, our analysis shows that building a data center with a traditional/monolithic approach is impractical for most, whereas modular solutions enable:
- Faster deployment
- Flexible scalability
- Risk adverse capital expenditure model
From a purely cost perspective, modular implementations provide a competitive alternative to colocation solutions. For example, in the following scenario we modeled out a 2MW Tier III equivalent data center with a PUE of 1.5:
*All numbers are in millions
Beyond just dollars and cents, it’s critical that you consider the following strategic factors:
- Is owning and operating a data center a strategic differentiator for my company?
- What is my organization’s risk tolerance and culture?
- Does my organization have the capacity to forecast and plan effectively?
- What is your cost of capital? Does the business favor operational expenses or capital expenses?
For full insights and analysis around this discussion, see our recent report: Build Or Colocate? The ROI Of Your Next Data Center