Data Centers: Colocation, Expand or New Build?

This question and the correct answer can be one the most expensive decisions that any organization may face. The cost is relative to the size and ratio of the company; it is not only the upfront cost, but the operating expense and the consequences of the decision. Colocation is without a doubt worth considering. The new data processing houses are close to modern day technical cathedrals! But they do come with pitfalls, and the question is, are they as flexible as what you could either use or what you could build for yourself. The operator must carefully weigh the options. It’s the age-old adage: what is the price or what is the cost? Price is what the company has to spend today to make the move, tying up the cash, or borrowing the cash and dealing with diminished working capital or available credit. The flip side of the coin is the cost; this is can be a doozy if you get it wrong. The company lives with that mistake for years and it could cost a fortune in lost productivity, running costs and even lead to having to pay additional funds to correct the decision.

As a design-builder, it is only to be expected that DCS wants you to build a new data center, but in reality, this is not the case. Any reputable company wants to give its clients the best advice prior to making what could be a career-changing decision. Colocation may be on paper the easier decision. These facilities (if designed and built correctly) have all the bells and whistles, Tier III, Tier IV, low entry costs; some tell you, the facility will never go down. These are bold statements indeed. There have been cases where a well-built facility has gone dark. When considering colocation, these are some points worth discussing and evaluating thoroughly. This list is by no means complete, but it does provide a starting point. It`s like buying a car a house or any long-term purchase, “read the small print.”

• Cost of the Relocation.
• Risk of the move.
• What length of contract do you want to sign? What are they guaranteeing?
• Examine the small print, what are the exit strategies, is there a cap on the space rental.
• What type of space is available to move into and how will you handle growth?
• Evaluate the risk to leave the Colo, before you agree to arrive!
• What is the up lift on the electricity cost?
• Enquire on how they maintain the facility and if the Colo has resident engineers.
• What Tier level is the facility and who has ratified there claims.
• Find out what telecoms carriers are in place.
• What other types of clients share the space
• How is security handled and access controlled and monitored?

These are only some of the questions to ask, consider and understand. These will obviously change if your use for this space is primary or secondary.

Get Advice! Work with an Independent Consultant to assist in making a well-informed educated decision, lower the possibility of making a costly mistake.

Building a data center also comes with an abundance of difficult issues, nothing is simple. Knowing what you have now as a baseline is key. Conducting an assessment of existing conditions is essential as it is the start point that will help put a line in the sand, creating where you are and where you need to be. Now look at what your company needs today and in the future; consider projecting 3, 5, and 10 years into the future, There is no exact science to projecting, however your knowledge of the company you work for or own is way better than most; with qualified guidance you may well surprise yourself. Start to build a picture or roadmap.  Once the initial stages of the investigation are complete, the question is, do we expand? Are we able to expand? Do we build close by? How to test, commission and move? The answer isn’t simple, but extremely complex.

If you decide to build, it is key to establish a budget. This can be done by employing a specialty engineering company to help identify needs, create conceptual drawings and then go out and solicit contractors to assist with providing  ROM pricing (Rough Order Magnitude). This is a solid route, however based on experience, it is rarely the most cost effective solution. It tends to create an adversarial relationship between contractors and engineers from the start, likely putting the operator in the middle, which is never good.

The awarded contractor is already under pressure, bidding against others and being forced to give a very low price to win the deal; this is usually at a price that they are not comfortable with. Unfortunately, most operators tend to pick the very lowest number with little forethought and investigation. It is important that the prudent employer would check very thoroughly the full content and scope of work included, prior to the letting of the contract. DCS firmly believes whether we have been selected as a contractor or that has had to bid for the work or one where we have been selected as a sole source provider, that our price should reflect a “fair-day`s work for a fair-day`s pay“. This is always the very basis of our cost to the client. In fact, our mantra should be, “Success through Quality “. Quality Engineering and Quality Construction must be the core in all of these critical projects.

We therefore suggest that a client seriously looks at the design/build scenario; clients should interview companies until you establish a relationship built on trust and understanding. There are many ways to protect yourself when structuring a contract with your selected partner. Cost plus (% on cost), not to exceed (working on the project agreeing a number not to exceed), lump sum (agreed contract value, all in.) and time and material (not advisable) and many other variables should be considered. When taking the design/build route, make sure that you have a dedicated representative to assist, often referred to as an owner`s rep. This will help with communication and help further protect the interests of the project. This method is a quicker way to have your facility up and running is less time. The team approach is working to a common goal: getting the facility working as designed and ready for operation ASAP, without cutting corners.

By adopting a design-build approach, a client may need to place the eggs in one basket, but by doing this the company lessens the links in the chain, lowering costs and speed up the entire process.