•

This presentation was given during the Spring, 2012 Data Center World Conference and Expo. Contents contained are owned by AFCOM and Data Center World and can only be reused with the express permission of ACOM. Questions or for permission contact: jater@afcom.com.

Interested in data center build and design?

Learn about specific sessions on build and design at the upcoming Fall 2012 Data Center World Conference at:

www.datacenterworld.com.

“Buy vs. Build” Considerations in Today’s Data Center Marketplace

Presenters:

Jerry Gallagher, CEO & PresidentJeff Robinson, Vice President

The Situation TodayThe Situation Today

• In today’s dynamic Data Center market, firms needing IT space are faced with the choice of Buy vs. Build

• Both sides have their backers• But which factors & tools should drive

the decision? • This session provides a high-

level overview from several perspectives:– Financial– Operational– Technical

Today’s Learning ObjectivesToday’s Learning Objectives

• Following today’s presentation, you should be able to:– Identify factors & differences to evaluate co-

location and build-out solutions– Determine situations where both options

might be considered viable solutions– Conduct a Comparative Analysis of the

options to demonstrate the best choice

Distinguishing Buy & BuildDistinguishing Buy & Build

• Buy – Outsourced Wholesale– Colo – Managed Hosting – Cloud (SaaS)

• Build – Traditional Construction of a Data Center Facility – May be either:

• User-Owned• User-Leased

What We Won’t Be Talking AboutWhat We Won’t Be Talking About

• Strategic Planning: Wider Variety of Options – Consolidations– Platform Migrations– Operational Reconfigurations

• Hybrid Facilities – Combined Office & Data Center Space

• Reverse Colo Options– Overbuilding, then renting to other sub-

tenants

Today’s Situational ExamplesToday’s Situational Examples

• Scenario A – Major Insurance Firm– Outgrowing the Current Facility

• Scenario B –Fortune 500 Services Provider– Needs a Disaster Recovery Environment

• Scenario C – Not-for-Profit Governmental Contractor– Current Facility is Reaching End-of-Lease (or

End-of-Lifecycle)

Factors to ConsiderFactors to Consider

• Technological • Functional • Operational • Financial• Other

Factors: TechnologicalFactors: Technological

• Mix of Your Equipment– Servers– Storage– Network

• Projected Growth & Predictable Expansions

• Projected Contractions– Virtualization– Consolidations

• Platforms Deployed & Evolutions• Spatial, Electrical and Cooling Densities

Factors: FunctionalFactors: Functional

• Infrastructure Reliability (Tiering)• Uncertainty in the Growth Profile• Necessary Proximities & Adjacencies• Business Continuity Plans

Factors: OperationalFactors: Operational

• Staff Requirements• SLAs• Security• Limitations w/Data Center Support • NOC Requirements• Power Management• Telecommunications• Corporate Culture

Factors: Other Advantages/Disadvantages

Factors: Other Advantages/Disadvantages

• Storage Space• Distance & Proximity to HQ and Staff• “Core Business” Concepts• The Neighbors

Big Question:Big Question:

Can the Factors You’re Considering (Technological, Functional, Operational, Other) be Reduced to Financial Terms?

If not, then you’ll need to develop a Factor Weighting approach that helps weed out the good options from the bad

Applying the FactorsApplying the Factors

• Initial “Mandatory Features” Checklist• Narrow Options to 5 or 6 Choices• Solicit Lease Pricing• Develop Construction Estimates• Pre-Weight Importance of Non-Financial

Factors• Judge Choices Based on Factors

Financial: Checking the NumbersFinancial: Checking the Numbers

• Cost Comparisons Typically Include:

– Construction Costs vs.– Host Vendor Lease Costs

Financial: Checking the NumbersFinancial: Checking the Numbers

• But Don’t Forget to Consider: • Shell Lease Costs• Land/Building Purchase Options• Energy Costs• Facility Management• Facility Maintenance• Security Services• Staffing Differentials• Telecommunications• Tax Consequences• Incentives

Financial: Checking the NumbersColo/Host Vendor Pricing

Financial: Checking the NumbersColo/Host Vendor Pricing

• True lease cost bottom line may be disguised – Often until after you’ve determined to go colo

• Pricing Tomfoolery– No Final Price Quotes not until near-time

contract signature– Translating $/kW vs. $/sf vs. $/Rack– Added Cost “Options”:

• Cross-connects• Management fees• Power whips and electricity charge-backs• Allocated vs. Actual Power Draw

Financial: Checking the NumbersConstruction Pricing

Financial: Checking the NumbersConstruction Pricing

• Price Estimates may be all over the map– Uptime Institute has a system that tends to

lean upward– Natural inclination for internal estimates:

Too low– Inexperienced AMEPs tend to forget

Reliability Estimates

• Construction Options & Variations– No Final Price Quotes not until near-time

contract signature– Translating $/kW vs. $/sf vs. $/Rack– Added Cost “Options”

Best Practices: Cost Estimating TricksBest Practices: Cost Estimating Tricks

• Apply Rules for the Time Value of Money– Allows for a Fair Comparison for Trading Off

Long-Term Operational Costs vs. Capital Costs

• Some Cost Estimating Rules-of-thumb

• Cost Comparison Example

The Final ComparisonsThe Final Comparisons

Best Served with:• Structured Evaluation Process • Stable Weighting Factors• Comparison Understandable by Both:

– Upper Management & – Users

• Eval Template Prepared & Agreed on in Advance

Co-location May Not Fit WhenCo-location May Not Fit When

• 10+-Year Usage Horizon – Colo Cost Savings don’t match Owner-Constructed– TCO basis: Construction cost pay-back is typically

7 to 8 years

• Control Over Facility Operations Required

• Tight Data Center Colo/Hosting Markets

Purpose-Built May Not Fit WhenPurpose-Built May Not Fit When

• Raised Floor < 2,500 sf• Need for Environmental & Operational

Control • Affordability Depends on Reverse Colo

Option

Take-Away’sTake-Away’s

• Take Industry White Papers w/a grain of salt

• No “One-Size-Fits-All” Answer• Real Data Center construction costs

often– Greater than internal estimates– Less than industry standard estimates

• w/Most Data Center cost comparisons, it’s very common to forget an expensive element

Q&A

“Buy vs. Build” Considerations in Today’s Data Center Marketplace

Presenters:

Jerry Gallagher, CEO & PresidentJeff Robinson, Vice President

•

This presentation was given during the Spring, 2012 Data Center World Conference and Expo. Contents contained are owned by AFCOM and Data Center World and can only be reused with the express permission of ACOM. Questions or for permission contact: jater@afcom.com.

Interested in data center build and design?

Learn about specific sessions on build and design at the upcoming Fall 2012 Data Center World Conference at:

www.datacenterworld.com.