Is it better to own or outsource your data center?

Should organisations always build their own data center or is time to outsource and move to the cloud? ZDNet looks at the options and the costs involved.
Written by Sam Shead, Contributor

Once it was standard for organisations to own and operate their own data centers. But a number of factors are making businesses think twice about whether they always need to own their own facilities. Virtualisation, various forms of cloud computing and changes to the ways companies run IT projects are all having an impact.

How much does it cost to build a data center?

The cost of a data center depends, of course, on how big you want it to be. According to IT consultant Ian Bitterlin the cost of a power connection can be up to £100,000 per megawatt, while the cost of a fibre connection could be as high as £250,000 per kilometre.

The costs will vary depending on the level of resilience built into it, as more resillient data centers have more equipment to reduce the chance of failure. Bitterlin said kitting out a data center can cost £17,000 per KW for a Tier 2 site, £21,000 per KW for a Tier 3 site and £28,000 for a Tier 4 site. And on top of this, of course, you have to buy or rent the building.

Once you've built it, it's almost certainly time to upgrade the hardware: Bitterlin argues that datacentre hardware should be updated every three years before it becomes outmoded. 

Surrey County Council decided to build a data center in three existing warehouses after considering all options available (Credit: SCC)

Building and operating data centers appeals to organisations that need to keep a tight control over their data: for example Surrey County Council (SCC) recently replaced its 31-year-old data center, which had been tucked away in the basement of the local county hall.

Surrey County Council's information, management and technology manager, Paul Jennings, told ZDNet that he considered several options, including cloud, to help cut costs, but decided to build a brand new £3.1m data center with enough capacity for the council and other partners.

Jennings said that he doesn't feel ready to trust cloud providers with certain data that falls under the council's remit, such as data on children and adults in social care.

"Certainly we would be quite nervous about social care data spun up in the cloud," said Jennings.

Public cloud

Over the past few years, public cloud providers like Amazon Web Services (AWS) and Rackspace have come onto the market offering businesses access to computing power and storage on demand.

The pay-as-you-go cloud model allows businesses to pay for what they use instead of forking out upfront for equipment that they may only bring into action once a month or once a year — something that's particularly attractive to organisations with peaks and troughs in their computing needs.

Rackspace estimates that customers can use its servers from as little as 2p per hour or £14.60 per month. That will get them access to a Linux server with 512MB of RAM and a 20GB disk. Those customers seeking a higher performance from their server can pay up to an estimated  £1.38 per hour, or £1,007 per month, for a Windows server with 30,720MB of RAM and a 1200 GB disk. 

When using the cloud you don't have to pay for a lot of the additional costs that come along with having your own datacentre, such as, construction costs, council tax, air conditioning and security, an AWS spokesman told ZDNet. "That's before you've bought a single piece of hardware," he added.

The head of Amazon Web Services in the UK, Iain Gavin, told ZDNet that running applications in the cloud can be 70 percent cheaper than running them on-premise over a five year period, citing a survey by IDC in July 2012

"To build out your own physical data center and fill it with kit can take months if not years to do", said Gavin. "Meanwhile, you can spin up a server within a couple of minutes with AWS."

"From an innovation perspective, if someone wanted to try something new like a joint venture or a different micro site, you can spin it up, try it for a couple of months and then kill it if it doesn't work," said Gavin. "Cloud is easier, quicker, cheaper and more flexible."

News International is using AWS to develop and spin up new web pages for its publications, which include The Times, The Sunday Times, and The Sun.

"Generally we build new things on Amazon and keep existing things at Telecity. We'll still have both for a long time but I see us using Amazon more as time goes on, absolutely." —  News International's head of infrastructure and cloud, Ian McDonald

"You can scale up and scale down and adjust very quickly. It's really about all-round business agility," said McDonald. "We're bringing on new products all the time so we don't want to have a development server for a month and then not need it."

News International built its second-generation paywall on AWS from the ground up. "We've built that using DynamoDB which is Amazon's NoSQL database. It was designed to be scalable right from the start and then we've been able to adjust it to the workload as needed," said McDonald.

The corporation, which currently has approximately 500 AWS servers, is aiming to increase its cloud dependency over the next few years and have 13,500 servers by 2015.

Private sector organisations aren't the only ones putting their faith in the cloud providers.

NHS Direct is using managed hosting provider Rackspace to handle peaks that would have forced its on-premise IT infrastructure to buckle.

NHS Direct's online Health and Symptom Checkers, which were developed by medical software company, InferMed, went live in June 2010. The checkers experience peaks in demand when there are outbreaks of illness like norovirus and the H1N1 flu pandemic, but Rackspace handles the traffic by spinning up new servers. 

Roger Donald, associate director for multi-channel at NHS Direct, told ZDNet: "I was tasked with building a high volume, high availability, national service that could stand up to pandemic levels of demand which far outstripped our internal capability at that time to provide that kind of service."

Rent space from a data center provider 

Digital Realty's new London data center has space up for grabs (Credit: Digital Realty)

There is a third option available to businesses seeking to reduce their IT costs and get more for their money. Businesses are able to rent space in an environment that has been customised to accommodate vast amounts of IT equipment, helping it to run more efficiently and therefore at a lower cost. 

Businesses likes Telecity, Equinix and Digital Realty build data center empires and invite others to rent space in their data halls. Customers typically install their own equipment into pre-fitted racks and are usually charged by the amount of power they draw from the datacentre.

For example, although News International has 500 servers on AWS, the vast majority of its infrastructure — 80 percent — is in a Telecity datacentre. "Generally we build new things on Amazon and keep existing things at Telecity," said McDonald. "We'll still have both for a long time, but I see us using Amazon more as time goes on, absolutely."

Most of these specially designed server sanctuaries have built in resilience in the form of additional power supplies, network feeds and cooling units so that they can guaranty customers that their IT systems won’t go down. Many data centers also have backup sites, usually over 15 miles away, in case something like a natural disaster or a terrorist attack should completely wipe out the primary datacentre.

Digital Realty CEO, Michael Foust, told ZDNet that there is an increasing trend of businesses outsourcing their data center needs.  "Businesses are getting the data center out of the converted office space or conference room and into a proper data center," said Foust.

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