Many companies, reaching business maturity, are faced with a dilemma – to build their own server room or to take advantage of the available offer from companies specializing in colocation services in a professional data center. Historically, the preferred option seems to have been the option of an in-house server room, or in the case of larger entities, an in-house data center. The arguments for either option are compelling and should not be underestimated. Interestingly – it is very common for proponents of one option and the other to point to the same argument in favor of the ‘on prem’ (in-house) option or in favor of so-called outsourcing. Security is a good example. However, let us start with costs.

Fortunately, gone are the days when a data center was associated only with a few servers and a fast connection. A modern data center is all about sophisticated power and cooling systems, connectivity that ensures adequate transmission parameters, professional staff carrying out the center’s operations and a number of measures to ensure the security of the center’s operations.

All of these elements will be priced with reference to the scale of purchases made. And here, with the exception of centers built by, for example, large energy consumers, the advantage will be on the side of those offering colocation in the centers provided by them. Although, in the case of energy, the scale of purchases made is not the only element affecting the costs incurred.

Servers are becoming increasingly powerful, which unfortunately goes hand in hand with the amount of energy consumed and, consequently, the cost of that energy. One of the indicators of the level of costs in a data center is a parameter called ‘density’, which indicates the power of the servers that can be accommodated in the area of a particular center. In the case of individual centers, this is in the order of 3-5kW per rack. In colocation centers, these values are up to 20kW.

Another important parameter when calculating the actual cost of data center operations is the PUE (power usage efficiency) indicator, which shows the amount of additional electricity (additional to the energy consumed directly by the server) that is necessary for the center to function properly (for example cooling costs). It is considered that this indicator should be in the magnitude of 1.3-1.5, while it is closer to 3-4 for customers preferring ‘on prem’ solutions.

While on the topic of costs for a moment, it is worth pointing out one more element. Well, according to the forecasts of IMARC Group analysts in the report ‘Green Data Centre Market Size: Global Trends, Share, Size, Growth and Forecast 2022-2027’, the aforementioned market will gain an average of 22.9% year on year, until it reaches a value of USD 200.84 billion in 2027. Many colocation providers, also in Poland, are already addressing the environmental challenges of reducing their carbon footprint, which is worth taking into account when deciding on an enterprise strategy in this regard.

Security of data center operations means not only security related to cyber threats, which comes to mind as a natural association. It is also security associated with an uninterrupted power supply, security associated with the response to possible failures (e.g. extensive specialized fire-fighting systems), redundancy and appropriate telecommunications bandwidth, and finally the security of the data processed in the data center (both physical and security against illegal third-party interference).

These elements have proven to be particularly important following the introduction of regulations that threaten very high penalties if data security is not properly secured (e.g. GDPR, National Cyber Security System Act).

Naturally, there is nothing to prevent an entrepreneur from building their center according to the rules of the art and using the latest solutions available on the market. Here, however, we return for a moment to the question of economies of scale and the costs of the entire project. It is also worth considering the answer to two additional questions: once the data center is built, will the company be able to maintain it at a high operational level, introducing all the necessary technological innovations. A negative answer to this question would call into question the wisdom of investing in an ‘on prem’ center.

Yet another question – in the event of a spike in demand (or possibly a drop in demand) for data processing resources, which happens very frequently in some industries these days (e.g. e-commerce), will our newly built center be able to support the increase in demand within the required timeframe? Alternatively, will it be able to reduce costs when such demand falls sharply?

Again, a negative answer to such a question would suggest the need to target professional colocation providers.

Although only two aspects of data center operations were analyzed, there appears to be a strong case for turning to professional colocation providers.

However, it all depends on the situation of the company in question. Indeed, when talking about scale, it should not be forgotten that some large service or industrial conglomerates may have sufficient demand, resources and capabilities to compete with professional providers. On the other hand, it is possible to imagine companies (although it is becoming increasingly difficult to do so) that have less regulatory pressure, process fairly constant volumes of data, and the possible interruption of this processing does not significantly affect the continuity of the business.

One thing certainly does not hurt. Before deciding on the multi-year burden of our capex, it is worth conducting a thorough analysis of the costs associated not only with the initial investment, but also maintenance and development costs, as well as an analysis of the risks associated with the available solutions. It would also not be out of the question to verify the standards used by other companies in our industry. Cost and security are one thing. Very often, however, the competitiveness of our company will depend on how we answer this question.