To build or to buy – When should your Data Centre be in-house or outsourced?
Updated: Jun 28
There’s nothing really like owning your own. Compared to renting, there’s something visceral about objects belonging to you. Whether it’s your home, your car, your phones, your appliances, your watches and jewellery – everything is better when you own it, especially in these days of easy credit and paying for everything later. If you’re lucky enough to own all of those debt-free it can be a very happy situation, at least from a materialistic point of view.
But when we start discussing bigger items we’re often in the realm of the ultra-rich. I’m sure it feels just as great to own your own plane, boat, helicopter, vacation home and so on but realistically the rest of us need to rent these things, or even better: pay for them as we use them.
When it comes to Data Centre space, it’s undeniable that it’s nicer to own your own. You can design and build it to your specification exactly, if you’re knowledgeable in the field or if you have great partners to help you. If you’re intimately involved in the build phase then you can correct mistakes as you go and can even improve the design if things change in the real world. Once it’s operational, you’ll also have full control as to how the facility is run and the space is all yours – you can operate it the way that you want.
As designing, building, operating and owning your own data centre appears so great, the value proposition for outsourcing it needs to be extremely compelling. As a starting point, let’s assume it’s better to own your data centre and work towards enough reasons to make you want to outsource this important company function. If you’re not convinced count yourself as the company equivalent of “the top 1%” and enjoy your great wealth. I wish I was in your shoes.
For the rest of us, let’s look at a couple of things that are important if you’re currently making this decision. If you’re going to build your own it’s important to do it right.
Experience and expertise:
ICT is a specialised field and it’s rather small in South Africa. It’s very common to see the same faces over and over again in different companies as you both advance through your careers. Data Centre construction and operation is an even more specialised subset of the ICT field and the faces are even more familiar. For this reason, it’s important to have great partners in the field who have access to the best specialists. The mix of expertise can be quite daunting. Civil, electrical & mechanical engineers; electricians; fire experts; qualified health and safety consultants; cooling and cabling specialists; legal & compliance experts; programme and project managers…. The list goes on and most of these experts won’t be required for many other projects in your company.
Once designed and built the facilities management expertise are quite specialised, and maintenance of the specialised equipment is essential. A data centre isn’t somewhere you want to have a mistake or failure. The smallest mistakes can be extremely unforgiving and it’s an area of your business where failure is immediately noticed and harshly criticized. Continuing success, for years and years or even decades isn’t even noticed, never mind thanked. If you build your own data centre make sure you hire or contract in the right expertise to keep the lights on. In-house data centres are often maintained by the IT Manager. Unless it’s an area of extreme interest for them it’s probably not the best use of their time. Even cleaning a data centre is a specialised skill and shouldn’t be left to normal office cleaners under any condition. I’ve known IT Managers who have been fired or reprimanded because the cleaner unplugged their server rack so that they could plug in a vacuum cleaner or (horrors!) a kettle. And I mean that’s multiple IT Managers who have suffered the same events.
The benefit of large, co-location data centres is that they’re a multi-billion Rand investment and their construction projects are rare and high-status so can attract the best talent in the region, but even then they battle to hold on to the best experts. These individuals are globally sought after. The same is true of operating the data centre. It’s easier to keep the best facilities managers and engineers busy when they have plenty aircons, distribution boards, fire suppression equipment, UPS's, generators, batteries, and building management systems to maintain. There are constant redevelopments and expansions in a co-location data centre so the staff are busy and complacency is less likely.
The Covid-19 pandemic showed the IT departments of the world that you can only consider so many potential events that you need to adapt to. No matter how well you plan and prepare, life will smack you in the face and laugh at your plans. Overall I would say the South African IT field did admirably in the way that they responded to the crisis. IT became an essential skill and elevated the humble network engineer to (almost) the status of a first responder. The companies that did the best during the pandemic had the same common virtue: flexibility.
When it comes to your data centre most IT executives are looking for an interesting juxtaposition – flexibility and stability. Ideally, you would like your equipment to be consistently in the same building for years or even decades but at the same time you would like to be able to easily expand, and even more, essentially reduce when required – especially if you’re thinking about a large move to hyperscale or private clouds.
The other side of flexibility that the pandemic has shown us is that not all office space is necessarily a good use of company resources. The laptop class showed they could do just as much work from home and if you’re going to be in a pointless meeting then you might as well be in your pyjamas with your doggie at your feet than in an expensive boardroom. If you’re stuck with your data centre in your building it can be a ball and chain for your company’s flexibility potential.
Good co-location data centres should have ample room for expansion and the ability to grow or contract the services they offer you as your business requires.
Power Usage and Carbon Footprint:
Data centres are massive consumers of power, and if you’re getting that power from Eskom it means that it’s terribly bad for the environment. Unfortunately, our power grid is still very coal dependent, which isn’t good for the environment – especially with the age and poor maintenance of this national infrastructure. As a rule of thumb, a continuous kW of power pulled from the national grid will produce about a ton of CO2 a month, never mind the sulphur dioxide, nitrogen oxides and other nasty particulates will get pumped into the air with Eskom grid power used.
It's in the interest of large co-location data centres to be as efficient as possible – electrical wastage costs a lot of money and that means the businesses won’t be profitable or will try to pass on the costs to their clients and so won’t be competitive. There are also a lot of efficiencies which you can get at scale which are difficult to achieve in smaller installations. Although environmental impact is never a problem you can completely outsource, you can find partners who are motivated to be as efficient as possible.
Also worth mentioning is the development of renewable energies, battery storage and other sustainability practices. A good outsource partner will have a strategy to incorporate these into their expansion plans which will benefit your company down the road when it comes to emissions.
The unforgiving nature of outages means that to build a data centre properly means adding a lot of redundancy for key components. Maintaining certain equipment often means shutting it down which means doubling up on critical components (often called 2N by experts) or at least having backup units so that you can experience outages without your IT equipment going down (called N+1).
Similar to your efficiencies, redundancy is easier to achieve at scale so although the development costs for large data centres can be eye-wateringly expensive, when you work it back to cost per client, per rack or per kilowatt, it becomes more viable to deliver the required level of uptime.
All of the above eventually boils down to brass tax and impacts the costs of running your IT systems. Naturally buying a ticket for a single flight would be a tiny fraction of owning and operating your own plane. Using someone else’s data centre will almost always be more cost-effective than building or operating your own unless you’re a massive company that can achieve the same scale and efficiency as a large co-location facility (think Google, Amazon, Microsoft and Facebook who have that scale - but even then still outsource in new or smaller regions).
Your costs should also be more predictable with a good partner. Besides extreme inflation or massive power increases, you should be quite certain what your costs will be for the duration of your contract. You should be able to scale up and reduce as your requirements change and there shouldn’t be any large, unexpected repair bills when something important breaks. Although your outsourced partner will still be making a reasonable profit, the benefits of scale and efficiencies should mean that it still costs less to have this function with someone else.
For anyone who’s reached this far into the article and is certain insourcing is the way to go then it means you’re in the rare and lucky situation of being able to own your own data centre – congratulations! I hope your projects to build and operate go well and you deliver great value to your company, and I hope it doesn’t give you too many grey hairs!
If you’ve reached this far and you think building and maintaining your data centre is a hassle you’d like to give to someone else then please join us for our next article where we discuss how to decide on the right co-location partner. Until then stay happy, healthy and productive.
Constructing a Data Center: Understanding the Key Issues (https://www.jdsupra.com/legalnews/constructing-a-data-center-5834124/)
Tips to Build a Modern Data Center (https://crsc.ca/tips-to-build-a-modern-data-center/)
5 Reasons Building (and Operating) Your Own Data Center In-House Is a Bad Idea (https://nfinit.com/5-reasons-not-to-build-your-own-data-center/)
Reasons Why Building a Datacenter Yourself is a Terrible Idea (https://mosaicnetworx.com/blog/5-reasons-why-building-a-datacenter-is-a-terrible-idea/)
Should you Build your Own Data Center? (https://www.datafoundry.com/blog/should-you-build-your-own-data-center)
How to Build a Company Data Center? Part One (https://www.masterdc.com/blog/how-to-build-a-company-data-center-physical-security-guide-tutorial-part-one/)
Eskom 2020 Carbon Footprint Report (https://www.eskom.co.za/wp-content/uploads/2021/09/CarbonFootprintReport2020.pdf)