The Cost of Going IT Alone: Outsourced vs In-House Data Centers

Nov 13, 2018

For many companies, the management of its own data center is not likely to be of strategic importance. An increasing number are turning to outsourced services, but not only because of the expertise that can be gained, but also because it can reduce costs significantly.

At the same time, green data centers are gaining momentum due to environmental concerns and their cost efficiently. Compared to building, owning and managing an in-house data center, the total cost of ownership (TCO) of a green data center will be far less. This is due to lower CapEx through economies of scale and reduced energy costs, and lower OpEx through specialised expertise and efficient operations.

Cloud computing doodle against digitally generated grey server tower

When running an in-house data center it can be difficult to create the right capacity, both for now and for the foreseeable future.  If your company needs 1 megawatt (MW) today, but is expecting significant growth, what capacity do you build for? The risks are either that you build too small and then need to re-do the whole thing in a short space of time, or that you build too large and are overspending for a long time on an inefficient, over-dimensioned solution. The risk of wasting capital at a critical phase in your company’s development is uncomfortably high.

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For an organisation that is not in the data center or IT market, it is difficult to match the efficiencies of a business where data center building and management is its sole competence. By outsourcing your data center you can pay as you grow, only ever using the exact amount of capacity you need, instead of having to fund and commit to a fixed amount of capacity.

Another area of overspending is energy. Electricity accounts for almost 50% of the total cost of operating a data center, therefore initiatives to reduce the cost of energy will have a significant impact on your TCO. The most common performance measurement for data centers is PUE (power usage effectiveness) which is calculated by dividing the amount of power entering a data centre by the power used to run it.

In 2016 the average PUE was 1.72. Today, many data centers across Europe are still operating at a PUE of 1.8 or 2.0. Due to environmental energy efficiencies in Sweden and having one of the lowest costs of energy in the EU, it is possible to run at a PUE of 1.10.

By using a green data centre that runs with a low PUE, and has the ability to re-use the heat that the data centre generates, savings of up to 75% can be made on the cost of electricity, compared to a standard data centre or an in-house solution. 

There are many factors that will influence the TCO of your data centre services, but making savings on energy costs and being able to ‘pay as you grow’ are crucial.