You Don’t Need a Crystal Ball to Future-proof Your Data Center

You Don’t Need a Crystal Ball to Future-proof Your Data Center

Rapid technological change, growing needs for bandwidth and increased data center capacity and distribution needs are constantly challenging CTOs, CIOs, CEOs and their organizations to find more agile, cost-effective and scalable solutions for the data centers that house their information technology.

While there are some advantages to the large internal data center approach, the ancillary costs of the elements that accompany it, such as the energy, equipment, space and resources needed for operation, significantly increase costs for a business.

Companies that use internal data centers are often forced to work with utility companies and network providers to provide additional power and hire data center development, space planning and construction teams. They’re also required to retain a full-time IT staff to maintain the equipment. Adopting a simpler, less expensive and scalable approach is a more prudent tactic for future success. A data center that can deliver capacity quickly and provide the needed adjustments for growth simplifies data center capacity planning, mitigates risk and helps “future proof” your IT strategy.

A Silver Lining to Cloud Computing

With a cloud computing approach, companies can outsource portions, or all, of their IT management, which typically lowers total IT costs per employee. It also enables companies to upgrade and back-up their systems through the provider, reducing upfront fixed costs. However, it sacrifices control of the hardware, and it can present important security and privacy concerns. These issues may be among the reasons that a 2016 Uptime Institute survey of global IT professionals indicated that only about 9% of organizations with more than 1,000 employees manage their IT assets via the cloud. Still, more and more businesses and organizations are undertaking the effort to move more of their workloads to the cloud.

Organizations can consume cloud-based services through the Internet publicly or privately by establishing a private connection via a VPN tunnel through the Internet. But a future-proof IT environment should offer alternative ways to connect to a provider from the data center. Private connections are more secure since traffic is not routed through the Internet. Secure, private connections such as a Connected Campus is a secure, scalable environment that can help prepare your future IT strategy. Facilities with scale, colocation and networking capabilities, along with local connections to on-campus cloud providers, are an effective solution for supporting the evolution of an IT environment.

The Inside Track on External Data Centers

Leveraging an external data center is one of your best bets for future-proofing your technology because it’s a more cost-effective approach. Companies own their servers but lease a portion of a data center. They then handle the equipment maintenance via contractors or with their own employees. This approach delivers similar flexibility and speed to the cloud computing approach, but it enables companies to remain in control of their hardware and data. According to the 2016 Uptime Institute data, 20% of global enterprises retain the majority of their IT assets in external data centers.

External data centers offer two alternatives of their own: wholesale and retail data centers.  The key differences between the two are found in the duration of the lease and the varied size of the tenant:

  1. Wholesale Data Centers – lease power, as opposed to leasing the server cabinets, as with retail data centers, or by the square foot, as with other real estate. Rents average about $150 per kilowatt, per month, but if you subtract the percentage of data center square footage that is not CSRF and calculate the savings in the depreciable electrical and HVAC equipment that you don’t have to purchase, the cost proves similar to traditional office rental prices. Tenants sign longer leases, the utilities are metered separately, and each tenant is responsible for buying, installing and maintaining their equipment.  This colocation option is a good fit when a lot of space, or more than a megawatt of power, is required.

With wholesale data centers, the tenants build out the interior of such properties at their expense; however, some experienced data center developers can handle the buildout and provide a turnkey data center in about three months. Wholesale data center Real Estate Investment Trusts (REITs) offer the benefit of having a more efficient leasing and development platform.

Retail Data Centers – these are smaller properties that lease server cabinets. Rental rates for these centers are usually based on a monthly, per cabinet basis or a monthly, per kilowatt basis with a fixed allocation of power. Retail properties are classified by network density, which is measured by the number and size of the networks.  They are frequently selected by smaller companies where storage requirements are minimal, the space is needed only for a limited time, or companies cannot provide the appropriate personnel to maintain it.

Retail colocation centers with lower-network density usually offer some geographic, infrastructure, or tenant-based advantages that make it an effective, flexible solution. Rents are similar to turnkey wholesale, but they sign shorter-term leases to a higher number of tenants. And, while they have less pricing power, retail colocation data centers and build to scale solutions are less risky than wholesale data centers due to the number of tenants.


IXPs resemble a large wholesale data center. But along with the basic amenities provided by wholesale centers, IXPs also house physical connection points to several networks and/or carriers. These include ISPs, cloud providers, content delivery networks and content providers.

IXPs tend to manage short-term leases at high rental rates and they can cost around $2,500 per square foot to build.

IXPs also sell cross-connects, which are fiber or copper cables that connect the equipment of different retail data center tenants. IXPs can charge approximately $200-400 per month per cable for the one-time act of running a cross-connect cable between the servers of different tenants or carriers. Network-dense IXPs will probably experience faster growth than wholesale enterprise data centers due to tenant diversification, interconnection and location. Additionally, REITs with exposure to IXPs can offer organizations an attractive risk-adjusted return.

You Can’t Predict the Future, but You Can Prepare for It

If predictions hold true, the transfer and storage of data will increase significantly in the future. Internet service providers, content providers, content delivery networks and cloud providers will likely need to invest in data storage to handle demand. With factors such as the constantly increasing number of applications available to the public, a rise in cloud deployments, the popularity of Video on Demand (VOD) services and a host of other factors, the need for more bandwidth is growing. Companies need data center solutions that offer a full range of flexible choices to meet both current and future business requirements, without causing disruption or having them compromise on support. It is therefore likely that third-party external data centers such as REITs will become a prominent alternative over the next five-plus years.

Future proofing your data requires an adaptive data center with three key components:

  1. Connectivity – alternative ways to connect to a provider from within the data center either through a cross connect or an exchange platform.
  2. Deployment Agility – the ability to shift between public and private cloud architectures needs to be as seamless, support foreseeable workloads, and handle spikes. A future-proof IT environment also, ideally, offers a range of services that can meet a varied customer demands.
  3. Scalability – the capabilities to grow as new opportunities present themselves. This demands an environment provider that delivers the added capacity to support match changing business needs as well as mitigating any inability to meet new and existing capacity requirements.

Although there are several viable approaches to data center solutions, each approach holds its own benefits and differences. The trick is to carefully consider and determine which one best suits your organization’s needs and to develop an appropriate strategy for the future of your business.

KW: data centers, future proofing, scalability, IXPs

Meta Description: Different approaches to developing more cost-effective, efficient data centers can help you prepare for the future demands of technology and achieve better agility, scalability and connectivity.