Are there too many options for outsourcing data center operations?

Outsourcing data center operations is popular among businesses seeking flexibility and low costs, but the plethora of providers muddies the water.

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Outsourcing data center operations has become mainstream, but that doesn’t mean it's simple. As a former data center owner and provider, I appreciate the value of outsourced data centers. Done right, outsourcing simplifies a very complex part of business, saves money and provides greater flexibility and reliability. But it does create a new set of challenges that need to be understood and managed.

Take expansion. Last summer, one of our customers, a law firm, was presented with the right of first refusal for an expansion less than 60 days after signing a lease. The firm hadn't even started moving, and it was already being asked to decide whether to expand its footprint.

Business model and market inconsistencies

The seeds of today’s push toward data center outsourcing were planted nearly a decade ago, when many of today’s dominant data center providers established models that provided economies of scale for their customers. Ever-increasing equipment densities, increased use of server virtualization and the rising price of energy helped accelerate migration to the point where data center outsourcing is commonplace.

Today, the market is flooded with data center providers, each attempting to differentiate itself from its competition. It's good to have options for outsourcing a data center, but they make choosing a provider much more confusing. For example, last month, five providers all submitted proposals for a 300 kW data center customer.

Each one offered “pass-thru metered pricing” for power. Despite the cost of electricity ($/kWh) being the same, the cost varied by 17%, depending on each provider’s approach to pricing power. Many of the details were found in the lease and not in their responses to the request for proposals.

Nor are data center offerings consistent, even within a single large provider. Many of their sites were acquired from other providers, and the facilities don’t always match the parent company's standards. In addition, new designs are being modified to reflect market conditions or specific building limitations.

During a recent site-selection engagement, we toured data centers in a major U.S. city, and not one of the providers offered N+1 backup generators for their customers, despite the presence of three international data center providers known for N+1 concurrently maintainable sites.

Balancing the needs of the organization

The time, cost and risk of migrating a data center infrastructure should motivate organizations to take the selection of a data center provider seriously. The data center has become the nervous system of the entire organization, and what was once solely a facilities and IT decision now requires input from security, compliance, real estate and finance departments.

Problems tend to arise when one or two groups within the company dominate the decision-making process at the expense of the others. Long-term success is dependent on meeting the requirements of each department and balancing those requirements appropriately.

I saw a case, for example, where finance and facilities drove the process, selected a site and signed a 10-year lease at a location that was not staffed around the clock. The IT organization was forced to add staffers to support the facility 24/7, plus the “remote hands” needs and service-level agreements as expected by the business units. Had IT been involved in the process, that situation could have been avoided.

Data center administrators must consider the overall value of the transaction, the length of the outsourcing relationship and how complexity may affect success. Deciding whether to outsource a data center requires the thoughtful input of a qualified team to understand the range of service options and what factors differentiate them.

Let us know what you think. Write to us at editor@moderninfrastructure.com

This was first published in March 2013

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