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Big IT shops look to rent data center facilities

Exorbitant costs have forced IT organizations to reconsider the wisdom of buying data center facilities.

IT organizations have become increasingly reluctant to invest in data center real estate. Building and operating data center facilities is a complex, expensive and risky process and companies now want alternatives.

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Negotiating a successful data center outsourcing arrangement

Outsourcing the backup data center

Tim Sander, the vice president of IT at University Park, Ill.-based Applied Systems Inc. is in the business of providing Software as a Service (SaaS) for independent insurance agencies. Because building and maintaining a data center didn't make business sense for the organization, Applied Systems uses the data center provider Terremark Worldwide Inc. to deliver IT services.

Sander said his company faced $150 per square foot in construction cost for its data center, plus the extra expenses of facilities maintenance, 24 hour security, fire suppression, and more. "Unless we were building a data center that would be 80% occupied, we wouldn't recoup the cost over the 10-year lifecycle of a data center," Sander said. "Frankly, running a facility like that isn't our core business. Trying to manage an entire facilities infrastructure is a distraction."

In addition, the local power utility wouldn't give Applied Systems the capacity on its local grid in the Chicago suburbs to run a 1 to 2 megawatt data center

High data center prices get higher
Data center construction projects can come with a nine-digit price tag and IT organizations that don't build data centers on a regular basis can wind up building the Taj Mahal. "Companies hire a bunch of consultants whose fee is based on the size of the project, and they end up with a behemoth that's hard to operate," said Chris Crosby, the senior vice president of corporate development at data center leasing company, Digital Realty Trust. "These data centers are one-off projects. It's the equivalent of you building a Toyota Camry in your garage."

Over the past several years, the capital cost to build a data center has increased.

Over the past several years, the capital cost to build a data center has increased, and the true operating cost associated with supporting IT operations has become clearer. According to a Forbes article by Ken Brill, the executive director of the Uptime Institute, the facilities capital and operating cost associated with supporting a single $2,500 server is $8,300 to $15,400 (depending on the facility's redundancy levels).

The true cost of supporting IT equipment is often hidden, lumped into corporate real estate, paid by a different department, or misrepresented. But the economic climate has forced executives to look more closely at the money pit of IT facilities.

A company's decision about whether to build and maintain its own data center facilities has begun to move from the machine rooms and into the executive suite. For many companies, managing the software and servers can be a business differentiator, but managing the delivery of power and cooling to those servers is not.

Jeff Zisk, CEO of Speed FC, is a data center colocation customer at the Planet. His company provides Web development, hosting, fulfillment and call center services for companies selling over the Internet. "Our developers and IT operations people are our employees and work for us; development and IT operations are core competencies," Zisk said. "But managing a facility, with all the redundancy that's necessary -- multiple Internet access points, diesel generator backup -- we don't think we can differentiate ourselves with that competency."

Many executives are not ready to hand over the keys to the entire IT operation, data center leasing and facilities outsourcing can be an attractive option.

"We have noted an emerging trend of large organizations -- in industries that have historically operated their own portfolio of data centers -- [that are now] considering for the first time an outsourced facility to serve as their enterprise/primary data center," said Julian Kudritzki, the vice president for development and operations at Uptime Institute Professional Services.

The true cost of supporting IT equipment is often hidden.

The flip side of this trend is outsourcers' ability to meet this new market demand from sophisticated organizations that have previously been in the data center business themselves, Kudritzki said.

"Clearly, there is a potential boon for the outsourcing industry, as any one of these organizations will require multiple megawatts of UPS and tens of thousands of square feet of computer room. However, the majority of domestic outsourced facilities that we have reviewed against the Uptime Tier criteria have been Tier 2, and organizations need to do due diligence on the providers."

Data center facilities offerings
Several companies offer data center facilities leasing and services. The offerings can be broken down into a few categories: wholesale data center space, colocation and managed services.

According to Tier1 Research, wholesale data center space is typically offered in increments of 10,000 to 20,000 square feet -- individual white rooms for servers. In these large leasing situations, tenants have more control and flexibility over infrastructure, layout, security systemsand so on.

Colocation is typically characterized by shared data center space, separated by cages. Cages can range from 500 to 5,000 square feet in size, where the colocation company provides full-facility maintenance, including fire suppression, security, power backup, and heating, ventilation and air conditioning. Tenants typically have less control over the facilities aspect of their space.

Managed services are often offered by the same companies that offer data center leasing options, and include more comprehensive IT outsourcing, managing the servers and software.

The model an IT organization selects is based on the organization's IT demand, flexibility and security requirements.

Large companies offering data center leasing options include 365 Main, Digital Realty Trust, CoreSite, Equinix, Dupont Fabros, Savvis, SunGard, Terremark, and hundreds of others.

Selecting a data center facilities provider
Choosing a data center provider can be difficult. Dan Golding, the vice president and research director for Tier1 Research, said many IT managers don't have the expertise to make the decision, and uptime service-level agreements [SLAs] aren't much help.

The dirty little secret of data centers carriers is that [service-level agreements] are meaningless.
Dan Golding,
VPTier1 Research

"The dirty little secret of data centers carriers is that SLAs are meaningless," Golding said. "If you negotiated really hard for a better SLA, did it change anything in the data center? It might have changed your cost structure."

SLA penalties do not offset the cost of downtime and are not an indicator of a data center's stability, he said. "The only prediction of future performance is past performance," Golding said. "Ask to see the last two to three years of outage numbers. It's not necessary for a provider to have zero outages, but zero really bad or preventable outages."

A key factor in selecting a data center provider is finding a company that offers room to grow. Applied Systems' Sander learned that lesson the hard way. Before moving to Terremark, his IT department outgrew his former data center facilities provider, AT&T.

"We ran out of power and cooling," Sander said. "We couldn't get more space in our existing environment and we were beyond our watts per square foot,"

According to Sander, Terremark offers 160 watts per square foot, and its NAP of the Capital property is situated on 40 acres, with one data center built and room to build five more as demand requires. "I'm not going to have to move data centers again. because I'm locked out of space," Sander said.

Another factor in selecting a provider is ensuring that the facility meets certain regulatory standards. Payment Card Industry (PCI) compliance was a deciding factor for Speed FC to go with the Planet.

"PCI compliance is all about how you're managing credit card data," Zisk said. "For us to be compliant, we have to have full-time cameras on the equipment. We have to have full-time cameras on all the access points to the equipment. They have cameras recording everybody going in and around our servers. There are 12 individual requirements."

In addition to meeting regulatory requirements and room for growth, IT managers need to evaluate the company's preventative maintenance procedures, review how companies handle downtime, and consider factors such as network connectivity, geographical location for both latency and disaster issues, among other criteria.

Managing IT in a leased data center facility
Some IT managers are unsettled by the idea that they can't put their hands on their servers, but data center leasing customers are adjusting to the situation.

Zisk said his IT team visits the Planet data center site once every other week to restart servers and identify issues with the machines. But day-to-day management issues are handled remotely. "We have access to update the content on every box remotely. We can apply service patches," Zisk said. "If we had a server with an issue, and needed it restarted immediately, the Planet could do it. Most colocation operations have remote 'hands and eyes' services."

Sander's team at Applied Systems goes on-site even less frequently. "We generally have someone in one of the facilities once every eight weeks for a health check and scheduling maintenance," Sanders said. "We have 99% remote capability, managed power controllers to remotely reboot any device in the environment."

According to Tier1's Golding, remote management is the best way to manage any IT asset. "Being in a wholesale data center facility forces enterprises to do what they should be doing anyway: remotely managing their equipment in a lights-out environment," Golding said.

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