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When deciding whether to upgrade an existing data center, build a new one, or outsource to a colocation data center, begin by considering business needs, future plans and financial preferences. A 10-year total cost of ownership (TCO) comparison may favor upgrading or building over outsourcing, but strategic factors such as cash flow, deployment timeframe and more can outweigh economics.
Determine the right approach
Simple upgrades to existing equipment may be the easiest and most cost-effective solution. When minor upgrades like installing air-flow management solutions are feasible, keeping the IT load in house makes financial sense. Over 10 years, upgrading may save more than 60 percent compared to outsourcing.
While all data centers require the same types of capital and operating expenses, the cash flow model for a new-build data center and a colocation data center are very different. New build involves large upfront capital expense and variable annual operating expenses. Colocation data center space is more predictable, representing a steady monthly expense. Businesses that value lower capital expenses may view the colocation cost model as a benefit, despite a higher long-term TCO.
When a data center has an expected life of five years or less, outsourcing makes financial sense; but when expected life exceeds five years, building a new data center is the better financial choice.
Financial factors are critical to the build or outsource choice, but cost isn’t the only consideration. Decision “filters” such as the need for rapid IT deployment rule out an upgrade or new build in favor of outsourcing. Such filters, along with strategic factors, often exert a compelling influence on the decision:
Evaluating the risks and benefits of upgrading, building or outsourcing to satisfy increased IT deployment requires a considered approach to balancing cost against timeframe and the inherent values of a business.