CyrusOne Executive Summary: Build vs. Buy

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5 Key Steps to Overcoming Capital Constraints in the Data Center

CyrusOne, a leader in the data center industry with 25 colocation facilities across the United States, Europe, and Asia serving 9 of the global Fortune 20 companies, recently published an executive report examining the issues an enterprise should consider in data center expansion.

The report analyzes factors to determine whether building a data center or leasing space from a colocation provider is advisable.

The report is a part of CyrusOne’s continuing focus on supplying intelligent analysis offering unique perspective on data center and IT infrastructure issues.  Content is designed to inform busy executives on big picture issues of importance relating to technology and IT performance.

Key Items to Review – Build vs. Buy
What are the main concerns that influence a decision on whether to build a data center or engage the expertise of a services supplier? CyrusOne executive Scott Brueggeman highlights a pattern of growing technology spending (projected by Gartner to be 8.2% from 2012 to 2014), and isolates company-owned data centers as an area for potential savings.

This IT growth requires smart organizations to carefully analyze the infrastructure approach that fits their needs, particularly with the two primary options being colocation (buying services) or construction (building a data center).

A Capital Intense Activity with Significant Risk
The build vs. buy question is critical due to the capital costs involved in building.  Brueggeman points out ownership of a data center can cost far in excess of the physical building itself.   When management, operations, utilities, and associated expenses are calculated, the cost of ownership can reach nearly triple the cost of construction of a data center.

Possible escalation of expenses can impact operations if construction budgets are not met.  The construction of a data center is approximately 7 times that of an office building with an equivalent footprint, due to the infrastructure, networking, and security demands inherent in the successful operation of such a facility.

Owner/Operated Requires Staffing, Detracts from Focus on Core Business.
Additionally, a company building a data center must understand operations require particular expertise in power, networking, maintenance and operations of complex infrastructure. In addition, staffing and benefit expenses can run into hundreds of thousands of dollars. Therefore, organizations must analyze whether staffing to operate a data center is a core competency since data center management can detract from the company’s focus on their primary business operations.

Financial Analysis
Ownership of a data center requires significant upfront costs, as well as costs associated with power, staffing, equipment, maintenance, and security.   In addition, depreciation of a data center occurs over 20-30 years, while equipment depreciation typically occurs over a 10 year span.  As colocation investments can be depreciated over a 3 year time frame, companies who build and operated their own data centers miss out on the tax advantages afforded those who choose colocation.

Additional Benefits of Colocation
Speed to Market:  Colocation increases the speed to market, as a major data center build typically takes longer than a year. However, similar modern infrastructure is available from a colocation partner within just months.

Scalability:  A corporate owned data center build faces the difficult task of accurately projecting business needs in the future.  Therefore, often times it is under-utilized and more costly to operate. Colocation offers much more flexibility and ensures the ability to scale more quickly and effectively.

Connectivity and Control:  A colocation provider likely has greater connectivity options through multiple carriers to address latency issues. And, like CyrusOne, they have proven security processes and offer military-grade security on site.

Downloading the Build vs. Buy Executive Report
A wide range of factors are considered in CyrusOne’s executive report.  It is available for download at http://www.cyrusone.com/landing-pages/build-vs-buy/ and other thought leadership material is available at www.cyrusone.com

About the Author
Scott Brueggeman is Chief Marketing Officer of CyrusOne. His responsibilities include worldwide strategic marketing, branding, public relations, and advertising.

Scott’s marketing experience includes Fortune 50 firms, as well as smaller high-growth companies. Before joining CyrusOne, he led marketing and inside sales at a data center hosting company where he launched its new brand architecture and integrated marketing activities. Under his leadership, the company received several awards of distinction from the American Marketing Association and Business Marketing Association.

Previously, he was Chief Marketing Officer at PEAK6 Investments, a high growth financial services firm located at the Chicago Board of Trade. He was also Vice President of Marketing at CareerBuilder where he launched the company’s first national TV ad campaign which propelled it to become the number one online job board. Scott also held earlier leadership positions at AT&T and PepsiCo.

Scott holds a Bachelor’s Degree in Science from the United States Merchant Marine Academy and a Master’s Degree in Marketing from the Kellogg Graduate School at Northwestern University.

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