The Cost and Control Concerns in Data Center Outsourcing: How Colocation Provides Value

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Moving to a colocation strategy sometimes creates angst among IT professionals.  In many cases, they’re concerned with giving up control of the data center infrastructure.  And in other situations, IT managers need to analyze whether colocation will bring down costs and mitigate downtime risk, as well as provide additional strategic benefits.

In recent years, numerous companies, especially emerging and medium-sized businesses (EMBs), have moved to colocation.  Several factors are driving this colocation trend.

The “Great Recession” created a difficult environment for companies to invest in their own data center facilities.  With money tight and increased market uncertainty, businesses have been choosing to lease colocation space instead of building, owning and operating a data center. Gartner Inc., a respected industry analyst, does not believe this trend will subside unless capital markets improve significantly.

The shifting priorities of CIOs also contribute to the attractiveness of colocation.  In a Gartner survey of 2,014 CIOs across all industries and geographic locations, the top two priorities in 2008 were improving business processes and attracting new customers.  However, the focus for 2014 is on growing the business and improving operations.

Although attracting new customers and growing the business seem synonymous, the Gartner study provides insight into why there’s a distinction.  According to the CIO participants, business continuity and risk management have become more than insurance policies.  A resilient environment contributes to business growth – which is the number one priority for today’s CIOs.

Why Companies Select a Colocation Strategy

Colocation helps accomplish an organization’s goals in an economical, low-risk manner.  A few of these advantages include:

  • Diverse Sites – Rather than have a company’s entire data center operation in one location, CIOs can better protect the business by relocating some or all of its IT infrastructure to a colocation site.

An off-site location can provide a different power grid and road access.  If power or access issues develop at the corporate headquarters, chances are the off-site data center operation won’t be affected.

With advanced facility design and leading-edge equipment, proven colocation providers offer high levels of redundancy and reliability.  They also staff their facility around-the-clock with IT experts who monitor and manage the facility.  Most EMBs find it challenging to fund a similar data center operation.

  • Network Connectivity – A good candidate for providing colocation services will have access to multiple network service provider backbones.  They’ve developed strong carrier relationships and forged agreements most EMBs would find difficult to do.

However, the best colocation providers are carrier-neutral.  In other words, they don’t lock companies into any carrier for network connectivity.  Instead, companies can decide which carriers will best meet their requirements.  A colocation provider creates a market environment in which their customers can buy bandwidth.  Therefore, if one carrier experiences an outage, the colocation provider has other carrier networks available to provide Internet connectivity.

  • Cost Economies – Creating a high-availability environment is cost prohibitive for many EMBs.  Fortunately, data center outsourcing provides dedicated space, power and bandwidth in an economical solution.  Rather than incur significant capital outlays for building a facility, companies turn to colocation for a low, monthly operating expense.

This monthly fee typically includes three things:  floor space, power and bandwidth.  Colocation providers usually offer additional services, including monitoring and “remote hands” services for an added fee.

  • Multi-Purpose Space – Not only does colocation provide a sound disaster recovery strategy, but it also provides a testing environment.  When companies launch a new application or modify components within an infrastructure, they need to first test performance before moving to a production environment.

Colocation space can be configured to emulate multiple environments.  It will help determine how resilient the application or infrastructure will be under various conditions.

Businesses have a choice when acquiring data center space.  They can build a facility they own, operate and manage.  They can lease a facility and retrofit it to their requirements.  Or, they can move their infrastructure to a colocation provider’s data center facility and lease space on a monthly basis.

According to Gartner, colocation is usually the most cost-effective strategy for data center footprints of 3,000 square feet and below.  The research firm also believes the colocation market is maturing, with the U.S., Canada and Western European markets offering the most stability.

The colocation trend continues to grow for good reason.  CIOs and their companies get the best of both worlds:  they gain access to an off-site facility without giving up control over managing their infrastructure.  And, colocation frees up budget, eliminates facility management issues and helps reduce the risk of costly downtime.  And that’s a tough value proposition to beat.

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