Build or Lease? The Economics of Datacenter Facilities

buildorlease

December 2, 2014 | Posted in News

Recent research shows that for most companies leasing a datacenter facility is more economical thanbuilding and operating one.buildorlease

Willemstad, Curaçao – December 2, 2014 – In today’s fast evolving business climate, companies rely heavily on the availability, quality and consistency of their IT infrastructures in order to guarantee the continued success of the business.

The traditional approach was to host all IT infrastructure in-house. However, as business expands and demands for additional IT services increases, companies are increasingly faced with the challenge of meeting increased power and cooling demands.  As a result, sooner or later they are faced with the critical decision to either lease or (continue to) build-out their own datacenter facility.

Each approach has its own unique benefits and challenges.  Building a datacenter provides perceived control over the facility and its operations. On the other hand, leasing a datacenter presents an attractive operational expenditure model with better access to space and power, improved security and the ability to expand faster at a lower cost.

So what is the right decision for your business?  We take a look at some recent research to answer this question.

 

Datacenter facilities are your most expensive investments.

There’s a good chance that your datacenter facility is reaching its limits on space, power and/or cooling capacity.  A recent research by Forrester finds that there are three primary drivers behind this: data growth, virtualization and consolidation. Forrester estimates that storage consumes anywhere between 5% and 15% of the total power consumed by the datacenter. 

With data growth between 25% and 50% YOY, the explosion of data growth is having a real impact on datacenter capacity.  In addition, as companies drive their virtualization deployments to greater densities of virtual machines per physical machine, companies are driven to look for new facilities that can support more extreme densities.  Lastly, organizations are consolidating their multitudes of small data repositories and smaller datacenters into centralized regional sites.  

However, the decision to build a new datacenter can’t be underestimated, as it will likely be one of your largest infrastructure investments. Many companies don’t fully understand the costs associated with building and operating a datacenter before they commit to this option.  Similarly, many companies don’t fully assess the risks that they are potentially shouldering.  Before making this big decision, it’s imperative that organizations understand all the options, their pros and cons as well as their risks and costs.

Three factors determine the economics of datacenter facilities

It’s imperative that organizations objectively evaluate the financial impact on their business when considering leasing versus building a datacenter. Three critical factors that ultimately should help to determine your final decision are:

  1. Benefits – How will your company benefit from leasing versus building a datacenter?
  2. Costs – How will your company pay for your datacenter facility?
  3. Risks – How do uncertainties change the total impact of a datacenter on your business?

Let’s take a look on how the key benefits of leasing versus building a datacenter compare.

As can be seen from above, there are significant benefits for leasing a datacenter versus building one.

Now let’s take a look at the cost comparisons between the two options:

 

Again, some clear benefits and clarity in terms of costs for considering leasing over building.

Beyond Dollars and Cents: consider Core Competencies, Risk and Forecast

 

The financial benefits of building or leasing a datacenter are critical decision points but organizations should think beyond just dollars and cents.  Beyond calculating the total economic impact of a leased versus owned datacenter, recent study recommends organizations to ask themselves the following questions:

  • Is owning and operating a datacenter a strategic differentiator?  An import consideration in the lease versus build decision is core competency.  An important question to ask yourself is whether you want to be in the business of running a datacenter.  Can you operate a datacenter facility as well as, or better than, a third-party provider?  For most organizations, the answer is no, and they would be better off directing resources toward other more differentiated or strategic areas.  But in some cases, the answer is yes, if your organization is a producer or operator of technology or a large operator of industrial space, for example.  In these less common cases, when it is a strategic differentiator to run a datacenter, whether or not it makes economic sense for the company, building could be the more advantageous option.
  • How effective is my organization’s capacity planning capability?  An important early step in planning for a new datacenter is forecasting how much capacity your organization will require.  If you’re building a datacenter, you will need to forecast out the capacity for up to 15 years in advance, a difficult task for many organizations.  If leasing, the forecast only needs to extend to the life of the lease, generally less than five years.
  • What is my organization’s risk tolerance and culture?  Building a datacenter facility is accompanied by the risk associated with making a massive capital investment.  However, leasing a datacenter facility has associated risks involving the loss of control of every aspect of a facility.  Which of these risks is more tolerable to your specific organization?

Conclusion
In summary, there are clear advantages and disadvantages for leasing versus building a datacenter and each organization should do their own due diligence in order to determine what’s best for their long-term success.  However, it is clear that from a purely economic assessment perspective, the choice of leasing a datacenter greatly outweighs that of building a datacenter facility.  Furthermore, organizations should consider additional critical factors such as their core competency for running and operating a datacenter and also the associated risks and cultural tolerances that each organization can afford to sustain.

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Partnership between Telecommunications Services of Trinidad and Tobago, Limited (TSTT) and Curacao Technology Exchange, N.V. (CTEX) to deliver high-end datacenter and Cloud services

July 16, 2014 | Posted in News

Companies reach agreement to jointly deliver advanced communications, datacenter and cloud solutions to theCaribbean and Latin America market.

Willemstad, Curaçao – July 16, 2014 – Telecommunications Services of Trinidad and Tobago Limited (TSTT), and Curaçao Technology Exchange N.V. (CTEX) today announced that they have reached a partnership agreement to deliver high-end communications, datacenter Colocation, Cloud, managed services and disaster recovery services to customers in Trinidad & Tobago, Barbados and other countries in the region. TSTT will leverage CTEX’s, Tier-IV datacenters to deliver high-end, Colocation, enterprise class Cloud solutions and managed datacenter services, while CTEX will leverage TSTT to provide high-performance communication services to customers in Trinidad & Tobago and other countries in the region. The companies will jointly service the needs of multinational organizations and others that have geographically dispersed locations or those that require their critical technology assets to reside in a highly secure datacenter in a safe jurisdiction.Partnership TSTT & CTEX

 ”We are very pleased about our partnership with TSTT. Our customers have high expectations about reliability and availability of their critical technology infrastructures and core business systems. CTEX’s Tier-IV datacenters are certified by the Uptime Institute for both design and constructed facility thereby ensuring the highest levels of redundancy and availability. Hence we stand by our 100% uptime commitment for all critical datacenter components. Customers in Trinidad & Tobago and the region benefit from this partnership by gaining access to unified communication and datacenter services,” said Anthony de Lima, CTEX’s Chairman & CEO.

“We are excited about partnering with CTEX. CTEX’s Tier-IV datacenters are situated in Curaçao, a neutral jurisdiction, located outside the traditional hurricane and seismic active zones, boasting strict European-based privacy laws, a multilingual workforce and great fiscal benefits for international companies. These are the only datacenters in the Caribbean and Latin America to have both the design and facility, certification by the Uptime Institute. Through this partnership, TSTT will expand its services offerings. Customers in Trinidad & Tobago and the region will benefit from this partnership by getting access to solutions that will help them improve their total cost of ownership, leverage an advanced technology platform to run their business systems while having access to a high-end prime or disaster recovery datacenter,” said Rakesh Goswami, TSTT’s Executive Vice President of Government and Enterprise Services.

TSTT and CTEX aim to drive significant growth by jointly servicing market opportunities where customers require high-end datacenter and Cloud services.

About TSTT

TSTT Limited is jointly owned by National Enterprises Limited (NEL) which in turn is majority owned by the Government of Trinidad and Tobago, and Cable & Wireless (West Indies) Limited, (C&W). TSTT is the country’s largest provider of communications solutions to the residential and commercial markets and its leading edge products are designed around its IP-based core infrastructure and marketed under its BLINK and Bmobile brands. In addition to fixed line and mobile communications, the company has an innovative line of BlackBerry; Android-based and iOS devices; Broadband access including best-in-class Wi-Max, HSPA+ 4G and LTE technologies; Metro Ethernet; TelePresence and Video Conferencing; subscription-based IPTV as well as business and home alarm monitoring services. The company has also installed over 50 Bzones -which are large Wi-Fi zones in high traffic areas offering free unlimited data at 4G speeds to its customers in high traffic areas.

TSTT is the industry leader deploying both wireless and fiber optic networks to deliver voice, data and multimedia capabilities making it also one of the most advanced solutions provider in the country. The company’s customers include key industry leaders in the finance, energy, government, manufacturing, education, healthcare and tourism sectors. www.tstt.co.tt

ABOUT CTEX

CTEX is building four Tier-IV, green certified, data centers and an internet exchange point from which co-location, interconnection and managed services will be delivered to enterprise, government, and institutional clients in the Caribbean and Latin America. In March this year, CTEX officially opened the first of four Uptime Institute certified Tier-IV certified datacenters. The company is deploying the latest data center technologies to support high- density cloud computing infrastructures. CTEX offers six core solutions including Cloud, Managed Colocation, Managed Services, Virtual Datacenter, Managed Continuity and Professional services. CTEX’s Tier-IV data centers are located on Curaçao, safely outside the hurricane belt and major seismic zone in a politically neutral jurisdiction. The company is funded by local pension funds, development banks, and regional financial institutions. For more information visit: www.ctexpartners.com

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CTEX at the IMN New York Conference

June 5, 2014 | Posted in News

Staying Ahead of the Curve on Services”

CTEXNY-IMNNew York, New York, June 5, 2014 – As datacenters continue to evolve, service providers and enterprise customers alike are facing dramatic industry shifts. At this years 4th Annual Spring Forum on Financing, Investing & Real Estate Development for datacenters in New York, various industry specialists and stakeholders provided valuable insight on where the industry is heading – the opportunities.. read more here 

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