Owned or shared: Which data center suits which company

Data centers are critical to a company’s success and performance. Today’s data center landscape is very diverse – there are different ways and models for companies to access data center resources. In order to make the right decision, it is important to obtain sufficient information about the different solutions in advance. The selection criteria include the server requirements, the power supply or the cooling infrastructure.

Large companies in particular are faced with the question of whether they should rent data center capacities or build their own data center right away. An obstacle in the decision is often a lack of knowledge about the real estate type “data center”. According to PwC, 41 percent have poor to very poor knowledge of these special properties. The yield expectations are even higher than for conventional residential and office properties. More and more investors and data center operators are therefore focusing on Germany.

Outsourcing to colocation providers

For small and medium-sized companies in the IT industry, it is usually worth using shared data centers. In so-called colocation data centers, racks are rented from a colocation operator depending on the required capacity. The costs are individually adaptable and manageable. The customer’s devices are operated in separate data centers with increased security standards in separate cages or even completely separate rooms. However, it is often also possible to rent just half or a quarter of a rack. Customers benefit from a large number of network operators and the resulting data transmission rates. This allows companies to scale and expand with little complexity and at low cost. This is particularly useful for companies that do not yet know which and how much capacity they actually need. In addition, the colocation provider provides infrastructure services and operational support for the customer’s leased hardware. This includes service work on the devices, patch and cross-connect services, admission of visitors and service personnel as well as project and logistics services. The security staff is also provided by the colocation provider.

However, this type of data center creates a dependency on the operator. Customers are bound by the legal form and ownership structure of the operator. This also includes aspects of sustainability as well as contractual conditions and data protection. The distance from the data center used also plays a major role for critical Internet services such as IoT devices. The greater the distance, the greater the risk of latency and delays in communication. Likewise, with a single, centrally located data center, there is a risk that there may be delays for all users during peak times. This also leads to an increased risk of catastrophic failure if traffic exceeds data center capacity.

Owned Data Center

Corporate data centers are built and operated by the organization itself as a private facility. These data centers can be located either directly in the company or outside of it. The choice of location is usually based on the criteria of connectivity, type of power supply and security.

Large tech companies in particular are increasingly relying on their own data centers.

These have the advantage of being fully tailored to the needs and requirements of the companies. Therefore, they are compatible with all software applications and internal processes. Companies that have special network requirements or expect high sales benefit from the predictable scalability. Do-it-yourself companies can also have extensive surveillance systems installed. This ensures transparency of your own bandwidth and power usage and makes it easier to monitor the tools you use most. This makes it easier to determine and adjust capacity requirements. In addition, the company data remains within the company and is not stored with third parties. This increases data security and makes own data centers almost indispensable, especially for public and political institutions. An on-site data center is particularly useful for data-intensive processes such as computer-aided design applications, industry 4.0 or machine learning processes in order to keep latency times low and to make processes efficient.

However, building and equipping your own data center requires significant investments and incurs ongoing maintenance costs. This is a major financial burden, especially for smaller companies if they want to remain competitive.

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Company size matters

Whether a company should build its own data center or rent racks from a colocation provider depends on various factors – but above all on the size and orientation of the company. Large companies and public institutions that have to adhere to strict security standards and high compliance guidelines as well as rely on data protection regulations should definitely consider investing in their own data center. In view of the high investment, it should be ensured in advance that your own data center is a viable system for the individual business goals in the long term.

Smaller companies, on the other hand, benefit above all from the support and know-how of the colocation providers. These offer a comprehensive range of advice, infrastructure and security. Even if a company experiences an unpredictable growth spurt, the colocation data centers are quickly scalable. However, these are only flexible to a limited extent and result in internal company data being stored by third parties.