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What is the ideal data center sourcing arrangement?




Bernard Cobb
Portfolio Lead, Modular Data Centers

HP Critical Facilities, Americas Region


What, exactly, is the ideal data center sourcing arrangement?


An organization may have separate cost centers for facilities and IT, but in reality, there is only one pot of corporate capital. And as we all know, the more capital you tie up in facilities, the less you have available to invest in IT. The challenge that most corporations face is to find the right balance between investing in data center facilities or investing in IT infrastructure.  Business needs dictate the path taken, but with that, corporations do have other sourcing options depending on their priorities.


For some managers, IT is not seen as being core to their business. They will generally look to outsource all IT functions, including data center operations.  This model provides IT services entirely through an OPEX model but, generally speaking, on-going operating costs are higher than if they perform some functions themselves. For others, some level of control over IT is preferred, but even then there are further options to consider.


If the priority is to minimize capital outlay only, the best option is to utilize a co-location or hosted service provider (SP).  This option can have its drawbacks for some businesses, as the company is effectively renting shared space.  Although the business has control over the IT infrastructure, platforms, applications and logical security, they do not maintain complete control over physical access.  Similarly, there is not a maintained control over facility change management or maintenance scheduling.  Granted, they may sign a service-level-agreement with a hosted SP, however, this only outlines the parameters within which the SP will operate the facility.  Once again, this is an OPEX model, with those on-going expenses generally costing less than if they had fully outsourced IT delivery, but still costing more than if they had managed everything themselves.


If the priority is to maintain full control and minimize operating costs, then a savvy IT manager could invest in an “owned facility”. Keep in mind that this can involve significant upfront capital, and most likely will require capital financing. Creating the necessary business cases and obtaining approvals required to gain this funding can itself be an onerous and lengthy process.  Because of this, capital funding is generally sought after and approved once, and for a sufficient amount of money to cover data center needs well past immediate requirements.


Service providers do not have the same options available as do their customers.  They cannot simply rent space from another provider and resell competitively.  They must invest in facility infrastructure at the start, before they can offer their services, let alone generate any revenue. Regardless of industry, however, minimizing capital investment in a data center -- while managing and controlling operating costs -- is a key consideration for any organization.


There is no one option that is the best fit for every business model. The data center industry needs to address capital requirements with a solution that best accommodates the unique facility requirements of each enterprise.  Each of the current options has its positives and negatives, and each organization must decide if the capital they conserve is worth the control they lose. 


Back to the original question I posited:  What, exactly, is the answer for an ideal data center sourcing arrangement? The capital question needs to be addressed, and the solution needs to accommodate it for the best fit for the enterprise. There are benefits with each, so perhaps what’s required is a new model that leaves the disadvantages behind.


I would be interested in hearing your thoughts on this subject, and in the coming weeks, HP will share more forward-thinking ideas on this topic, too.



Bernard Cobb has over 20 years of experience in business consultancy and project management.  Since 2007, he has been a Critical Facilities Trusted Advisor, building business cases, managing the design and/or overseeing the build of both small and large data centers throughout Canada, the US and parts of South America.  He had managed data centers spreads from 50kW to 20MW solutions, and his experience end-to-end has given him a unique perspective within each facet of the decision-making process.


Mr. Cobb began his career in venture capital, working to prepare companies for their Initial Public Offering (IPO) or merger/takeover.  He was an acting Chief Financial Officer of an expanding petroleum engineering company, and upon their successful merger with a European energy services company, he returned to business consulting, engineering project management and critical facilities consulting.


Presently Mr. Cobb is responsible for HP’s Americas Consulting portfolio of Modular Data Center solutions.



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