Build vs Buy

Written by Darren Watkins, Managing Director, VIRTUS Published 2017-03-09 10:22:00

The decision to build a data centre facility or buy data centre colocation space has always been a choice for large organisations to consider when deciding upon their data centre strategy. There are of course several advantages and disadvantages to both approaches. 

Over the years, the data centre market has grown exponentially and become much more sophisticated. All current market trends including cloud adoption, virtualisation and the internet-of-things (or internet-of-everything as it has been called) only point to this growth continuing at a rapid pace.  Traditionally, building a fully owned data centre for the larger enterprise has been the obvious choice as it made sense financially and was often the only option. But over the years the scale at which you need to build a data centre to ensure its financial viability has become increasing larger; recent independent industry reports indicate it is only feasible if you have requirements of more than approximately 15-17MW of capacity. Today, data centre providers are building large hyper-scale data centres which allow many customers to house their equipment and enjoy shared economies of scale within a colocation environment.

For example VIRTUS’ first data centre in Enfield has a total IT load of 4.2 MW. Recently, they have brought online a single data hall that is almost 6MW. This just shows that scale at which you need to build to be financially and economically efficient.

In summary, you need to build to huge scale in order to make a data centre financially efficient. This scale has grown over five times in the past 15 years, and looks likely to continue to increase over the next 10 years and beyond.


Looking globally, there may be some markets that have a shortage of available colocation space, and in these instances an organisation may be forced to build. In the early 2000s, this was often a likely scenario, but in 2017, there is generally a good supply of data centre space globally, with most data centre providers offering facilities in multiple countries in several continents

In the London market, availability of data centre space has been good in the past few years, with more new space being built every year. Representing around 80 per cent of the total UK data centre capacity, CBRE says that London has 384MW of total data centre supply (at Q3 2016), which represents 44 per cent of the total across the major European markets, which also includes Frankfurt, Amsterdam and Paris. This provides healthy competition within the market, enabling organisations to find high quality facilities at very competitive prices.  It also enables organisations to deploy their servers in readily built facilities in short timeframes, which is often critical to the business. 

As the IT industry is one of the most rapidly evolving sectors in the world, the data centre colocation market needs to emulate this, as it provides the foundation to this growth industry. Data centre providers commit huge resources to R&D to ensure they their facilities are built to the highest level of efficiency and this benefit is passed to customers, enabling them to maintain a competitive edge on their competitors. This is an advantage to organisations that choose to buy outsourced colocation space, where they can be assured that the space and power they are purchasing today is future proofed technology and efficiency for several years into the future; this alleviates the headache and expense of huge data centre upgrades which would need to be made on a regular basis by the organisation to their own facilities, or risk becoming increasingly inefficient over the years ahead.

Should an organisation choose to build their own data centre, there is of course the advantage that they can build it to their exact specification and potentially in their ideal location. This may often appear to be an advantage over buying third party owned colocation space. However, many data centre providers now build their data centres in a modular fashion, and most are in highly optimised locations. The modular approach allows customers to be involved in the design specification and fit out of their space. This level of customer input enables a bought colocation data centre to be flexibly customised almost to the same level as building their own environment, whilst harnessing the expertise of the operator. 

Financial flexibility is an extremely important consideration for any data centre deployment, whether it is an internal corporate investment, or outsourced to a third-party provider. Setting up data centres is hugely capital intensive and demanding on CapEx, and beyond this building out the facility will often necessitate a provision for growth which in the short-term will make the facility inefficient.  And sometimes this leads to investing money in space which may never be used.

When buying colocation space, most providers will give their customers flexible contracts, with terms that allow for i) the amount of space contracted to shrink or grow depending upon your actual requirements over time; ii) the amount of time the contract runs for, providing ramp up periods for installation, without having to pay full rent until everything is successfully deployed; iii) the amount of power consumed, billing only for power used on a ‘pay as you go’ plan, which maximises budget during times of low or peak usage.

One other significant factor is the commitment which is made to a location when investing in your own facility, which obviously cannot change once this has been decided without significant cost.  If there is any reason to want to move location, due to market or geographic changes, this is very difficult within the organisation’s own built facility. However, if you outsource to a colocation provider, they will often have more than one data centre and this will therefore give you far more flexibility to move your deployment to another facility – either by physically or virtually moving the servers.

More and more enterprises are now adopting a hybrid cloud model for their IT infrastructure and being able to easily reach cloud services is essential. By choosing to colocate in a third-party data centre, customers are naturally in an environment with an abundance of other customers, many of whom will be offering cloud platforms and applications. This creates a natural ecosystem where customers can benefit from the services that other customers supply. Cloud solutions from providers like Google Cloud, Microsoft or AWS may be just a cross connect away within a premium data centre that provides a cloud access solution, and this ease of access to pubic cloud platforms makes for a very reliable environment.  

To support this, most data centres have a good selection of Tier I and Tier II carriers within their facilities who have provisioned extremely dense high quality fibre networks giving customers a wide choice of connections to cloud platforms and beyond. These connections are often 100% reliable, as fail-safe options can be aligned to support any potential outages.  For an organisation’s own build data centre, this option is generally considered too costly and so they are often made to work with one or two service providers only, limiting their reliability and potentially increasing the risk should an issue arise. 

With all this to consider, more and more organisations have made the decision to move from their old and often expensive and inefficient facilities into high quality, third party owned and managed data centres.  They are no longer looking to build their own data centres and many that did are seeking options to revert to a colocation/cloud solution and remove the considerable real estate costs from their businesses.

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