Analyzing the Cost Benefits of Colocation

Colocation facilities are able to simulate large IT infrastructure features that normally only enterprises can enjoy. Setting up a private data center with every feature including redundancy, security and reliability can be very costly.

Colocation can be a huge cost saving service for companies of all sizes and is a growing trend even among some larger enterprises. This trend can be attributed to two things. First, in this economy, many companies are trying to cut costs. Competition within every industry has increased greatly, prompting enterprises to cut down on costs in order to maintain profitability. Second, by placing all of the responsibility of IT management on colocation facilities, firms can concentrate on their core functions.

Comparing the Private Data Center to Colocation

How do you compare the cost of these two drastically different approaches? Here is an estimation example. For single server space, a colocation facility will probably charge around $100 per month. In addition, there are also costs associated with the provision of bandwidth and Internet connectivity. These can total over $1,000 per month for a connection with a speed of 100 Mbps. These costs also include the redundancy features that are provided by colocation facilities. It must not be forgotten that such facilities have a network, power and cooling infrastructure that is typically completely redundant. Also these facilities provide top level security, which is included in colocation contract fees.

Now, compare these costs with the costs of setting up a similar in-house data center. Simulating the infrastructure and services that are provided by colocation facilities can be much more expensive. The average cost to construct a data center from the group up ranges from $20 – $25 million dollars.  This cost doesn’t take into account the ongoing operational cost of the facility.  These facility cost can start to add up quickly.  Colocation facilities lower the cost for each customer by splitting the total cost across multiple different companies. In addition, they also feature multiple provider options. This is a main reason behind their reliability and server uptime guarantee.

Colocation facilities also incur the energy costs associated with operating the servers and ensuring their temperature is regulated via cooling systems. These costs are already included in a company’s fee. In addition, colocation can spread them across all their clients, meaning each customer will end up paying less.   When a privately owned setup is established, these costs are realized fully by the business itself. They have to deal with their energy use and remember to handle the bill when it comes. The cost of a trained staff of IT professionals is also something that should be kept in mind. Within colocation facilities, IT personnel are present at all times to assist with a variety of tasks. The initial installation of the servers and other equipment requires expertise that colocation facilities specialize in. In addition, making sure that hardware and software malfunctions are fixed instantaneously require their presence, as well. This type of availability and expertise is not easy for private data centers to maintain. It often requires the creation of a whole department or contracting with a technician to be on call. These both are costly for companies that may not have extra capital on hand.

Consequently, comparing costs associated between a private infrastructure and a colocation facility tip the balance in favor of colocation.

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