Connecting Technology and Business.

The Economics of Data Center Operations

The economics of operating a data center are comprised of many items that factor into the total cost of ownership.

1. Resiliency: Whether building a data center or evaluating provider facilities, cost is derived from the level of redundant infrastructure built into it. The Uptime Institute data center tiers describe criteria to differentiate four classifications of site infrastructure topology based on increasing levels of redundant capacity components and distribution paths.

2. Down Time: The historical cost model for operating IT effectively has been the cost of down time. The data center reliability attribute is a key ingredient to how the data center should be designed and what the requirements of infrastructure are. The cost of down time is drastically different among the different types of businesses and the facility design considerations should reflect as much. The amount of risk a business is willing to assume in maintaining the uptime of their IT has a large impact on the cost of a data center.

3. Staffing is an often overlooked or underestimated factor in determining the cost of data center operations. In addition to IT staff, facilities staffs ensure data center reliability and provision and maintain electrical and mechanical systems. Security staff requirements will vary depending on the size of the data center and individual needs of the business, but often require on-site personnel 24 hours a day and 365 days a year. If you are building a company data center, does the business have the experience in designing, building and operating it?

4. Financial considerations:

a. Site Selection: If you have the luxury of selecting a location throughout the U.S. for a data center site, incorporate local utility rates and tax incentives into the overall cost.

b. Cost Segregation: Research the use of audit estimating techniques to segregate or allocate costs to individual components of property (e.g., land, land improvements, buildings, equipment, furniture and fixtures, etc.).

c. Capital Recovery Factor: When evaluating the true capital cost of a data center, look at capital recovery factor, which is the ratio of a constant annuity to the present value of receiving that annuity for a given length of time.

d. Internal Rate of Return (IRR): What is the estimated IRR for the data center build project? IRR is an indicator that is commonly used to evaluate the desirability of investments or projects.

5. Timing: Consider the economics of technological obsolescence if building a data center. Weigh the costs of alignment with business and IT strategies against the risk of obtaining additional funding to increase power and cooling capacity to accommodate higher IT densities down the road.

6. Vertical Scalability: Scale is top of mind throughout most aspects of IT. The significance of scalability in the data center carries a different connotation and has a higher price tag if not considered properly. Vertical scalability means cloud computing-like elasticity capabilities incorporated into data center infrastructure and available floor space. It means turning up the dial on power and cooling densities without disrupting the business. The gains of turning up that dial equate to agility in operations adaptability to changing business needs and future cost avoidance in provisioning additional power and cooling to match increased requirements of IT.


An implicit value is derived from a data center strategy that is the coalescence of internal and financial perspectives. The misconception that going high-density in the rack equates to a higher cost is usually not founded with the realities of what efficient infrastructure is capable of. The new datacenter is equipped to handle and scale with high density servers and will ultimately save money through the power and cooling efficiencies gained. Examine all aspects of the economics of data center operations in order to understand the implications of risk assumption and true costs involved.