Hyperscale vs. colocation: Go big or go rent?

Here’s
the
situation:
You’re
the
CIO
or
similarly
empowered
representative
of
an
organization.
Different
voices
within
your
business
are
calling
attention
to
the
awesome
scalability
and
power
of
hyperscale
computing,
which
you’ve
also
noticed
with
increasing
interest.
Now
the
word
comes
down
from
on
high
that
you’ve
been
tasked
with
designing
and
implementing
your
company’s
hyperscale
computing
solution—whatever
that
should
be.

Your
organization
already
has
an
ambitious
agenda
in
mind
for
whatever

IT
infrastructure
you
wind
up
choosing.
The
company
is
working
with
extremely
high
volumes
of
data
and
expects
this
situation
to
continue
or
grow.
So,
you’ve
got
a
ton
of
assets
earmarked
for

data
storage,
with
many
more
workloads
on
the
way.

Your
business
isn’t
expecting
this
data
to
collect
dust
in
a
vault,
either.
Company
leadership
is
already
trumpeting
new

data
processing
applications
and
how
smoothly
already
favored
apps
will
be
integrated
into
the
new,
high-performance
system.
Still
others
are
wowed
by
the
promise
of

artificial
intelligence
(AI)
and

automation
that
hyperscale
data
centers
offer.

For
these
reasons,
there’s
a
lot
of
positive
support
for
going
ahead
and
building
a

hyperscale
data
center,
customized
expressly
for
this
business.
However,
that’s
just
one
set
of
opinions.

Other
leaders
remind
you
that
the
company’s
primary
allegiance
is
to
the
bottom
line
and
that
your
solution
needs
to
be
cost-effective
and
“thread
the
needle”
by
providing
the
most
return
for
the
least
investment
possible.
These
voices
forcefully
advocate
using
a
colocation
solution,
where
your
company
will
instead
rent
space
in
a
hyperscale
data
center,
thus
saving
USD
millions
or
even
billions
in
construction
costs
and
other
associated
charges.

Both
options
offer
compelling
arguments
for
their
adoption.
So,
hyperscale
vs.
colocation—which
do
you
choose?

Big
systems,
costly
decisions

When
deciding
between
building
hyperscale
data
centers
or
renting
in
colocation
data
centers,
there
are
many
variables
for
hyperscale
customers
to
consider.
To
effectively
weigh
the
decision,
one
must
consider
the
total
costs
of
ownership
versus
renting—plus
a
range
of
other,
tangentially
related
issues.

Both

data
center
options
have
their
advantages
and
disadvantages.
Both
options
deliver
complex

Software-as-a-Service
(SaaS)
solutions.
Both
are
based
on
complicated

digital
infrastructures
and
depend
on

virtualization,
the
underlying
concept
of

cloud
computing.

To
make
the
smartest
decision
possible,
it’s
important
to
first
focus
on
each
option,
and
check
out
their
advantages
and
disadvantages.

What
is
a
hyperscale
data
center?

Hyperscale
data
centers
represent

data
storage
on
a
gigantic
scale.
According
to
the
Independent
Data
Council
(IDC)
definition
of
a
hyperscale
database,
as
reported
by

VIAVI
Solutions
(link
resides
outside
ibm.com),
to
be
considered
a
true
hyperscale
data
center,
it
must
contain
at
least
5,000
servers
and
occupy
at
least
10,000
square
feet
of
physical
space.
There
is
no
hard-and-fast
guideline
concerning
energy
usage,
although
most
hyperscale
data
centers
use
somewhere
between
100
megawatts
(MWs)
and
300
MWs.

Components
that
go
into
building
a
hyperscale
data
center

It’s
not
an
overstatement
to
say
that
creating
an
on-premises
hyperscale
data
center
from
the
ground
up
is
a
major
endeavor—one
that
will
require
deep
pockets
and
considerable
effort.
Even
a
simple
listing
of
basic
components
provides
a
sobering
idea
of
the
project’s
overall
complexity
and
pricing:

• A
  tract
  of
  land
  that
  can
  support
  a
  structure
  of
  at
  least
  10,000
  square
  feet.
• Development
  costs
  to
  survey
  the
  land,
  clear
  the
  site
  and
  prepare
  it
  for
  construction.
• One
  structure
  with
  at
  least
  10,000
  square
  feet
  of
  floor
  space.
  It
  should
  be
  built
  sturdily
  enough
  to
  support
  normal
  operations
  as
  well
  as
  withstand
  normal
  building
  “wear
  and
  tear,”
  plus
  any
  relevant
  local
  conditions,
  such
  as
  extreme
  weather
  situations
  or
  even
  geological
  occurrences.
• Fire-safety
  equipment
  that
  is
  sufficient
  for
  protecting
  the
  building
  and
  its
  operators,
  such
  as
  sprinkler
  systems
  and
  extra
  extinguishers,
  as
  well
  as
  the
  development
  and
  instruction
  of
  fire-safety
  Standard
  Operating
  Procedures
  (SOPs).
• A
  parking
  lot
  of
  sufficient
  size
  to
  support
  the
  number
  of
  vehicles
  used
  by
  data
  center
  operators,
  as
  well
  as
  ample
  parking
  room
  for
  any
  emergency
  vehicles
  that
  might
  be
  needed.
• Cooling
  system
  equipment
  to
  offset
  the
  immense
  heat
  generated
  by
  5,000
  servers
  operating
  24
  hours
  per
  day.
• Specialized
  water
  lines
  and
  piping
  to
  support
  the
  cooling
  system.
• Dedicated
  and
  reinforced
  power
  lines
  and
  equipment
  to
  safely
  handle
  massive
  electrical
  loads.
• Back-up
  power
  systems
  in
  case
  of
  mainline
  outages.
• At
  least
  5,000
  servers.
• Metal
  (or
  wooden)
  racks
  for
  housing
  5,000
  servers.
• Associated
  IT
  equipment.
• Reinforced
  cabling
  to
  connect
  5,000
  servers.
• Networking
  equipment
  to
  connect
  5,000
  servers.
• Telecommunications
  (telecom)
  equipment.
• Specialized
  firewalls
  and
  other
  protocols
  for
  enhancing
  the
  
  cybersecurity
  of
  data
  centers.

Keep
in
mind
that
this
list
is
in
no
way
comprehensive
and
doesn’t
represent
the
full
costs
associated
with
building
a
hyperscale
data
center.
For
example,
it
doesn’t
include
the
primary
asset
needed
for
such
activities:
electricity.
Nor
does
it
mention
the
complicated
and
possibly
expensive
agreements
that
will
need
to
be
struck
with
local
governments
and
communities.
The
list
does,
however,
suggest
how
complex
and
multi-faceted
this
undertaking
can
be
by
showing
that
what’s
being
constructed
is
nothing
less
than
a
full-scale
data
factory.

What
is
colocation?

Some
organizations
are
interested
in
the
power
and
potential
of
hyperscale
computing
but
have
no
wish
to
build
their
own
data
center,
especially
once
they
see
a
breakdown
of
all
associated
costs.

The
concern
of
such
companies
is
understandable
and
legitimate;
the
sums
of
money
required
to
operate
in
this
space
are
not
small.
Depending
on
the
facilities
constructed,
some
use
cases
will
require
USD
millions
or
even
billions.
Businesses
building
hyperscale
data
centers
do
have
to
maintain
deep
pockets—both
when
they
construct
the
facility
and
then
during
its
entire
operation.
A
hyperscale
data
center
should
not
be
considered
a
one-time
purchase.

Colocation,
on
the
other
hand,
is
simply
a
situation
wherein
one
company
owns
a
hyperscale
data
center
and
rents
out
its
facilities,
servers,
bandwidth
and/or
space
to
interested
businesses
that
presumably
do
not
have
their
own
data
center
facilities.

The
obvious
benefit
for
the
company
renting
space
in
the
off-site
data
center
is
that
doing
so
saves
it
from
having
to
make
its
own
large-scale
investment
into
a
hyperscale
data
center.
Viewed
another
way,
what
the
company
is,
in
fact,
purchasing
when
it
rents
out
data
center
space
is
flexibility.
By
opting
for
colocation,
the
company
can
delay
the
significant
investment
in
a
hyperscale
data
center
until
a
later
time,
keeping
its
cash
reserves
right
where
they
are.

There’s
even
a
specific
term
for
when
smaller
companies
make
a
gradual
entry
into
this
market—
retail
colocation,
which
allows
organizations
to
start
slowly.
Typically,
this
plays
out
like
this:
The
company
sets
up
servers
within
a
colocated
environment
and
starts
getting
the
feel
for
the
process.
Then
the
business
begins
experimenting
with
different
cloud
deployments,
trying
on
different
configurations
and
checking
them
for
fit.

So,
colocation
(and
retail
colocation)
allows
businesses
to
enjoy
the
benefits
of
hyperscale,
without
the
major
investment
required
to
make
it
happen.
On
the
other
hand,
nobody’s
going
to
let
a
company
use
their
hyperscale
data
centers
for
free,
as
anyone
trying
to
negotiate
such
an
arrangement
soon
learns.
Further,
since
you’re
renting
these
facilities,
you
should
probably
accept
the
fact
that
a
colocated
data
center
will
not
provide
the
same
perfect
“fit”
as
custom-built
hyperscale
data
centers.

Regardless
of
whether
you
choose
to
build
a
hyperscale
data
center
or
rent
space
through
a
colocated
data
center,
organizations
usually
need
to
designate
someone
as
an
integrator
to
shepherd
the
project
across
all
possible
hurdles
and
into
completion.

For
the
purposes
of
this
blog
post,
the
integrator
is

you.

Hyperscale
vs.
colocation:
Biggest
misconceptions

It’s
interesting
that
at
such
a
“modern”
time
as
this,
when
whole
new
vistas
of
computing
are
opening
up,
that
some
people’s
attitudes
are
still
trapped
in
old
ways
of
thinking.
For
example,
when
you
see
the
phrase
“buy
or
rent,”
certain
longtime
assumptions
can
still
come
to
mind:

• Renting
  options
  are
  primarily
  provided
  for
  those
  who
  can’t
  afford
  to
  make
  purchases.
• Persons
  or
  organizations
  purchasing
  items
  can
  afford
  such
  purchases.
• Renting
  options
  are
  primarily
  provided
  for
  those
  subject
  to
  frequent
  moving
  around.

While
the
first
two
statements
contain
some
measure
of
truth,
the
only
statement
that’s
fully
true
is
the
final
bullet
point.
Renting
options,
it
turns
out,
are
indeed
perfectly
designed
for
people
whose
work
keeps
them
in
constant
motion
and
relocating
to
different
areas.

So,
there’s
validity
to
the
third
bullet
point.
The
first
two
contain
various
levels
of
validity.

Let’s
take
the
second
bullet
point
first.
While
it
is
true
that
most
people
and
companies
can
afford
the
purchases
they
make,
you
can’t
always
bank
on
it.
We’ve
seen
example
after
example
of
companies,
families
and
individuals
who
were
supposedly
wealthy—until
it
was
suddenly
discovered
that
they
weren’t.
Bottom
line:
Without
seeing
a
verified
financial
balance
sheet,
there’s
really
no
way
to
know
what’s
going
on
with
a
company
or
a
person
and
who
can
afford
what.

But
it’s
the
first
bullet
point
that
can
be
most
misleading
because
it
could
definitely
be
a
valid
business
strategy
for
a
company
to
avoid
building
hyperscale
data
centers
and
instead
rent
colocation
facilities
and
services.
Businesses
have
to
walk
a
complicated
financial
line
and
part
of
that
is
keeping
enough
cash
in
reserves.
Hyperscale
data
centers
can
cost
USD
millions
or
even
billions
to
build
and
operate,
quickly
turning
a
thriving
company
cash-poor
because
of
the
massive
commitment
it
has
made
to
this
technology.

Who
are
colocation’s
biggest
users?

Prepare
to
be
surprised,
because
some
of
the
world’s
biggest
users
of
wholesale
colocation
services
are
actually
Amazon
(AWS),
Google
and
Microsoft.
Actually,
each
of
the
“Big
Three”
data
center
providers
either
currently
rent
out
some
of
their
space
from
other
colocation
providers
or
have
done
so
in
the
past.
For
example,
members
of
the
“Big
Three”
have
leased
significant
data
center
space
from
a
company
called
Equinix,
which
owns
and
runs
260
data
centers
in
71
markets.
Then,
these
cloud
service
providers
turn
around
and
rent
out
their
newly
acquired
space
to
users.

That
this
practice
occurs
should
surprise
no
one;
most
economies
function
using
mid-level
distributors
that
are
instrumental
in
moving
goods
or
services
from
Point
A
to
Point
B.
Still,
based
on
their
collective
clout
in
this
market,
it
is
intriguing
that
some
of
the
world’s
largest
providers
of
data
center
infrastructure
are
also
some
of
its
biggest
customers.

Not
that
there’s
any
shortage
of
external
data
center
customers.
The
market
is
sizzling
hot
right
now
and
has
been
for
a
while
now.
For
example,
Synergy
Research
Group
reported
in
April
2023
that
the
first
quarter
of
that
year
saw
a
USD
10
billion
jump
over
Q1
2022

spending
on
data
centers
(link
resides
outside
ibm.com).

Most
recently,
there
has
been
a
perceptible
shifting
of
corporate
assets
among
giant
companies
to
enable
their
concentration
on
establishing
data
centers.
As

real
estate
analyst
CoStar
(link
resides
outside
ibm.com)
reported
in
October
2023,
“While
Microsoft
and
other
tech
giants
such
as
Google,
Meta
and
Amazon
have
made
deep
cuts
to
their
once-vast
office
portfolios,
they
have
increased
spending
on
development
of
data
centers.”

Things
to
consider
when
deciding
between
hyperscale
and
colocation

For
companies
who
are
strictly
compelled
by
the
bottom
line,
the
matter
routinely
comes
down
to
the
simple
comparison:
Which
is
the
cheaper
alternative?
But
divining
the
answer
to
that
rather
complicated
question
usually
involves
a
number
of
areas
of
comparison,
some
involving
tangible
quantities
but
others
based
on
various
intangibles
that
usually
come
into
play
and
which
should
be
considered:

• First,
  assemble
  all
  the
  projected
  costs
  you
  can
  related
  to
  the
  building
  of
  a
  hyperscale
  data
  center
  to
  serve
  your
  company.
• Next,
  try
  to
  carefully
  imagine
  and
  gather
  all
  the
  annual
  costs
  related
  to
  operating
  the
  type
  and
  size
  of
  hyperscale
  facility
  you
  have
  concepted.
  Remember
  to
  factor
  in
  the
  cost
  of
  needed
  labor,
  even
  if
  it’s
  just
  a
  skeleton
  crew,
  as
  well
  as
  any
  security
  staff
  kept
  on-site.
• The
  next
  part
  of
  your
  due
  diligence
  is
  to
  repeat
  the
  last
  step,
  but
  this
  time,
  project
  the
  annual
  operating
  costs
  of
  using
  a
  colocated
  data
  center.
  And
  don’t
  be
  surprised
  to
  learn
  that
  even
  though
  this
  type
  of
  solution
  requires
  no
  construction
  costs,
  there
  may
  still
  be
  imposing
  start-up
  fees
  involved
  with
  working
  with
  this
  technology.
• At
  this
  point,
  you
  should
  possess
  enough
  data
  to
  run
  time-based
  comparisons
  for
  various
  intervals,
  so
  you
  can
  answer
  that
  original
  question
  about
  which
  is
  the
  cheaper
  alternative.

Questions
to
ask

However,
by
this
point,
you
will
have
surely
realized
that
when
it
comes
to
data
centers
of
this
magnitude,
a
bottom-line
comparison
doesn’t
tell
the
entire
story.
There
are
many
questions
and
considerations
to
entertain.
Before
any
organization
selects
either
of
these
solutions,
it
would
be
wise
for
it
to
engage
in
a
bit
of
serious
soul-searching
about
what
kind
of
company
it
seeks
to
be,
both
now
and
in
the
future:

• 
  What
  kind
  of
  organization
  do
  you
  have?
  If
  you’re
  part
  of
  the
  IT
  industry,
  that
  may
  affect
  your
  decision-making,
  because
  this
  technology
  directly
  targets
  the
  IT
  industry.
  If
  you’re
  at
  an
  IT
  company,
  it
  may
  be
  in
  your
  interest
  to
  go
  ahead
  and
  invest
  in
  a
  hyperscale
  data
  center.
• 
  Are
  you
  sure
  you
  can
  handle
  the
  costs?
  Hyperscale
  data
  centers
  are
  currently
  a
  “hot
  item,”
  and
  some
  businesses
  will
  base
  their
  decision
  on
  desire,
  instead
  of
  need.
  But,
  because
  we’re
  talking
  about
  such
  a
  sizable
  and
  ongoing
  investment,
  some
  extra
  forethought
  is
  warranted.
• 
  What
  level
  of
  control
  do
  you
  wish
  to
  maintain?
  If
  your
  organization
  has
  a
  “hands-on”
  culture
  that
  is
  apt
  to
  making
  constant
  tweaks
  to
  the
  system,
  you
  may
  want
  to
  build
  your
  own
  hyperscale
  data
  center.
  This
  will
  more
  easily
  enable
  any
  customization
  your
  business
  desires.
• 
  How
  concerned
  are
  you
  about
  
  
  sustainability?
  Hyperscale
  data
  centers
  consume
  huge
  amounts
  of
  power,
  often
  more
  than
  the
  villages
  or
  towns
  near
  them.
  Although
  it’s
  not
  impossible
  to
  hyperscale
  and
  avoid
  leaving
  a
  heavy
  carbon
  footprint,
  it
  may
  be
  more
  difficult.
• 
  What
  new
  technologies
  do
  you
  want
  to
  incorporate?
  It’s
  essential
  to
  envision
  not
  only
  where
  your
  company
  wants
  to
  be
  tomorrow
  but
  also
  down
  the
  road.
  Will
  the
  solution
  you
  select
  let
  you
  incorporate
  emerging
  technologies,
  such
  as
  the
  
  Internet
  of
  Things
  (IoT)?

The
real
bottom
line

As
you’ve
probably
already
figured
out,
there
are
few
quick
or
easy
answers
when
it
comes
to
deciding
between
building
a
hyperscale
data
center
or
renting
space
from
a
colocated
data
center.
There
are
simply
way
too
many
issues
at
work
to
make
a
casual
decision
one
way
or
the
other.

It
might
even
be
such
a
weighty
decision
that
you
need
more
than
one
person
to
help
make
the
call.
If
so,
the
integrator
may
need
additional
staff
to
help
divide
up
and
tackle
the
different
decision
areas
that
require
extra
study.
For
example,
you
may
need
to
assign
a
staff
member
to
handle
any
ecological
impact
statements
that
will
need
to
be
drafted
and
submitted
before
a
building
site
can
be
legally
cleared
for
construction.

As
for
parting
advice,
make
sure
you
do
your
homework
in
full.
The
stakes
of
this
decision
are
very
high
indeed.
Not
only
are
we
discussing
vast
sums
of
money,
we’re
also
talking
about
issues
that
have
a
direct
and
perhaps
lasting
bearing
on
an
organization’s
fiscal
health.
Therefore,
when
feasible,
get
the
freshest
data
that
exists.
Create
contingency
plans
defined
according
to
data-center-performance
levels.
You
must
be
thorough
in
your
thinking
and
cover
every
angle
possible.
That’s
how
you’ll
draft
a
blueprint
for
success—no
matter
which
type
of
system
you
choose.

Get
started

Solutions
like
IBM
Storage
Scale
help
you
grow
a
global
data
platform
and
both
define
and
refine
your
organization’s
data
strategy
approach.

Explore
IBM
Storage
Scale