What is Data Center as a Service?

Data Center as a Service (DCaaS) is a solution whereby a data center provider offers the use of its facility, power and network in exchange for a recurring fee. Client companies “colocate” their servers at the data center provider’s offsite location and take advantage of the provider’s infrastructure but still own and operate their own servers.

DCaaS has become popular for the same reason cloud services have become popular. In the past, owning and operating one’s own data center was an expensive but necessary evil. Now technology and ubiquitous internet connectivity have made it affordable and easy to tap into essential, utility-like technology services without having to own and operate the expensive infrastructure yourself.

As shown in the Figure 1 below, organizations turn to DCaaS solutions for a variety of operational reasons, from disaster recovery and backup to shared storage, Platform as a Service and more.

DCaaS offers a financial advantage as well. With DCaaS, companies can transfer what used to be a large capital expense (Capex) over to a predictable, monthly operating expense (Opex). This allows companies to preserve their precious capital and invest in projects that drive revenue and growth in their core business.

How companies utilize Data Center as a Service

Figure 1. Source: Australian Government Department of Finance and Deregulation report; http://slideplayer.com/slide/3161249/ (slide 14)

The Evolution of Data Centers

Though data centers date back several decades, even before mainframe computer rooms, the boom came during the dot-com era in the late 1990s, when companies needed fast connectivity and non-stop operation to establish a presence on the Internet. Installing such equipment and networks was not feasible for many smaller businesses, so other companies filled that need by building large Internet data centers designed to provide clients a more viable outsourced solution for deployment and operation.

The Shift to “As a Service”

With the emergence and widespread adoption of cloud computing, today’s IT organizations are shifting from an infrastructure, hardware, and software ownership model toward a subscription and capacity-on-demand model–also called “as a service.”

Though much of the attention to date has been on Software as a Service (SaaS)–where software applications are available over the Internet on demand–this trend has led to other “as a service” offerings, including Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Disaster Recovery as a Service (DRaaS).

And Now, DCaaS

For its part, Data Center as a Service (DCaaS) has emerged as an ideal solution for companies seeking to offload their processing, storage, networking, and data assets for a fee. There can be several different reasons to consider data center outsourcing, including:

  • Inadequate staffing or inexperience supporting computing resources
  • Limited power, cooling, and space to meet current and future needs
  • A fundamental shift towards IT outsourcing, to reduce capital expenses (more on that below)

DCaaS as a concept isn’t new. In fact, it’s also known as “colocation.” DCaaS simply emphasizes the “as a service” business relationship that a company would have with a colocation data center.  The data center provides the raw facility with rack space, power, network, security, and cooling, and the DCaaS customers colocate and manage their own servers at the data center facility.

That said, there is some added flexibility with DCaaS. For example, providers might offer to lease capacity at shorter intervals and have the ability to scale the power clients pay for up and down over time. In other cases, the DCaaS provider also will help clients customize the space to accommodate unique needs.

Benefits of DCaaS

Regardless, Data Center as a Service delivers a wealth of benefits. Beyond eliminating logistical hassles and enabling clients to focus their IT staff on other issues, initiatives, and opportunities, a DCaaS solution offers:

Opex vs. Capex

But perhaps one of the greatest opportunities that DCaaS offers is the ability for organizations to expand their infrastructure by shifting from the capital expense line (building and owning a data center) to the operating expense line (paying a service subscription). This rings true for any cloud computing or “as a service” model and, in most cases, is the more cost-effective solution.

Reducing IT costs is one of the leading goals CIOs are tasked with each year. How much does it cost to build a data center? On average, it takes about $15 million to build a 10,000-square-foot, 1 megawatt data center. Excluding the costs of power, the operating and capital expenditures to run and maintain the data center systems can add another $10-15 million over 10 years. An outsourced data center provider will absorb the entire infrastructure operating and capital expenditures–savings that can be used for IT gear and talent.

Control and Manage Costs with Predictable Expenses

Instead of dealing with the ups and downs of power and cooling costs, spinning budgets out of control, Data Center as a Service (DCaaS) offers a predictable monthly cost.  Power and cooling costs are passed through, but because third-party data centers are highly efficient, these costs can be a fraction of what you currently pay.

Beyond cost, there are other strategic factors to consider when deciding whether to “build or buy” your next data center, such as a company’s cash flow sensitivity, cash cross-over point, deployment timeframe, data center life expectancy, regulatory requirements, and more–all of which can further support data center outsourcing.

Data Center as a Service