When determining the impact of data center strategy and its effect on customer experience, it is important to consider the context. This comes down to fully understanding the expectations and resources of the business concerned.
It is also absolutely vital for an organizational identity to be created and used to deliver a corporate strategy. It is equally necessary to have clear communication between the vision and strategy, data center operations and your customers because of the inevitable interdependencies created.
How does a data center tie into your business strategy?
It’s a place where technology gathers.
Businesses are relying on technology for everyday operations – with a data center being a vital component that is rarely thought of first. This shouldn’t be the case, however. After all, a data center is really the foundation upon which your technology strategy grows.
If we look at the breakdown of a typical IT organization, we see a skills gap and potential variations of workflow at the physical layer of the stack – this gap is an area that data centers mostly cover. There is a huge amount of technical work that goes into the data center and server functioning, most companies don’t have the expertise within their IT department to do this work in house.
That being said, some companies do choose to take on this work in house, and when doing so, have to be aware that any time variations in workflow are created or inefficiencies introduced it prevents employees from focusing on their core mission. With this in mind, there must be clear reasons and strong benefits to having the work carried out within your own organisation rather than optimised by data center specialists.
Data Center Operations: Insourcing vs Outsourcing
When weighing up the pros and cons of owning or outsourcing a data center, it’s important to take the context of the business into account. As mentioned before, the context and growth stage of an organization plays a big role in informing data center strategy – particularly when deciding whether to in-source or outsource.
Due to the high costs and expertise required to own and operate a data center in-house, established businesses who have passed the exponential growth phase and have a strong and steady stream of income are naturally the organizations most likely to insource. But what are the advantages of this?
Running a data center in-house gives businesses complete and total control over data, security and the data center environment. This means organizations can implement their own security and redundancy measures and gain greater peace of mind over the housing of company data.
Insourcing data centers also comes down to the perception of cloud-based solutions and third-party data center solutions as a one size fits all approach. Running your own data center allows you to change and add any measures you need to. With this in mind, owning and running your own data center becomes more attractive.
All of this, however, comes with a substantial price tag. Depending on the size and location, building a data center can range anywhere from $200 per square foot to over $1,000.
Factoring the need for building in redundancy, fail-safes and regulating processes, alongside the cost of powering the data center and the price point becomes even higher. For example, running a single mile of fibre optic line can cost $10,000. Not to mention the hiring of employees with the knowledge base to operate a data center, as well as the training of existing staff. Ultimately, when factoring in overheads and running costs, insourcing works out to be 4-5 times more expensive than outsourcing. Consequently, we are seeing an uptick in the latter.
It is fair to say that the downsides of insourcing data center operations are increasingly outweighing the benefits – which is why an increasing number of organizations have moved over to cloud-based and cloud-like solutions.
Generally speaking, a data center only makes up 10% of most infrastructure budgets. This means, for many businesses, it doesn’t make sense to focus on 10% of their operational problems (the data center) when they should be focusing on the remaining 90% of cost coming from other areas of their infrastructure. Especially areas in which they have real expertise and can make a direct impact.
It is easier to build in redundancy when outsourcing. When data centers are run in-house it is impossible to build in redundancy without paying for extra infrastructure. With outsourcing, however, multiple options are available at a lower price point. Having multiple carriers decreases the possibility of failures which means critical applications are better protected. Moreover, high-risk activities such as moving core networks pose a lesser threat because the need for interfering with physical infrastructure decreases as does the margin for error.
In organizations where there has been a push towards financial efficiency, the sheer convenience of outsourcing is an attractive feature. Government organizations funded by taxpayer money have been looking towards the cloud for a while because of a heightened awareness of where and how taxpayer money is spent. The Data Center Optimization Initiative started the ball rolling with a cloud-first strategy within the US government by prompting the consolidation, and in some cases closing down, of data center facilities. With these efforts, a reported 450 tiered data centers (that is, a facility with its own separate space for IT infrastructure, an uninterrupted power supply, a dedicated cooling system and a backup generator) and more than 4,000 non-tiered data centers were closed down by 2019. The resulting savings amounted to some $2 billion in taxpayer money since 2016.
With a cloud-based model as an alternative to an in-house data center, smaller businesses who are just starting out can speed up their time to market, simply because they aren’t going through the process of starting a data center from the ground up. Not only this, but in terms of scalability and future-proofing, having an outsourced data center operation provides a greater degree of freedom and flexibility. With outsourcing, you are free from the financial constraints and logistics that come with changes in an owned data center. You can move locations without having to move all your infrastructure and can therefore easily scale up or down depending on changing business requirements.
Data Center Strategy and the Customer Experience
So, what impact does data center strategy have on the customer experience?
The answer to this starts with an organization’s decision to insource or outsource data center operations. Financial reasons aside, the key is looking at how insourcing and outsourcing strategies correlate with customer service. Ultimately, for larger companies, owning and operating a data center in-house comes with an added layer of security because they have total and unlimited access to the data center premises. With added peace of mind comes extra confidence in and ability to serve customers and provide them with a safe and secure service.
On the other hand, outsourcing is a strategy that lends itself to future growth. Smaller companies anticipating future change look towards outsourcing with cloud-based or cloud-like data services because it can grow or shrink as the business does. As customer expectations change, technology has to keep up – which is why flexibility is key in consumer facing industries such as E-Commerce. With this in mind, a data center strategy focussed around outsourcing emerges as the more attractive offering for organizations in the midst of growth.