On-Prem Data Center, Colo, or Cloud? Demystifying the Dilemma

Economic considerations in workload-placement decisions

Michael Vizard

July 1, 2015

2 Min Read
On-Prem Data Center, Colo, or Cloud? Demystifying the Dilemma

When it comes to deploying application workloads these days there is certainly no shortage of locations to chose from. IT organizations can build their own data center facilities, take advantage of colocation or hosting services, or opt to deploy workloads in the cloud.

At the Data Center World conference in National Harbor, Maryland, this September, Laura Cunningham, a consultant with expertise in data center economics, will explain how much of that decision is actually influenced by whether the CFO prefers to treat IT as a capital or an operating expense.

In situations where access to capital is tight, or there’s a lot of internal competition for a limited number of budget dollars, IT organizations tend to favor treating IT investments as an operating expense, Cunningham said. Conversely, organizations that have a lot of access to capital tend to favor investing in data centers, because the potential tax savings can be substantial.

Another major factor to consider may be the amount of time an application workload needs to be deployed in. Cloud computing services tend to be more expensive than data centers over time, but they also provide a level of agility that most internal IT teams working within a data center can’t match.

All factors considered, the key to getting any IT project approved is understanding the financial preferences and predispositions of the organization being asked to approve it, Cunningham said.

In addition, organizations need to be aware of what tax incentives might be applicable. Many second-tier cities or even smaller countries will provide incentives to entice organizations to build a data center in a particular location.

Finally, internal IT organizations need to pay close attention to the overall process to make sure they are actually getting what they want, she added. A facilities team, for example, may select a data center location based on the cost of real estate and access to inexpensive sources of power, without considering how important network latency might be for any given set of applications.

It’s usually crucial for modern web and cloud applications to be located only one or two network hops away from an internet peering exchange.

There are clearly a lot of factors that go into determining where best to physically locate any given application workload. The good news is that barring any specific compliance requirement, most IT organizations today have plenty of options to consider.

For more information, sign up for Data Center World National Harbor, which will convene in National Harbor, Maryland, on September 20-23, 2015, and attend Laura Cunningham’s session titled “Demystifying the Data Center Sourcing Dilemma”

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