5 Factors for Assessing Total Data Center Cost

We break down the main data center cost variables, where they affect total spending, and how they impact total cost of ownership.

Christopher Tozzi, Technology Analyst

February 7, 2023

5 Min Read
Eemshaven, The Netherlands - June 2, 2022: Entrance view of a Google data center in front of a clear blue sky in Eemshaven, The Netherlands.
Martin Bergsma / Alamy

How much does a data center cost? That's a simple question with a complex answer. A large number of variables – such as construction costs, IT infrastructure costs, energy costs and more – may impact the total cost of a data center, and not all cost variables apply in all situations.

Still, understanding the major cost variables of data centers is the first step in calculating data center total cost of ownership. This article provides guidance by breaking down the main data center cost categories and explaining how they affect total spending.

Facility Construction Cost

The most significant variable that impacts data center cost is the money spent on constructing the physical data center facility. Facility costs account for around 45 percent of total data center costs, on average.

Estimates of data center construction costs range widely – from as low as 200 dollars per square foot to more than 1000 dollars per square foot. The variability reflects factors like differences in local labor costs and varying requirements for special physical data center features (like resistance to extreme weather events).

Of course, facility construction costs don't impact every business with a data center. Some companies may repurpose existing facilities to serve as data centers. Others may opt to use colocation facilities that someone else pays to build.

Related:Data Centers: Total Cost of Ownership and Cost of Risk

IT Infrastructure Costs

The second largest component of data center costs is the capital required to acquire the IT infrastructure – servers, networking equipment, UPS systems and so on – that are housed in the data center.

Here again, exact costs can vary widely depending on the type of IT equipment you need. You could pay just a thousand dollars for a lower-end server, for instance, or pay ten times that figure if you need a high-end server with specialized hardware.

There are ways to avoid the direct costs of IT infrastructure acquisition; for example, some colocation providers offer IaaS services that allow customers effectively to rent servers instead of purchasing them outright. But in most cases, IT infrastructure spending is a significant and unavoidable component of total data center cost. 

Data Center Energy Costs

The amount of money you spend to power the IT equipment and auxiliary systems inside your data center is also a major cost variable.

The energy cost of your data center hinges on two factors:

  • How much energy the data center actually consumes. On average, expect to consume about 7 kW per server rack, plus the energy required to keep it cool.

  • How much energy costs to source. The cost of a kilowatt-hour can range widely between different regions, seasons and (especially) power sources. In general, you'll pay more for cleaner energy, like wind and solar, than for traditional energy – although sustainable energy costs are declining overall.

Related:Evaluating Ongoing Total Cost of Ownership (TCO) for UPS Systems

Thus, although data center energy costs can range widely, you can get a sense of how much you'll spend on energy if you can determine how much energy your IT equipment consumes and the price of electricity for your preferred energy source.

Data Center Utilization

A fourth – and often overlooked – variable in total data center cost is the extent to which your data center is fully utilized.

The average data center is using only 30 percent of its total capacity at any given time. That means that only 30 percent of the total IT infrastructure that could be housed in the data center is under active use (even if the total IT footprint relative to data center size is larger).

From an efficiency perspective, it's a good thing to have high utilization rates, because it means you're not wasting money on data center capacity that goes unused. But from a total cost of ownership perspective, higher utilization translates to higher costs, because the greater your utilization, the more you're spending on infrastructure and the energy required to power and cool it.

Data Center Staffing Costs

Finally, to understand how much your data center costs, you'll want to know how much you spend on the staff required to manage it.

Most data centers have small staffs relative to their size. Once a data center is set up, you might need only a few technicians on hand on a typical data to keep things running. However, you'll probably want to have other engineers available to assist with outages or other emergencies, so the total size of your data center staff on a normal day doesn't necessarily reflect your total staffing costs.

The extent to which you take advantage of data center automation also plays an important role in staffing costs. More automation, of course, translates to fewer employees to keep a data center operating.

Address the Complexity of Data Center Costs

There's no straightforward way to calculate total data center costs. Some cost factors, like data center construction expenses, don't apply to all businesses. And all cost factors can vary depending on a wide variety of factors.

Nonetheless, if you want to get a handle on how much it costs to build and run a data center – and determine whether using the public cloud or a colocation facility is a better bet financially – the first step is figuring out which data center cost factors apply to your plans, then working to assess exactly what they'll cost you based on your unique requirements.

About the Author(s)

Christopher Tozzi

Technology Analyst, Fixate.IO

Christopher Tozzi is a technology analyst with subject matter expertise in cloud computing, application development, open source software, virtualization, containers and more. He also lectures at a major university in the Albany, New York, area. His book, “For Fun and Profit: A History of the Free and Open Source Software Revolution,” was published by MIT Press.

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