Hey Decision-Makers: Don’t Do What These Guys Are Doing

Brian Wood Blog

451 Research wrote this article which, boiled down, is about the silliness of investing in the re-creation of resources that already exist.

“We must build it, we must own it, this is how it is done” (my words) is definitely NOT how IT is done these days.

Less Make, More Buy — but it seems the folks at the City of Largo were not thinking along these lines.

Key takeaway: Multi-Tenant Data Centers make the most sense for 99.9% of businesses not named Google or Facebook.

Emphasis in red added by me.

Brian Wood, VP Marketing

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City of Largo, Florida Building Questionable $3m Datacenter

The City of Largo in Florida is building a questionable $3m datacenter to house its IT equipment, currently housed in the Largo City Hall building that is at risk from hurricanes because it is located in a flood plain. The project is $1m over the original budget for the new datacenter and the overage will affect capital spending that the city could use for other projects like roads and building improvements.

Context

In June 2011, the City of Largo issued a request for qualifications (RFQ) for building its new datacenter. In the RFQ, the City indicated that it was looking to build a new datacenter because its existing small datacenter within the Largo City Hall building has been determined to not be able to survive a hurricane because it is located in a flood plain and may not even survive a Category 1 hurricane. The new datacenter facility is to be designed to withstand a Category 5 hurricane, have emergency power generation capability and not be located in a flood plain. The new facility is to accommodate a minimum of 50% growth beyond current equipment space requirements that were outlined as:

  • Six HP server cabinets (with 60 HP DL380 and DL580 servers and a blade chassis)
  • Six data communications cabinets (three to four moving to new datacenter)
  • City telephone switch, currently using three cabinets in a separate room

The current small City of Largo datacenter is 800 square feet and the telephone switch room is 200 square feet, supporting a total of 15 racks between the two rooms. The 50% growth requirement equates to a requirement to support only 23 racks in the new datacenter or roughly 700 square feet.

The City of Largo, in the Tampa Bay area along the coast, planned for a two-phase project for its new datacenter. The first phase includes the identification and analysis of alternative building sites in the Largo area and determining space and technology infrastructure needs of the new datacenter. The second phase includes the design and construction of the facility and integration in the City data and telecommunications networks.

Project status

In November 2011, the City of Largo awarded a contract to FleischmanGarcia in the amount not to exceed $121,775 to conduct a needs analysis to determine the size and systems for a new datacenter facility, analysis and ranking of three alternative sites and project budget development. The budget deliverable from this initial contract estimated the cost of the new datacenter at $3.1m. In June 2012, the City negotiated datacenter design, construction document preparation and construction phase services with FleischmanGarcia, not to exceed $290,552. In November, the City also received responses to an RFQ for construction management for its datacenter and the City shortlisted the nine responses with Biltmore Construction at the top of the ranking. Biltmore Construction has performed work for the City in the past as construction manager for the Largo Public Library. Biltmore Construction also has experience with at least one datacenter project, having built a datacenter in Florida for Hillsborough Community College.

In a City Commission meeting held on November 13, the City disclosed a new project cost estimate for its planned datacenter as follows:

Datacenter project cost estimate

Item Cost
Building construction and permitting $2,245,815
Furniture/fixtures/equipment $311,240
Design $419,043
Owner contingency $50,000
TOTAL project cost $3,026,098

Source: City of Largo

The original budget for the datacenter project was $2m with funding coming from revenue from a countywide sales tax used for capital projects. The datacenter is being built at the southwest corner of the City’s library property, near Central Park Drive in Largo, which is less than five miles from the Gulf of Mexico. Construction is scheduled to begin early next year and finish by November 2013.

Was leasing datacenter space even considered?

We believe that City of Largo likely did not consider the option of leasing space in a multi-tenant datacenter (MTDC) facility instead of its decision to build a small datacenter. The city issued an RFQ for building a new datacenter but we are not aware of the City also issuing an RFQ to assess MTDC options in the Tampa area. A MTDC facility could provide many possible benefits over the small datacenter built by the City, including:

  • Lower up-front costs, no capex,
  • Immediate availability, providing faster time to market,
  • Higher redundancy than typical in a small facility (UPS, generator, cooling), meaning higher availability,
  • More flexibility to incrementally accommodate growth,
  • Higher-speed network connections via multiple carriers, and likely lower costs due to competition between communications providers,
  • Remote hands services, freeing up time of limited IT staff.

We continue to believe that small datacenter facilities cannot be economically built or managed to match the levels of redundancy and security found in the typical MTDC. We believe it should be difficult to justify building a $3m datacenter while also factoring in the ongoing costs of annual maintenance and electricity to house the small IT footprint of the City of Largo.

If the alternative of leasing space in a MTDC facility for the City’s current footprint of 15 cabinets (or 50% growth to 23 cabinets) were also considered, we think the City would quite likely decide not to build. If we assume colocation pricing at $1,200 per cabinet per month, this is only $216,000 per year for the current City of Largo IT footprint or $331,200 annually for the projected future need. There are several colocation providers in the Tampa area that could provide the City of Largo with an alternative to building a small datacenter, including Peak 10, Savvis, 365 Main, Hivelocity, Hostway, Sago Networks and E Solutions. Colo5 is also adding a new datacenter in Lakeland, Florida, which is about 35 miles east of Tampa on the way to Orlando.

The 451 Take

Over the past few years, we have seen a decrease in the number of small enterprise and government datacenters being built in datacenter markets as more enterprises and governments have assessed their many options and opted to lease space instead of building small datacenters. When we see small datacenters being built in markets with several MTDC options, we continue to question these, like the small datacenter facility being built by the City of Largo. We have seen government agencies as MTDC customers in many of our datacenter tours in many markets, so we are aware of many government agencies that have gone through the build-versus-lease analysis and have chosen to lease datacenter space over building. We believe the City of Largo should look at all options before continuing with its plans to build a small datacenter less than five miles from the Gulf of Mexico to house a relatively small IT footprint.

The bottom line is that we continue to believe that governments and enterprises should look at all options and it is not as simple as just a build-versus-lease decision for datacenters because there are other options, including build-to-suit and modular products that can potentially accelerate timelines, reduce costs and turn capex into opex, while leveraging the scale and experience of large datacenter providers where building datacenters is a core competency.

https://451research.com/report-short?entityId=74875