Organisations struggling with data centre build costs

More than 40 percent of companies will run out of data centre space during the next 12 months, says one interested player.

The high costs associated with building a new data centre are coming at a time when more and more companies are facing running out of data centre capacity.

So said Anthony Foy, the group MD of collocation provider Interxion during a speech at DataCentre World in London last week.

He said that more than 40 percent of companies will run out of data centre space during the next 12 months, thanks in part to increasing demand from the growth of enterprise applications such as SaaS, disaster recovery, as well as the high capital costs associated with building and maintaining data centres.

He also said that 70 percent are currently without data centre service or capacity. Foy echoed the sentiments of rival Equinix about the positive impact this will have on the co-location sector.

"The credit crisis is a growth driver for collocation providers such as Interxion, as well as our competitors," he told delegates. "So far in early 209, we have seen no drop off in demand," he added, although he could offer no outlook for how the sector would look at the end of the year.

According to Foy, 84 percent of companies are currently running their own data centres, with 10 percent opting for the outsourcing (or co-location) route.

But the high build costs of a data centre means that many organisations have either held off, or failed to update their existing data centre resource over recent years. Foy reckons that a completed, non high density data centre now costs on average 10,900 euros (9,740) per square metre.

He said that 2,000 to 2,500 square metres was needed in order to justify current data centre build costs. With the credit crunch, and budgetary pressures, it now more effective for organisations to outsource their data centre he added.

Holland-based Interxion has approximately 24 operational data centres in 13 cities across 11 European countries. It typically starts building a new data centre (a 12 to 24 month process) when a particular site reaches 50 percent capacity. "This allows us to get customers up and running much quicker, than building their own data centre."

"There is a real lack of data centre space in London," said Foy. He also added that customers still wanted to be close to their data centres (so called server huggers) and were not looking for data centres in Iceland for example. "We still live in a world of server huggers. The vast majority want a data centre reachable within a 10 or 15 minute drive," he told the audience.

He quoted internal survey results which found that 11 percent of customers said they don't mind their data centre being located anywhere in the country, 5 percent said it could anywhere in the world, whereas 25 percent want the data centre within a day's drive, and 59 percent wanted it within easy driving distance for IT staff.

Back in September, just before the credit crisis kicked off, Interxion was able to secure a 135 million euro (120 million) credit facility, and the company currently has 17 construction projects on the go.

Foy also took the opportunity to dismiss the container-based approach to data centres. "We are not really looking at that at the moment, and there is not a great deal of comfort with that approach," he said.

Instead customers are after increased resilience, guaranteed levels of uptime, and flexibility. He noted that many large Fortune 100 companies are now looking to colocation providers as a stop gap service.

"Organisations can selectively outsource elements of their IT infrastructure for overflow capacity, and can sign a 1 to 3 year contract, instead of normal 3 to 5 year contract," he said.

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