In-House Vs. Outsourced Data Centers

June 16, 2023

Your data center is an essential part of your business’s day-to-day operations. You rely on your data center infrastructure to power internal communications, facilitate customer interactions and support your mission-critical applications. As companies increasingly move toward digital transformation, optimizing your data center to meet your organization’s needs will be more important than ever.

If your organization is planning a new deployment or considering transitioning to a new data center system, you must determine whether your company should outsource your data center management or build an on-premise data center.

The Difference Between In-House and Outsourced Data Centers

There are two primary operating models for data centers — in-house and outsourced. Making the right choice will help your organization save money, enhance productivity and prepare for the future.

Here are some of the biggest differences between in-house and outsourced data centers:

Location: In-house data centers are usually either located on the company’s campus (“on-prem”) or at another location the company owns. Outsourced data centers are always off-premise — thanks to the cloud, they can be located anywhere.
Security: While many dedicated data center providers offer round-the-clock security detail to protect your data from physical harm, you’re responsible for securing an in-house data center.
Control: Your company has total control over everything in an on-prem data center, from security to airflow and cooling infrastructure. In an outsourced data center, your provider controls these components.
Scalability: In-house data centers are significantly harder to scale past a certain point because you can run out of space for new hardware. Many companies will reserve their in-house data centers only for mission-critical systems to account for this limitation.
Cost: While building in-house data centers requires a large upfront investment in hardware and infrastructure, an outsourced data center operates according to a leasing or subscription payment model. The right model for you depends largely on your organization’s size and operating budget.

Understanding how each one works can make it easier to decide which model would work better for your organization.

In-House Data Centers Explained

An in-house data center is the collection of servers your organization uses to support your everyday operations. It also includes all the digital and physical infrastructure behind your servers, such as:

Routers
Network switches
Storage systems
Server racks
Firewalls
Cooling and airflow systems
Monitoring structures

While some larger technology companies might have the resources to dedicate whole buildings to their data centers, most use either a single room or closet.

Because you own the equipment and facility, you have more control over an in-house data center than you do with an outsourced data center. You can implement whatever security measures you like, and you can choose how to arrange your infrastructure to optimize computing for end users.

You also have the freedom to customize your data center to suit your company’s specific processing needs.

Outsourced Data Centers Explained

Partly due to the rising demand for cloud services, more companies have been turning to data center outsourcing (DCO) in recent years. DCO involves outsourcing your IT management and provisioning functions to a third-party provider.

Companies typically use one of two outsourced data center models:

Colocation: You run your own IT infrastructure from a third-party facility. Essentially, you own the server, and your provider owns the rack space.
Data Center as a Service (DCaaS): You rent or lease IT infrastructure from a third-party provider, which they host in their facility. This model usually follows a pay-as-you-go pricing scheme, where you only pay for the resources your company actively uses.

Because you own the infrastructure, working with a colocation data center requires a slightly higher upfront investment. However, many colocation data centers are early adopters of the latest technology, so you can gain access to cutting-edge resources and services that benefit your company.

In comparison, the DCaaS model helps remove some of the barriers to entry for smaller companies and startups that lack the space and budget for an in-house data center. DCaaS data centers also provide redundancy and disaster recovery, which helps protect your data from disasters like unexpected outages.

The main drawback to third-party data centers is your lack of control over specific elements. Because your provider owns the infrastructure or the facility, they’re the ones who make the decisions about security, resource availability and other similar aspects. However, this is a small price to pay for all the additional services you can get from outsourcing.

Important Data Center Considerations

For many companies, the right choice isn’t obvious. Careful consideration is necessary to determine which arrangement would work better for your organization.

Some key considerations include:

Cost: Outsourcing reduces the initial setup costs for startups and small businesses and allows companies of all sizes to scale cost-effectively. Comparatively, building an in-house data center only requires an upfront investment for hardware and space.
Agility and flexibility: If your business experiences frequent fluctuations in demand, outsourcing can provide the agility you need to quickly adjust without the added burden of managing your full tech stack. However, if your capacity needs rarely change, an in-house arrangement is the more suitable option.
Connectivity: Because on-prem data centers only have one tenant, carrier neutrality can be a challenge. Third-party providers offer points of presence in their data centers, which allow you to connect your systems without having to pay local loop fees.
Service offerings: Many colocation data centers provide managed IT services such as disaster recovery and networking, which can reduce or even eliminate the need to maintain in-house staff.
Service level agreements (SLAs): The service level your provider commits to is one of the most important considerations to make. Often, third-party providers offer SLAs of 99.99%, which will help you reduce downtime and improve your offerings. In-house data centers can also achieve this level of uptime, but it takes more resources and effort to do so.
Compliance and certifications: If you choose to partner with a third-party provider, you must ensure you’re working with a company that complies with relevant industry standards and legal regulations. Make sure your provider’s certifications are up-to-date.

You can also blend the two together to create a hybrid system that more closely fits your tech stack. For example, you might choose to run mission-critical applications in-house and outsource the rest.

Contact DataSpan for Custom Data Center Services

Digitization is becoming more important day by day, and optimizing your data center is essential for meeting those rapidly evolving computing requirements. DataSpan’s expert team will work closely with you to develop a data center solution tailored to your organization’s unique specifications.

Thomas Liquori