Knowledge Base: White Paper

Data Center Build vs. Buy: How to Decide

Eventually, enterprise data centers reach capacity, whether that’s power, space, or cooling. Every workload may not be suited to the cloud, so IT managers must decide whether to lease data center space in a colocation facility or build out a new data center in-house.

Of course we’d like you to colocate in our data centers, but the ROI, risk, and core competencies must be judged by each individual organization. Here are some considerations when deciding whether to build or buy your new data center.

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Primary Expenses of Colocation vs. Building a Data Center*





Initial Costs

Setup and racking fees vary by provider

Planning, design, and commissioning can be up to 25% of total cost

Building Shell

Included in rent

$200 per square foot

Building Permits and Taxes

Included in rent


Security & Fire Suppression

Included in rent

$100,000 or more depending on size

Data Center Equipment

Included in rent

$7,000 - $20,000 per kW

Cross Connects

Most providers charge $100 - $2000 per month

$10,000 per mile to connect fiber


Local commercial rate plus multiplier; or flat rate of $15 - $50 per amp per month

70% - 80% of operational expenses-the average commercial rate in the USA is $0.112 per kWh


Green House Data includes several hours per month; providers charge $100 - $250 per hour

Varies but salaries range from $35,000 for security personnel to $65,000 and up for technical employees

Annual Maintenance

Included in rent

3% - 5% of total construction cost annually

*Sources: Forrester Research and Gartner Inc.


Weighing a Build

Before building or colocating, you’ll need to evaluate your current and future infrastructure requirements.  If they are variable, cloud could be an attractive option. If you foresee the need for a fixed or steady growth, or must own your hardware for other reasons, a data center build or lease is worthwhile. 

The main benefit of owning a data center is control. This includes the access, maintenance, and future improvements. That can also be a drawback—hardware refreshes are required every 3-5 years. Data center operation may not be a primary competency of your IT department, requiring additional staff or at least additional OpEx.

Building a data center requires significant upfront investment, but depending on the size and Tier rating it could have an ROI of 5 years or less. Gartner recommends leasing colocation space for Tier 2 or 3 deployments if leasing costs are $1,500 or less per month. Consider the upfront costs of building a data center:

Even beyond raw costs, you must think about the daily operation of a highly-available data center. Does your team have the experience and qualifications to keep infrastructure available 99% or more of the year? Is someone available at all hours to tackle emergencies? What about maintaining and updating the facility and equipment? Maintenance costs can add up to as much as 5% of your initial building expenses annually.


Colocation Advantages

Even if you decide building a data center will return your investment in an acceptable time frame, colocation can still be advantageous. A company dedicated to data center design and operation can arguably run your IT equipment more efficiently (at a lower PUE) and in a more controlled environment, extending hardware life.

Remote hands services (a portion of which are included in every Green House Data colocation contract) allow you to accomplish mundane tasks like racking servers or rebooting without using the time of your IT team. With dedicated NOC staffing and the latest monitoring tools and software, threats and maintenance are all handled as part of the contract. 

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