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News
19.09.2012

To Buy or Not To Buy, that is the question

…(or whether ‘tis more cost effective to lease).

Apologies for the corny Shakespeare pun but it had to be done. Seriously though, if you require a new data centre (or just more data centre space) and don’t have the budget then leasing may be the answer. Also if you are just looking for some additional rack space and are weighing the pro’s and con’s of expanding an existing data centre versus co-location or hosting then leasing is something to consider.

For the medium to long term, by which I mean anything over three years, building and running your own data centre will definitely cost less than co-location and in terms of the effect on your organisation’s “bottom line”, building your own data centre will be much more attractive as the cost can be amortised over the life of the facility – 10 years at the very least.

However a properly designed and built data centre is a significant investment and the up-front cost can be an issue. This may be because the business doesn’t have the cash, has the cash but has other things it would prefer to spend it on, or for some reason has the budget for “OPEX” but not “CAPEX” expenditure.

There can also be potential tax issues with building your own facility in that some of the costs may not be allowable against corporation tax and some of the VAT may not be recoverable.

However all these obstacles can be overcome by leasing (as opposed to lease purchase or hire purchase, which do not have the same tax advantages).

With a leasing scheme you pay for the facility on a monthly basis, just as you would with co-location, but with the knowledge that monthly cost is fixed for 5 years at the end of which it will drop to virtually nil while the facility can be expected to have a life of well in excess of 10 years.

Energy costs will of course rise with inflation but even here you will be paying the utility supplier direct so avoiding any intermediary’s mark-up and will be free to shop around and negotiate the best deal you can.

Of course leasing has been around for decades and equipment such as UPS’s, generators, and even air conditioning could be leased. What has altered in recent years is the ability to lease the whole facility. Whereas construction and installation work was difficult to get finance for that has changed, partly due to leasing companies taking a more flexible view and partly because of the popularity of the modular data centre. With a modular data centre the fact that it is possible to relocate it makes it “plant” rather than “fixtures and fittings” which is easier to finance and also has tax benefits.

If you’d like to gain an understanding of the costs associated with building and operating your own data centre facility, no matter how big or small, please contact our estimating team at info@future-tech.co.uk.

Once you’ve received a data centre construction cost please let us know you if are interested in leasing and one of our Data Centre Consultants will be in contact with the relevant information.

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