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2 Keys to Keeping Data Center Project Costs Under Control

Given the economic climate of the past several years, many companies have put off data center expansions and upgrades, creating pent up demand.  The situation can create a sense of urgency to complete projects quickly when companies finally do get the green light to upgrade.  That rush to complete a data center project can lead to costly mistakes.  To keep costs under control, companies need to take critical steps in planning data center projects.  Two mistakes that often occur are: (1) not taking TCO into account, and (2) poor estimation of the project cost.

The first key TCO component is the CapEx.  Capital expenses should consider not only the system cost, but also the project management, design, installation, and commissioning.  The more scalable the design, the more the capex can be deferred until future years.

While the upfront dollars required to build or expand a data center are top of mind during a project, companies also should factor in the costs to operate and maintain the data center over time.  Calculating an operations and maintenance expense budget is important to building an accurate return on investment model for the data center, which will help you make smart business decisions as you build.

To build an accurate OpEx cost model, you should include maintenance costs as well as other day-to-day operations, and energy costs.  Maintenance costs are anything associated with the proper maintenance of all critical facility support infrastructure.  A few examples are equipment maintenance contracts, data center cleaning expenses and fees paid to subcontractors for repairs and upgrades. For the day-to-day operation of the data center, most of that will be salaries for on-site personnel, but should also include training and safety programs, the creation of site-specific documentation as well as quality assurance and quality control policies and procedures.

Energy is the last opex component.  There are many design decisions that impact how efficient the data center will operate (i.e. economizer hours on cooling, % load on data center, efficiency of power & cooling devices).  Depending on the cost per kWh for electricity, the lifetime energy costs can be a significant piece of the TCO pie (it can come close to the capex of the data center physical infrastructure).

Leave any component out and you’ll have a flawed model, an incomplete picture, one that won’t enable you to make sound business decisions.

The second critical mistake – poor estimation of the project cost – results in delays and cost overruns.  Too often, companies go to their board of directors with a data center capital request that is too low.  The routine often goes something like this:

  1. A capital request is made and tentatively approved.
  2. Financial resources are allocated to investigate, capture and create a true budget.
  3. The company spends time driving the above budget process.
  4. Findings reveal that the initial budget request is too low.
  5. The project gets delayed, impacting careers as well as the ability to deliver service to internal and external clients and prospects

Tools such as the Data Center Capital Cost Calculator can be used to estimate the project cost.

That takes us back to the first mistake: failure to take the TCO approach and build an accurate, holistic financial model.

To learn about other common mistakes made when building a new or expanded data center, check out the Schneider Electric white paper, “The Top 9 Mistakes in Data Center Planning.

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