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What is Your Data Centre Costing You?

By 11th Jan 2021Mar 4th, 2021No Comments

Doing The Sums, The IEEE Way

Any IT analyst who has been asked by the CIO to quantify what their data centres are costing the company can confirm that doing so is not a trivial exercise.

In “It’s not about the rack space,” we outline why we believe that Gartner is correct and that the conversation needs to be about far more than cost comparisons, but we understand the need to do the sums and offer some pointers. In 2017 the IEEE published a paper entitled Total Cost of Ownership Model for Data Center Technology Evaluation where they develop a formula to quantify data centre costs. In true IEEE fashion, it is technical and rigorous, but in this case, relatively easy for the layman to follow.

At a high level and focused purely on data centre costs alone, the formula looks like this:

TCO = Ci + Cs + Cn + Cp + Cm
          Ci = cost of Infrastructure
          Cs = cost of Servers
          Cn = cost of Network
          Cp = cost of Power (server power, power loss and cooling) Cm = cost of Maintenance

To compare ‘in-house’ to ‘colocation’, we can eliminate Cs (the cost of servers) as you will need to deploy your hardware into the colocated racks provided for you at Teraco. Where we need to augment the IEEE formula is the inclusion of network-related costs that are avoided and specific benefits attained (some of which are admittedly difficult to quantify in terms of Rands and Cents) by moving to Teraco (as a vendor-neutral data centre with NAPAfrica as an IXP).

= costs avoided
          BT = benefits of Teraco

So we end up with:    TCO = Ci + Cn + Cp + Cm + CaBT  

Cost of Infrastructure (CI) Is In Two Parts: 

1. The total building infrastructure cost (cost of land and building per m2, as taken up by the racks in use).
2. The cooling infrastructure cost (cost of acquisition).

Cost of Network (CN) Is Also in Two Parts:

1. The cost of cabling and cabling management systems.
2. The cost of rack network equipment.

The above are all mainly CapEx costs, and once incurred, can be viewed as ‘sunk costs’, and apart from the power usage efficiency of the servers, have little impact on ongoing Opex.

Cost of Power (Cp) includes all aspects of electricity cost, including server IT power, power loss in the delivery process and cooling power. This is where the main costs of a DATA CENTRE can be hiding.

Cp = (Ce-kwh x 30 x 24) / 1000 x PUEDATA CENTRE x (PUEserver x Pserver + Pnet)
          Ce-kwh is the per kWh cost of electricity
          PUEDATA CENTRE is the total power utilisation efficiency of the DATA CENTRE*
          SPUEserver is the Server PUE*
          Pserver is Power consumed by the servers (average power)
          Pnet is the power consumed by all non-server DATA CENTRE network equipment
          *The PUE value mainly reflects the cooling system efficiency and associated power loss in chillers, pumps, fans and blowers in the cooling system.

Cost of Maintenance (CM)

Cost of maintenance includes power, cooling and network equipment, and needs to take mean time between failure of each item into account as well as the labour costs involved.

Costs avoided (Ca) are made up largely by:

• Purchasing IP Transit instead of internet services,
• Avoiding last-mile access link fees related to interconnecting in-house data centres,
• Replacing third-party links to technology providers with interconnects.

By creating a network node at Teraco and acquiring selected corporate compute and storage resources with a fibre cross-connect to an ecosystem of over 500 service providers, it is possible to shift up to 70% of your enterprise outbound traffic to free Teraco services like NAPAfrica IXP. With the decrease in traffic, it is possible to reduce the size of your last-mile link by up to 50% and still see improved performance.

Another significant but hard to quantify cost is that of downtime. According to Gartner, the average cost of IT downtime is $5,600 per minute. This cost doesn’t even account for the cost to the business when professionals are interrupted from productive work and take time to refocus (a study by UC Irvine, pegs that at an average of 23 minutes). Check your records for downtime in the last year or two and do that math.

Benefits of Teraco (BT)

Teraco colocation results in significantly less risk and cost of downtime related to a range of issues from human error to load-shedding. It also results in high-speed, low latency, low-cost proximity to a range of managed service providers which opens up a host of options for enterprises to embrace what we refer to as “Platform Teraco”.

It is now possible to virtualise firewalling and perimeter security, routers, domain controllers, session border controllers and IP telephony at Teraco, creating greater flexibility, scalability and cost control. Managed Service Providers offer these to Teraco clients using best-of-breed hardware and software. Once virtualised and outsourced, the speed of deployment of services begins to enable greater agility in deploying new digital products and services.

Teraco as a strategic node in your enterprise network becomes the ideal location for the head-end of a Software Defined Network (SDN) which, if you are accustomed to running an extensive and expensive MPLS network, can increase control, reliability, flexibility and speed of deployment while significantly reducing your network costs.

There are now more than 50 financial services and fintech companies colocated in Teraco. If you are in or work closely with that industry, what better place to be than a few milliseconds of fibre away? Now extend that concept to any industry where ICT enables B2B transactions. Colocating at Teraco provides the opportunity to leverage the proximity of a range of service providers; a fibre interconnect away.


Unless your core business includes the provision of hosting facilities and your technicians need
to tinker directly with the hardware, it is increasingly difficult to justify not outsourcing colocation to a multi-tenanted vendor-neutral data centre with a highly developed Internet Exchange Point (IXP) like NAPAfrica. It’s hard to beat the quality, reliability, and skills of a Tier III data centre facility, but when you add the benefits of making a vendor-neutral data centre a strategic node on your corporate WAN, there are increasingly fewer instances when it does not make sense for an enterprise to include Teraco as a strategic node.

Once you’ve done all of these calculations and given thought to the opportunities that colocation at Teraco unlocks, the price per rack of colocation space can be seen in the right perspective. If you are talking about the rack price, you’re having the wrong conversation.