Understanding Data Centre Costs and Dynamics


November 16, 2023

A data centre is an essential physical facility for businesses, housing critical applications and data. Its architecture integrates a network of computing and storage resources, supporting standard applications and data sharing. Key components in a modern data centre include routers, switches, firewalls, storage systems, servers, and application-delivery controllers, each playing a vital role in maintaining operational efficiency.

The Financial Implications of Data Centre Operations

Data Centre Cost encompasses the total expense of owning and operating a private data centre or co-location facility. This includes the cost of the property, building, servers, networking equipment, power supply, cooling systems, and other necessary network infrastructure.

The annual operating cost of a data centre is influenced by several factors, including the size and location of the building and its specific purpose. Large data centre services typically incur annual operating costs ranging from $10 million to $25 million. These costs are primarily allocated to ongoing application maintenance and supporting infrastructure, with additional expenses covering heating, air conditioning, property taxes, and labour.

Constructing an In-House Data Centre

Building a small data centre can cost around $1000 per square foot. This estimate does not include the potential high costs of laying fibre optic cables, which can reach thousands of dollars per mile. On average, constructing a commercial data centre costs between $10 million and $12 million per megawatt, with a significant portion of the expense occurring in the initial stages of deployment. As business needs evolve, companies often need to invest significantly in upgrading their infrastructure. Opting for leased facilities can aid companies in meeting their changing IT requirements.

Timeline and Effort for Data Centre Construction

Constructing a single-tenant data centre typically spans 12-24 months, encompassing planning, engineering, construction, and commissioning phases. In contrast, existing co-location facilities can prepare spaces in a matter of weeks, offering a more expedient solution.

Balancing Core Business Needs with Data Centre Requirements

Establishing a data centre requires diverting time, expertise, and personnel from a company’s core business to manage specialised data centre needs like power and cooling systems.

Ongoing Operational Considerations

Beyond the initial costs of construction and real estate acquisition, businesses must account for ongoing operational expenses such as power, heating, air conditioning, security, and maintenance.

Scalability and Cost-Effectiveness

When constructing a single-tenant data centre, the projected life cycle often exceeds ten years. This can lead to initial overbuilds, increasing capital costs, physical infrastructure, and energy consumption. A data centre that is too large increases the cost per rack, while a too-small facility may quickly run out of space, negating the benefits of scalability. Co-location services offer businesses the flexibility to scale their operations as needed, with providers competing to offer cost-effective solutions. Co-located facilities allow for rapid, cost-efficient adjustments in capacity, aligning with evolving business needs.

Shared Cost Advantages of Co-location Services

In a single-tenant data centre, the user bears all costs, including space, power, and environmental control systems. Co-location services, however, significantly reduce these fixed expenses by sharing the cost of facility management, maintenance, security, and infrastructure among multiple clients.

Connectivity and Cost Implications

Adding fibre and local loop connections to a data centre can escalate connectivity costs and extend operational timelines. Carrier facilities often include backup data centres, eliminating extra local loop charges. Co-location services may also bear the cost of constructing fibre entrance facilities or offer incentives to carriers to extend their fibre network, thereby enhancing connectivity in the data centre sector.


The expenses associated with obtaining certifications, such as SSAE16 and HIPAA, and maintaining compliance are crucial considerations in data centre operations.

Co-locate with 365 Data Centres

365 Data Centres focus on delivering secure and reliable co-location, network, and cloud services. They ensure robust security monitoring and maintenance, essential for the longevity of your equipment and infrastructure.

In-House Data Centre Construction Costs

Mid-sized Enterprise Data Centres (5,000 square feet):

Tier II: $11.5 million (160 racks at 5.0 kW/rack).

Tier III: $38.3 million (160 racks at 10.0 kW/rack).

Small Data Centre (1,000 square feet):

Tier II: $2.3 million (32 racks at 5.0 kW/rack).

Tier III: $7.7 million (32 racks at 10.0 kW/rack).

Large “Telco Room” (500 square feet):

Tier II: $1.2 million (16 racks at 5.0 kW/rack).

Tier III: $3.8 million (16 racks at 10.0 kW/rack).

Differentiating Data Centres and Cloud Computing

A data centre is a physical facility housing servers and storage systems, typically managed on-premises by an organisation. In contrast, cloud data centres offer as-a-service applications and workloads, with software running on servers in a centralised location, accessible to users via the internet.


As businesses grow, the demand for reliable and scalable data centre space to house IT infrastructure increases. Choosing between expanding an in-house data centre or opting for co-location services involves assessing costs, risks, and benefits. This decision is crucial for businesses to maintain operational efficiency, comply with security standards, and meet client expectations in software development and production.

As the data centre sector expands, securing top-notch talent is essential for success. Avery Fairbank specialises in executive recruitment for data centres, linking elite professionals with prominent companies in this arena. Rely on us to identify the ideal candidate that aligns with your team’s distinct requirements, solidifying your position as a leader in this evolving field. For more details on our executive search offerings, visit our services page. To talk about your specific needs, feel free to reach out to us.

Data Centre Costs

Published on 16-11-2023


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