“Buy vs. Build” Considerations in Today’s Data Center Marketplace

1. “Buy vs. Build” Considerations in Today’s Data Center Marketplace Presenters: Jerry Gallagher, CEO & President Jeff Robinson, Vice President

2. Today’s Agenda • What is Buy vs. Build? • Factors to Consider • Decision-Making Process • Conducting an Analysis • Some Take-Aways • Audience Questions

3. The Situation Today • In today’s dynamic Data Center market, firms needing IT space are faced with the choice of Buy vs. Build • Both sides have their backers • But which factors & tools should drive the decision? • This session provides a high-leveloverview from several perspectives: • Financial • Operational • Technical

4. Today’s Learning Objectives • Following today’s presentation, you should be able to: • Identify factors & differences to evaluate co-location and build-out solutions • Determine situations where both options might be considered viable solutions • Conduct a ComparativeAnalysis of the options todemonstrate the best choice

5. Distinguishing Buy & Build • Buy • Outsourced Wholesale • Colo • Managed Hosting • Cloud (SaaS/IaaS) • Build • Traditional Construction/Renovation of a Data Center Facility • May be either: • User-Owned • User-Leased

6. What We Won’t Be Talking About • Strategic Planning: Wider Variety of Options • Consolidations • Platform Migrations • Operational Reconfigurations • Hybrid Facilities • Combined Office & Data Center Space • “Reverse Colo” Options • Overbuilding, then renting to other sub-tenants

7. Today’s Situational Examples We will be referencing these…

8. Factors to Consider

9. Factors: Financial Financial Issues are Easily Recognized & their Impacts are Understood: • Capital Costs • Operational Costs • One-Time Charges • Lease Costs

10. Factors: Technological Realistically assessing future IT Architecture is crucial • Projected Growth & Predictable Expansions • Your Equipment Mix (Servers, Storage & Network) • Projected Contractions • Virtualization • Consolidations • Platforms Deployed & Evolutions • Expected Spatial, Electrical and Cooling Densities Detail is Important! Macro-Level Projections Can Skew Results

11. Factors: Operational Operational Factors define priorities & the tolerance for risk • Staff Requirements • SLAs • Security • Limitations w/Data Center Support • NOC Requirements • Power Management & Allocation • Telecommunications • Overall Corporate Culture

12. Factors: Structural Organizational Structure—how IT fits into the overall business mission— critically affects Data Center strategies • Is Data Center Management seen as w/in organization’s “Core Business?” • IT Standardization can minimize Planning Uncertainties • Who makes Decisions re: Reliability (i.e., Tiering) • Division of Responsibility: Who owns the power? • Importance of Business Continuity Planning

13. Other Factors Customer-specific factors can also result in unique advantages & disadvantages • Proximity between HQ & Staff • Server Hugging Tendencies • Storage Space • The Neighbors • Adjacent tenants at initial occupancy • Long-term synergies and threats

14. Comparing the Options:The Decision-Making Process The Decision Process is Best Served with: • A Structured & Objective Evaluation Methodology • Blending of Both Financial & Non-Financial Factors • Pre-Defined & Stable Weighting Factors • An Evaluation Template That is Prepared & Accepted in Advance • Comparison Prepared to Make It Understandable by Both: • Upper Management • End Users

15. Decision-Making Process Financial / Non-Financial Select or Narrow Geographic Region(s) Evaluate Build Options (non-site specific) Evaluate Buy Options (site specific) Analyze & Compare

16. Decision-Making Process Financial / Non-Financial Select Geographic Region Evaluate Buy Options (site specific) Evaluate Build Options (non-site specific) Analyze & Compare All Cost Factors will be discounted or adjusted for the Time Value of Money.

17. Decision-Making Process:Helpful Hints Important Process Steps: • Develop Initial “Mandatory Features” Checklist • Narrowing Step / Reduce Options to 5 or 6 Choices • Solicit ActualColo Pricing • Obtain Real-World Construction Estimates • Pre-Determine Weighting (i.e., Importance) of Each Non-Financial Factor • Document an Audit Trail

18. Conducting an Analysis: The Gotcha’s Pricing Factors Often Overlooked or Discounted: • Shell Lease Costs • Energy Costs (PUE) • Facility Management / Maintenance • Security Services • Staffing Differentials • Telecommunications • Tax Consequences • Incentives

19. Conducting an Analysis: The Gotcha’s Checking the Numbers: Construction Pricing • Cost Estimates can range all over the map • Uptime Institute tends to lean upward • Internal estimates often lean too low • Inexperienced AMEPs may deliver unreliable information • Commodities costs (steel, copper, etc.) often fluctuate • Construction Options & Variations • Too many permutations make comparisons tricky • Pick 1 or 2 “best” design scenarios and stick with them.

20. Conducting an Analysis: The Gotcha’s Checking the Numbers: Colo/Host Vendor Pricing • Determine true total cost • Pricing Complexities • Different vendors price differently—translation challenges • $/kW vs. $/sf • Cooling up-charges • Allocated (i.e., “Reserved”) vs. Actual Power Draw • Added “Options” can mean additional costs • Cross-connects • Management fees • Power whips and electricity mark-ups • Make sure Price Quotes are complete & valid for the entire evaluation period

21. Best Practices: Cost Estimating Tips • Apply Rules for the Time Value of Money • Allows for a Fair Comparison for Trading Off Long-Term Operational Costs vs. Capital Costs • Some Cost Estimating Rules-of-thumb

22. Purpose-Built Might Be the Best Fit When • Raised Floor Requirements Are > 2,500 sf • Lower levels can be affected by the Tier level desired • Client Needs Environmental & Operational Control • Hosting SLAs May Cause Regulatory & Legal Issues • Access to Capital should make it Affordable w/o Resort to a “Reverse Colo Option” • Usage Horizon is Greater than 8 Years • TCO basis: Construction cost pay-back is typically 7 to 8 years

23. Colocation Might Be the Best Fit When • Organizational Financing is Capital-Constrained • Usage Horizon is Less than 8 Years • Long-Term Colo Cost Savings often won’t match Owner-Constructed solutions • Operating a Data Center Facility is Not a Core Competency • Where Data Center Colo/Hosting Markets are Flush w/Available Providers

24. Take-Away’s • While many Industry White Papers contain valuable information, still take w/a Grain of Salt (i.e., Who’s the author?) • No “One-Size-Fits-All” Answer • Real Data Center Costs are often • Greater than internal estimates • Less than industry standard estimates • w/Most Data Center Cost Comparisons, it’s very common to forget an expensive element A defined & objective evaluation is key!

25. Q&A • Sample Reference Materials • Site Selection Criteria for Regional and Location-specific Searches • Mandatory Features Checklist • Financial Comparison • Typical Study Table of Contents • Conversion Method: Cost/sf to Cost/kW www.totalsitesolutions.com/BuyVsBuild

26. “Buy vs. Build” Considerations in Today’s Data Center Marketplace Jerry Gallagher, CEO & President ggallagher@totalsitesolutions.com Jeff Robinson, Vice President jrobinson@totalsitesolutions.com www.totalsitesolutions.com 888-329-4877