We are living in the era of the ongoing technological revolution. Artificial intelligence, 5G technology, IoT (Internet of Things) is changing the way we live and work. The number of telephone users has reached 4 billion, 2.5 billion of which have smartphones. The amount of video data on global networks doubles every two and a half years and the amount of web traffic doubles every nine months.
The massive transition of video and television to 4K Ultra HD is expected to double the television traffic. The amount of security cameras, that continuously transmit video data, is already over 100 million worldwide.
In 2018, the annual volume of Internet traffic and data, that was transmitted via mobile, telephone, and other networks, reached 1.6 zettabytes. That is a several time increase over the previous years. For example, in 2016, the total volume of digital information created by humankind was only 0.16 zettabytes. 1.6 zettabytes are equal to 1.5 trillion gigabytes. That’s about 4.5 trillion YouTube videos and 940 quadrillion text messages.
The rapidly increasing amount of data requires tremendous computing power and storage capabilities. Meanwhile, the capability of modern data centers lag behind the existing demand for rapidly growing traffic and data volume. The data center industry is one of the fastest growing market segments in the world economy. There are about 3 million data centers in the United States and this number is growing at an average of 10%-15% per year.
Edge Data Center Market is valued at over $4 billion and is set to grow over $13 billion by 2024, that is in just 5 years.
Growth in the number of data centers is no longer affected by economic crisis or by market fluctuations. This makes data centers to be one of the most stable and reliable businesses to invest in.
Data centers have three major customer groups:
- Wholesale companies such as Facebook and Microsoft. These companies buy data centers on a large scale and they are mostly interested in available floor space and power supply.
- Medium-sized companies. This category is represented by companies, that buy ready-made data centers with already established infrastructure and install their own equipment.
- Small companies. These companies typically buy several racks from an existing data center and use their own equipment.
In the modern world, it’s faster and more convenient for a consumer company to buy a ready-made data center. Therefore, the turnover of funds is accelerating, and companies, that acquire data centers, drive market capitalization growth. Data center construction and launch is a difficult, time-consuming process and requires serious labor and financial resources (capital investment).
When it comes to building a data center, there is no need to make a multi-million dollar investment or build high-rise towers. In theory, it’s possible to set up a data center on a floor space as small as 100 square meters in buildings, that have no windows (windows are not necessary for data centers). The main requirement is electricity (thousands of servers consume a significant amount of electricity), broadband Internet, and air conditioning.
Data centers can be located in skyscrapers, offices, and even shopping malls around the United States. Post 9/11 evidence indicated the presence of giant data centers that occupied at least 20 floors of the collapsed Twin Towers.
Now let’s talk financials. If you approach this business purely with an intention of renting (subleasing) a premise, this business model is ideal for you. Consider this scenario: in an area of one square meter, you can install a rack, that holds 20 to 40 servers. You can rent the servers at prices ranging from $100 to $250 per month. In fact, for one square meter of space, you can generate $2,000 to $10,000 per month. What other business can generate a profit of $10,000 per square meter?
Of course, let’s not exaggerate. It takes considerable amount of effort to go from making a decision to build a data center to its full operation. It includes recruiting staff, purchasing servers, commissioning, etc. You need to invest in buying server equipment and racks, provide electricity, the Internet, hire data center administrators. As a result, an initial investment is high. But, even at the profit rate of $2,000 per square meter, the data center business is considered to be extremely profitable.
One of the biggest advantages of this type of business model is its excellent scalability. You can open a small data center with a floor space of 100 square meters (less space is not practical due to the overhead costs). Alternatively, you can set up a data center on a 20,000 square meter floor. It’s not only about the servers, it’s about hiring the right people, which is crucial. Your team should be great at selling/renting to customers. However, you can start with a small data center, and then expand as sales grow.
Let’s talk about the technical details, starting with building a data center. Some companies build data centers using a “build and cut” concept. They select buildings, handle retrofitting, communication wiring, cooling and installation of emergency generators in case of power loss from the city. We will be using this concept as an example.
The next step in setting up a data center is “slicing” it into pieces and allocating these parts to specific customers. Next, you need to install arrays of racks, contract Internet service providers, open NOC (Network Operational Center) and buy servers.
In today’s market servers became more affordable, costing between $2,000 and $5,000 if you were to purchase them new. Used units can cost as low as $100. Usually customers don’t mind.
Our company can lead you through the process of building a data center and answer all questions you may have. More specifically, we can assist you with:
- Selection and rental of a building (or premises)
- Ventilation and cooling
- Arrays of racks
- Power supply
- Contracting Internet providers
- Hiring the right staff
Here are more details about data center infrastructure:
- Building. It can be just a regular building with increased requirements for ventilation and maintaining optimum temperatures.
- Arrays of racks. Depending on customer requirements, you will need to install 40, 42 or 45-unit racks along with Power Distribution Systems (PDUs) for each rack.
- Internet Service Providers (ISPs). Data center equipment needs to be connected to ISP to gain access to the Internet. For a newly built data center, it’s important to negotiate favorable terms with Internet providers. There are thousands of Internet service providers in the world. Before engaging in a negotiating process with selected ISPs, it is necessary to take into account the needs of data center customers.
- NOC (Network Operation Center). You will need a variety of personnel with different specialized skills to support and maintain the data center:
– Power Supply and Cooling Technicians;
– Server Hardware Technicians;
– Server and network Engineers;
– Local Technicians for physical access to equipment (in case of breakdowns and/or installation of new equipment).
Depending on data center customer requirements, you can recruit server maintenance engineers who are based in the US or in Eastern Europe, for example, in Belarus.
The areas of a data center, that are temporarily free of server racks, should be rented out to vendors, that serve the data center, or as an office space to any company.
According to various estimates, the collaborative workspace industry is witnessing exponential growth. Therefore, utilizing your floor space as a combination of a data center and an office space rental creates conditions for a safe and diversified investment.
Our company offers a new way for data center construction and servicing. Our method involves a combination of western market reliability and Eastern European developed engineering infrastructure.
We have 15 years of experience working with data centers in the United States and in Europe. We have established relationships with engineers in the United States as well as Western and Eastern Europe.
Here are common mistakes that we can certainly help you avoid:
- Incorrect Positioning of Data Center: Before installing their equipment, professionals take account of many factors, such as the possibility of expanding the data center, the proximity and availability of Internet providers, fault tolerance of power supply.
- Choosing Data Center in a Seismically Unstable Region: This step will reduce the capitalization of the data center.
- Incorrect Location of Data Center: For example, you place a data center in the same building with a bank. Banks have higher priority for reserve energy supply when the electricity goes out.
- Hiring “Off the Street”: Technicians and engineers will have access to important data. Therefore, proper selection of personnel will ensure a well-coordinated work and professional growth of the team with an increase in the company’s capitalization.
- Lack of Necessary Insurance and Licenses: When working in a data center, it is necessary to provide proper insurance to all personnel to cover all expenses in case of accidents.
We offer our assistance in building Cloud and Data Centers in the United States. Moreover, you will receive business support at all stages, from writing a business plan to the final sale of the data center.
- Data Center site selection, utilizing AV5 contacts of commercial real estate experts, who specialize in data center properties.
- Data Center positioning. Developing the right positioning strategy. The choice of target market segment.
- Hiring of Sale Representatives, who have extensive experience in the field of data center sales and already have a client base.
- Brand development for your data center. Promoting the new data center to AV5 partners in data center sales.
- Hiring of technicians for the maintenance of the data center, preparation of premises and finalizing of all necessary contracts. AV5 has all resources in place to hire trustworthy technicians to whom private information will be entrusted.
- Drawing up the requirements and hiring engineers.
- Writing a business plan.
- Maintenance of business relationships between the data center and its customers, taking into account the agreement on the level of service provision.
Data center installation after finalizing of all contracts:
- Data Center Design, Data Center map planning, placement of racks for servers, storage, and network devices.
- Rack installation, construction of a Structured Cabling System (SCS).
- Installation of power systems.
- Installation and customization of equipment (servers and network devices).
- Preparation of documentation.
- Staff training.
This is the longest and most profitable phase. Excellent customer service will ensure profits long-term. In addition to complying with the terms of current contracts, at this stage, non-obvious proactive activities are also important:
- Gathering customer feedback on service quality.
- Periodic meetings of Data Center executive directors with directors of client companies.
- Ongoing marketing promotions and optimization.
- Monthly social events with decision makers from customer companies.
After establishing all business processes, acquiring customers and showing profits, the company’s value increases significantly. At this stage, you can consider selling the data center.
Due to the rapid growth of the data center market in 2017, there were 48 large transactions worth $20 billion. In 2016, there were 28 transactions worth $10 billion and in 2015, 17 transactions worth $5 billion.
AV5 in partnership with US BUSINESS SERVICES, offers complete support for your company to create, maintain, and possibly sell a data center. To summarize:
- Setting up a company with the support of US BUSINESS SERVICES, including registration, opening accounts, obtaining visas, etc.
- Putting together business and marketing plans.
- Drafting the technical project and hiring all necessary engineering staff.
- Branding and marketing.
- Building a data center.
- Finding and supporting end customers.
- Preparing Data Center for sale and exiting the business.