A data center is essentially the brain of a company’s operations, so these facilities must always run smoothly and efficiently. Much like a clock with various complex parts that affect overall performance, each data center component should be properly updated and maintained.
But ensuring that data center equipment is up to the latest technology and efficiency standards—through the replacement of outdated equipment, upgrades and maintenance—can result in hefty costs. Further, as large companies increasingly outsource their IT operations, third-party data center managers and managed-service providers (MSPs) are experiencing both growth and new challenges as they operate on much larger scales. For all data center managers, having a dedicated, strategic financing and leasing plan can yield immense cost savings and streamline complex operations.
Staying Competitive With Rapid Refreshes
Although today’s data center technology is more capable, efficient and secure than ever, it continues to evolve rapidly. Advances in high-tech, critical data center equipment, such as servers, come to market about every six to nine months. Therefore, purchasing these assets with the intention of using them for more than three years doesn’t make practical sense. That leaves data center services multiple generations behind—and staying up to date and competitive is critical.
Further, new-generation servers often have more than double the processing capabilities of their predecessors, and ongoing advances in data storage, including optimization of the cloud, present the potential for even quicker turnover and higher obsolescence risk for data center equipment.
To circumvent these challenges, data center managers and service providers are increasingly considering leasing data center equipment in the short term. Leasing provides the opportunity to acquire the necessary equipment for as little as two to three years and then upgrade to the latest model with no added cost or time spent trying to sell the old equipment.
For example, if a data center manager acquires a $500,000 piece of computing equipment through a traditional purchase or payment plan, that manager will face a choice after using the equipment for a few years:
- Continue to use the equipment and risk holding onto outdated technology that might put data in jeopardy. (Or, for third-party service providers, lose a competitive edge and, potentially, business.)
- Cut losses and dispose of the equipment (which can come with additional costs).
Alternately, on a 36-month operating lease, the total cost to use that same piece of equipment over three years would be approximately $430,000—a $70,000 savings, which adds up quickly for midsize to large data centers. In addition, at the end of the lease term, the manager with the operating lease will be able to hand the equipment back with no strings attached and no added fees.
Similar leases on terms of just 24 months are also available in some cases, allowing for even faster turnaround. Such leases can be the best option for some data center facilities, especially those handling highly sensitive data.
Reduce Maintenance Concerns—and Costs
As demonstrated above, leasing on short terms can have immense benefits, as it allows for cost-effective equipment turnover in line with the IT industry’s rate of technological advancement. Not only does updating to the latest and greatest take advantage of the new technologies, but data center owners, operators and users get more for their money with each new generation as processing capabilities increase. Further, choosing the appropriate leasing option for the equipment in a data center can greatly improve total cost of operations and efficiency.
For example, new data center assets are typically on a three-year warranty, which means purchased equipment can become exponentially more expensive after the first three years of ownership. Fairly quickly, it becomes more of a hassle and cost burden to maintain the equipment than it is to dispose of it and replace it with newer equipment.
Managers and owners who finance their data center equipment, however, can use items only during their three-year “warranty covered” life span, then return them just as those warranties expire. Having a financing strategy that allows for a predictable, timely equipment-refresh schedule can mitigate the hassle of equipment upgrades and maintenance, as well as help streamline operations for an entire data center facility.
Shorter Terms Not Just for Servers
Network storage solutions such as server racks are a critical component of data center facilities, but they’re traditionally seen as having longer life spans than servers and computing equipment—and carrying less risk of obsolescence or inefficiency after a few years. But these items are critical pieces of the puzzle and are only becoming more significant through technological and design improvements.
Today’s upgraded racks can maximize a facility’s use of space and also help protect precious systems and data through their structures and contribution to air flow and temperature regulation. The result is considerable cost and energy savings.
According to a study, almost 40 percent of a data center’s total operational costs comes from the energy needed to power and cool the equipment. By setting up a strategic finance structure to keep racks and cooling technology up to date, data center owners and operators can stay competitive and reduce costs.
Today, many data center operators are financing their network storage equipment on 36-month terms, allowing them to easily replace it. Spend on upgrades for this type of equipment doesn’t make financial sense, so a consistent refresh is critical.
For example, we recently helped a national MSP to finance $1.4 million in network storage and server racks on a 36-month lease. By keeping the lease term to three years, the client will save a considerable amount in maintenance while also increasing energy efficiency, and therefore garner additional savings.
Maintaining Security and Efficiency
The need for secure, updated and efficient data storage will continue to grow exponentially over the next several years. To ensure that critical information is safe and secure, owners and operators must ensure that all data center assets are up to date and well maintained.
Financing is an essential component in this endeavor. By arranging strategic financing and short-term leases in lieu of traditional purchases, data center managers can save money, refresh technology rapidly, and keep their facilities secure, energy efficient and competitive for years to come.
About the Author
Jay Oswald is a senior account manager at Summit Funding Group, an Ohio-based company that provides equipment lease and finance solutions to businesses across the U.S. and Canada. Founded in 1993, Summit Funding Group has originated more than $3 billion in equipment lease and finance transactions to date. Contact Jay at firstname.lastname@example.org.