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Build a Data Center or Contract Hosting? 31

bbsguru asks: "Our Government agency has around 100 independent divisions that share a dozen national applications and a private WAN. We are working to consolidate some of these applications (e-mail, SQL databases, specialized web services), and are facing a familiar choice. One option is to contract out data hosting, e-mail server hosting, and so forth to various vendors (with negotiated SLA's and all the best guarantees, of course). We have already started doing this for our private WAN-to-World gateways, VPN management, and one major SQL application, each with a different vendor, so far. Others are advocating the creation of a national agency-owned facility, where employees would perform these functions instead of contractors. Network management, IDS, data replication and so forth, for all the consolidated applications under one umbrella. Is a series of contractors really the way to go, or are there real benefits to keeping it in house?"
The costs are always a factor, but the one-way nature of the contractor choice is also weighing in this decision. Some are concerned that if the expertise to create and manage these highly custom databases and services is farmed out to contractors, there will be no other choice in the future. Trouble is, as we evaluate our options, the process of contracting out bits of the whole is already underway. With each new contract, one more service to be brought into a datacenter is lost, making the whole thing less practical. Are we swimming upstream here?"
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Build a Data Center or Contract Hosting?

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  • Bring it in house (Score:5, Insightful)

    by Salvance ( 1014001 ) * on Wednesday December 27, 2006 @03:25AM (#17374336) Homepage Journal
    When you're talking about that many divisions, I'd say bring it in house. It may cost a little more, but the level of control you need cannot easily be quantified with a simple price tag.

    I used to work for a 100,000+ employee consulting company, and I saw SLAs and contracts broken time and time again ... or saw situations where companies had to spend millions (or even billions) to get out of contracts and unwind decisions that didn't make sense in the longterm. It was a nightmare to manage a few outsourcing contractors, I couldn't imagine trying to manage dozens or more.

    And since you're working for a government agency, you probably won't even be able to achieve any significant cost savings by outsourcing (since most contractors save money by offshoring resources, which I believe is still a no-no for government work).
    • Contract it out, anything you will bring in-house to government will be drowned by bureaucracy, hidden agendas and general incompetence.
  • We're doing both (Score:5, Informative)

    by plover ( 150551 ) * on Wednesday December 27, 2006 @03:32AM (#17374360) Homepage Journal
    Our company has gone both ways. We contract with a vendor to host our mainframes, but we've also built our own secure data center to house the many PC and Unix servers.

    Contracting is attractive because the lawyers have this idea that you can sue the hosting service for failing to deliver services as promised. Of course if they fail to deliver, you have roughly three days before your company is permanently crippled, and seven before you are out of business, so that ultimately means only the vultures and the lawyers will get paid; but it sounds like a good idea to management. As a government agency you'll get yelled at and fired, and a few members of Congress won't get re-elected, but you won't go out of business.

    One advantage to hosting is that they keep us current with hardware. Our contract stipulates an upgrade schedule for both hardware and operating systems, so we're constantly shuffling in the latest and greatest technology.

    I don't know what the price difference is, as I don't ever see those kinds of numbers. But a new data center is mind-bogglingly expensive after you factor in generators, fuel tanks, chillers, security, alarms, power, fork-lifts, flooring, racks, cubes, offices, operators, guards, etc. With a hosting service you're sharing some of that overhead with the other customers of the host.

    Running your own data center is good if you have a good team that knows what they're doing, and enough depth to survive the inevitable turnover. We do. But knowing how to successfully run a data center is different than knowing how to build one from scratch -- you need both kinds of knowledge before embarking down this path.

    • If you are building an ISP that does colocation, it's a WHOLE different ballgame. What you need for your enterprise is very different than what AT&T needs in a colo. Most likely, if you need guards at your building, you already have guards. If you don't need guards, just adding a data center isn't going to create the need.

      It also depends on the SIZE of your data center. If it's small, being a room or 3 in a building, in-house management can be cost-effective. When you build it, you use suppliers that fu
    • I think if you find a good combination of this then there is nothing like that. Complete outsourcing is not at all a good idea as you get no control over the quality after some time. And once outsourced you lost the ability to rearrange the things as per your conditions, you get totally dependent on the contractor. And total in housing not only costs you much but also get hectic to manage. So one should find out a great combination of both.
  • If the choice is between screwing yourself by becoming dependent on a bunch of different companies or screwing yourself by turning everything over to one monstrous internal bureaucracy, I'd say go with the former. It might be hard to fire one vendor and turn a project over to another, but it will be completely impossible to fire the central organization.

    Really, though, I suspect you've created a false dichotomy. Among the vast soup of tasks you're looking at, some are probably done best by vendors, some by
  • by QuantumRiff ( 120817 ) on Wednesday December 27, 2006 @03:39AM (#17374394)
    It is about Talent. Do you have (or can get) the people that are able to perform the duties well? Can you pay them competitively? and keep them? The cost of a data center is negligible vs. the cost of downtime due to mistakes, turnover, and bureaucracy. The hosted idea is great to get rid of mundane tasks that are not part of your "core competencies", or where you simply can't get or maintain enough work for a qualified person.

    You mention contracts with Service level agreements. If you want to do this "in house" you will need to create these same contracts with the business units that you need. This will give the higher ups the same finger pointing trail that they would have with a hosted solution, as well as the same assurances of reliability. Quite honestly, you would basically have to treat this new "group" as a separate company within the company. I have yet to see a case when it is cheaper over the long run to have a hosted solution, but hosted is much faster to setup and get working. Not to mention, it is awfully hard to re-negotiate, or terminate a contract when a company is holding all of your crown jewels.

  • by Travoltus ( 110240 ) on Wednesday December 27, 2006 @04:47AM (#17374634) Journal
    My boss's business was swirling around in the same toilet bowl that you are.

    We found that for accountability reasons and, in related issues, reliability and reputation issues, we had to bite the bullet, build the data center, expire (domestically) outsourced (er, contractor) contracts, and take it all in-house.

    If you're not a financial services company it might be a less dire necessity. If you're a public company of any type? Between you and me, I'd take the data center. For many reasons requiring about a megabyte sized post, SOX will inevitably bite you on the butt when your data is "elsewhere" - elsewhere being anywhere except right there in the data center where you can control its usage in a highly draconian matter. There was also a recent law that came into effect regarding keeping all internal emails.

    Contractors don't necessarily screw up, but there's an old war term my pappy taught me that applies here... don't let your supply lines get too numerous or too thin. Too many pipes tend to spring one leak, and nowadays one leak is very bad news. Keep it all in-house and you're statistically guaranteed to have less drama.

    Oh and before someone says it, yes, have two data centers. In case the first one becomes the real life setting for "Destroy All Humans" or something.
    • As the original architect of the key central government intranet network in one nation, the security manager of a trading platform for another and consulting performance auditor on a third, here are a few things I learned.

      (0) Before all, ensure you have someone in charge with common sense, and who has enough power to take decisions (that is, if it's not yourself). If not, you're targeted as scapegoat before you even start. Finding a way to deal with the politics is crucial or you'll be fighting those bat
  • by dbarclay10 ( 70443 ) on Wednesday December 27, 2006 @05:57AM (#17374876)
    Something you should consider is "perfect market" vs. "real world".

    In a perfect market, outsourcing is the main way of taking advantage of economies of scale. You don't run your own national telecommunications network, you outsource it to the national network. You end up paying (cost - economies of scale + profit). The trick is, if you can reach those economies of scale with your datacenter, and you're a competent bunch, you end up paying (cost - economies of scale). So you can save money. There are obvious security and accountability advantages too.

    That's the perfect market. In the real world, these folk charge far more than (cost - economies of scale + profit). They cater to inept organisations who couldn't collaboratively tie their shoes up without a contractor to show them how to do it. So you end up paying (cost_of_incompetents_doing_the_job - economies of scale + profit). The profit part of the equation is miniscule compared to the differences between "cost" and "cost of incompetents doing the job". If the home-grown data center would be big enough (I don't know that it would be, given the brief description in the post), and if it was competently-run, then you can save huge amounts of money by doing it in-house (again, aside from all other benefits).

    This post has dealt exclusively with cost. Personally I would consider the other factors (security, accountability) to be the deciding factors, assuming that both options implemented services competently.
  • What about security of your data when you do Contract Hosting? Have you classified what you can give away to out side agencty?

  • as an IT consultant and I helped building 2 data centers so far, third coming up. How much are you filling the data centers and at what rate. If you have lots and lots of servers and fill up about a half rack each month, it's usually cheaper to do it in-house.

    Calculate what you pay up-front and the general cost of maintaining. With a decent crew, you should be able to manage the data center with 3-5 people. Also calculate in the cost of the ground, power, cooling, ... and of course insurances and see what a
    • You know that co-locators do charge you the costs and a percentage of profit and their prices can change anytime and once your locked into a datacenter, you usually can't get out for cheap.

      Your costs can only change at any time if you have a really shitty contract. Contract negotiations can take longer than implementation in some cases. There are so many colo companies out there that you really can dictate your terms if your are persistent. Yes, moving from one data center to another is VERY expensive and a
  • There are several examples of government agencies running their own networks between labs or facilities spread out nationally. The Deparatment of Energy is the first one that comes to mind. The NSF also has experience with this. There are also a lot of regional optical networks at major cities which could be used to help get to where you want to go instead of costly custom last mile solutions from your network vendor of choice.

    It might be beneficial for you to
    a) See if an umbrella agency has a national
  • Remember, you will need two datacenters, whether you build them yourself or outsource you need two. One to be your main site and the other for DR. Depending on your requirements and the available technology in your current/planned solutions you might need as much space in the DR site, or quite a bit less, than in your main site. Failing to plan for DR now will cause you no end of headaches down the road when someone realizes this important piece of the puzzle was left out.
  • It will be cheaper to build your own data centres in the long run than to contract them out.
    For a large gov't project, you have to have two for disaster recovery. Selecting the sites will be a political mess but the real issues are "1) where is power and air conditioning cheap?" and "2) where can we get staff"
    For this I would propose you put your main data center near a major hydro dam and have your secondary site near where most of your existing staff is. That way when your main site goes down, your peopl
  • 3rd Option (Score:2, Informative)

    I think there is a third option that you should consider. Use a co-lo facility. Instead of trying to build your own data center (which is outrageously expensive,) or have someone else manage everything (which is unreliable,) put the servers in an existing data center and manage them in house. I am part of a hosting initiative at my company (we host environments for some of our customers,) and we've either priced out or tried the first two options. We are in the process of spending millions to move from
    • When you look at the long term costs (over 5 years for example,) building your own data center isn't as outrageously expensive as you think... But it depends on a number of factors such as size, competency of employees, how much you need to physically touch your stuff, etc.
  • Do you want to pay your operators Gov salaries (2.?% increase this year) or do you want to pay them a competitive wage? Think hard about the quality you get for each of these...
  • You could operate your whole network on the EC2 cloud at lower cost. It's not viable if you are dealing with SCI, however.
    • Strange, I've never seen a green woman. What country do they come from? Maybe they just eat a lot of spinach?
  • You're working for the government. India cannot be trusted, and even American owned companies cannot be trusted not to outsource to India. At least some part of your data is going to be data about your constituent citzens. Do you really want the front page of whatever paper your Bureaucrats and Legislative body respects to have a headline about you losing data to identity thieves in India?

    That alone should argue for you keeping all data in-house and relatively under control.
  • by avronius ( 689343 ) * on Wednesday December 27, 2006 @05:10PM (#17381008) Homepage Journal
    100 independent divisions that share a dozen national applications and a private WAN
    1. Identify your business, and what the basic requirements are.
      • 100 different divisions / private wan, virtual lans, vpns / disaster recover, failover
    2. The next step is determine what services are required.
      1. backend - the infrastructure
        • database servers and various network components
      2. middleware - the application layer
        • application, e-mail, etc. servers
      3. frontend - the pieces that talk to the 'net
        • firewall, load balancers, content switches, intrusion detection servers, web servers or portals
    3. Consolidate where possible - eliminate if not needed - improve if required
      • reduce complexity and duplication of services / standardize on a single database platform (if possible) / standardize on a single web architecture (if possible)
    4. Determine what your SLA's *really* are.
      • 99.99% for network and SAN - less than 5 minutes of downtime each month
      • 99.9% for major services - less than 45 minutes of downtime each month
      • 99% for individual servers in redundant or failover groups - less than 8 hours of downtime each month
    After you've taken the time to gather that information, and get a real understanding for scope, you should begin to look at your various options.
    1. Partial outsource - retain everything internally except for the actual server room(a)
      • rent or lease rack space from a third party
      • provide your own gear
      • continue to do all administrative tasks - including OS and hardware support
    2. Partial outsource - retain all administration, with all hardware support from vendor(b)
      • rent or lease server and rack space from a third party
      • continue to do all administrative tasks - including OS
    3. Partial outsource - retain all administration except for OS - all hardware support from vendor(c)
      • rent or lease server and rack space from a third party
      • obtain OS support from third party
      • continue to do all administrative tasks - except OS
    4. Piecemeal outsource - each service provided by different vendor - you become contract administrator
      • rent or lease server and rack space from a third party
      • contract out OS support to different third party
      • contract out application / database administrative tasks to other third parties
    5. Inhouse - this options requires a large initial expense, but results in the greatest overall control
      • requires facilities administrator - to take care of power / cooling / space allocation
      • If the facility does not currently exist, or requires expansion...
        • purchase generators / air conditioners / humidifiers or dehumidifiers / racks / network wiring / fire supression components / wiring harnesses and conduits
        • construction - server rooms are considerably more expensive than normal office space
      • OS support and administration / application and database administration / network administration
    Only once you have a thorough understanding of the current state, a more robust array of options, and an understanding of cost vs. control will you be able to make the right decision. This is not meant to be a complete template, but should allow you to see the steps that are required more clearly.
  • I have planned datacenters in the past and it is a pretty easy choice for a large government agency. You save taxpayer money in the longrun if you own the facility given the size you are needing (assumption). Hire contractors (hey, we are available!) to set you up and get it organized. Create a handoff plan where your own captive staff or long term contractors are brought in and trained by the folks contracted to create the data center. You don't want the high priced talent long term that is needed for sett
  • I bet you're not getting 'Best Guarantees' because you didn't define them.

    I also bet if you define them to your satisfaction, none of the vendors will actually agree to signing the contract. Then you can take that to your boss and he'll understand why you need to do it in-house. Don't be afraid to hire contractors to give you a hand in-house too. Pay them to document their work so you have records and little loss of knowledge.

    Bob Cringely wrote recently about the SLA on his Internet connection. The LEC
  • Introduction, dedication and learning curve

    My work is in hosting and administrating a server and client farm. I am both web programmer, system integrator, linux guru, part time designer, programmer, electronicus and artist all-in-one. The list certainly doesn't stop there which makes it a science and me a system engineer. It's a continuesly going learning curve. I've got many books for many years about mail, dns, Apache, Perl, Bash, bibles which have helped me further for about 14 years active unix duty now

"My sense of purpose is gone! I have no idea who I AM!" "Oh, my God... You've.. You've turned him into a DEMOCRAT!" -- Doonesbury