The Colocation Question In Canada: External Provider vs. In-House

Posted on April 13th, 2012


Colocation Hosting


When it comes to the important question of buying or building a colocation infrastructure, even CIOs and tech enthusiasts might hesitate with this decision. Looking at colocation hosting in Canada, from a financial point of view, there are numerous reasons why businesses should rightfully scrutinize their ability to build their own data center in-house. In many cases, leveraging the infrastructure and expertise of a professional service provider can be a significant cost saver.


The demand for server colocation in North America is higher than ever and projected to steadily grow throughout the upcoming years. Already at the beginning of this decade, the demand for server hosting and related services such as server colocation hosting was at an all time high. “A number of factors led to the strong 2010 results, including a recovering economy, strong demand, and continued adoption of […] managed services.”* All these factors are still prevailing, making the Internet data center industry a real gold mine.


Focusing on data centers in Toronto, the financial capital of Canada, the city emerged as one of the hubs of North American server hosting. Measured by GDP, Toronto is 11th in the list of the Top 50 Metropolitan Areas in North America with a GDP of $ 253, 000 Million in 2009. Market analysts estimate the operational square footage of Toronto’s multi-tenant data center market to be 744,304 Sq Ft. Currently, there are 48 data centers in Toronto and it’s suburbs and a total of 30 data center providers**.


In terms of money, the advantages of using a professional colocation provider‘s services as compared to building a data center are manifold. Colocation requires not only space but specially designed facilities that support cooling systems, high power connections and excellent security standards. Due to rising energy prices in Canada, research reveals that power supplies are amongst the greatest expenses of running a data center. “The designing of, building and operating of a data center is somewhat different than other buildings and requires a highly specialized level of expertise and experience.”***


Running a hosting facility also involves immense operational costs for highly skilled human resources, who need to maintain the servers around-the-clock. Not even every professional server colocation provider might have sufficient human resources and the expertise required to set up and maintain data centers of larger scale. Businesses, whose core focus is not data center hosting, might risk loosing a fortune on hiring technical experts equipping their in-house team to follow the “build-it-yourself” strategy. All in all, “the average costs of building a data center are between $1000 and $1500 per square foot”***, according to a recent Data Center Knowledge report.


Renting rack space in a professional facility can be a cost-saving option to bypass the listed responsibilities and costs of owning a data centre. Buyers can conveniently place their own IT assets in a multi-tenant environment and benefit from shared costs for power infrastructure, security and maintenance whereas the control over the stored IT assets entirely remains in their hands. As the IDC highlights, the latter is an important point because “buyers of colocation hosting prefer to retain control over their assets.”


Another, often unbeaten advantage of buying as opposed to building refers to scalability. “One of the problems for many organizations, both well-established and those that are new and rapidly expanding, is managing growth and having flexibility.” Medium- and large-scale data centers in Canada are likely to have expansion space and additional team members, even for rapidly growing requirements. Not only additional space and human resources, but also technical equipment in case of a disaster are usually taken care of with a professional host. “A properly designed redundant system will ensure that the data center remains available, even during a component failure.”***


To summarize, there are significant financial advantages of turning to a professional colocation host instead of building and maintaining one’s own facilities. Profiting from a supplier’s expertise and experience, reduces risks and eliminates hidden costs. Due to the fact that colocation hosting services are easily scalable only as long as there is enough space for expansion, turning to a large-scale data centre provider should be considered a valuable alternative to the “do-it-yourself” model.



*International Data Corporation, 2011. Canadian Hosting Infrastructure Services 2011-2015 Forecast.

** Tier1 Research 2011. Datacenter. THE 451 GROUP, LLC, TIER1 RESEARCH, LLC.

*** Data Center Knowledge. Data Center Economics: Build vs. Buy by Julius Neudorfer