“Capitalizing” on Modular and Prefabricated Data Centers

In a previous post, I wrote about how a “just in time” (JIT) delivery strategy can compress the design and build schedule and help preserve capital.

In the past, data center deployments were built with the mindset of growing into them over a period of years. This was in large part due to the long lead-time it took to get approval and build a traditional data center.

Today, most companies are moving away from building large data center structures. Rather, they are using modular data center construction techniques that allow them to build as they grow and match capital outlay with their business growth.

Modular construction techniques can be applied to traditional data center builds, but they can also be achieved through the deployment of prefabricated solutions for power, cooling and IT white space.

A prefabricated solution provides both increased speed to market, which further facilitates preservation of capital via just in time delivery of capacity, as well as a level of quality control that is sometimes hit or miss with traditional data center builds.

Schneider Electric has helped companies like Keystone NAP and a UK-based automotive firm realize the benefits derived from a prefabricated modular data center build.

Total Cost of Operation

Modular data center build techniques are a great way for companies to preserve capital, but this does not always translate into the lowest total cost of operation (TCO).

For example, if you build a large 1 MW UPS system versus building 10 – 100kw UPS systems, the total investment cost for the 1MW UPS system will be less expensive than the sum total cost of building ten 100kw UPS systems. In general, the smaller increments you deploy, the higher the cost per kW.

However, the total cost of construction should not be your only consideration. When you factor in the time value of money and your ability to preserve capital for higher and better purposes, the smaller, higher cost/kw deployments may be the better business decision.

Additionally, by deploying only the capacity you need, your equipment is more likely to be fully loaded and operate at peak efficiency, thereby, saving you money in operating expenses.

Not to mention, you are only paying for maintenance of equipment that is in use versus paying for maintenance of a larger system that is only partially in use.

Another consideration for building out in smaller modular increments is the timing of replacement of aged assets. Building out in smaller increments every year versus one large deployment every 5 years will smooth out your year-over-year capital spend for replacement of aged assets and can help avoid large swings in capital outlay from one year to the next.

Last, but not least, a prefabricated modular data center solution may offer you some tax benefits. For example, some companies view a prefabricated data center like a piece of equipment.

In some jurisdictions this is considered personal property versus real estate and may be taxed at a more favorable rate. A prefabricated data center is not typically depreciated over 39 ½ years like real estate. Hence, the accelerated depreciation schedule can favorably impact your balance sheet.

Right for you?

Modular data centers are a good idea for any organization, but the right approach will depend on the goals, business objectives and forecasted growth of a particular company.

The challenge is in determining what size increments you need to build and design a data center that can grow and scale with your business. Our whitepaper, “TCO Analysis of a Traditional Data Center vs. a Scalable, Prefabricated Data Center,” will help you navigate through these challenges and the decision making process.

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