The cost of some resellers' datacentres may emanate as an outgoing which could switch columns on the balance sheet.
Microsoft, Amazon Web Services (AWS) and Google have built data-focused businesses which fuel huge profits for the tech giants. If only a channel firm could grab a slice of this market for its own end users and potential new clients, it would be an opportunity which pays for itself. However, the reality is both tougher and very different from what the industry witnessed a decade ago.
Despite this, the temptation to spend to save by building a datacentre remains for some resellers. So is it a good idea?
To build or not to build
Eric Herzog, VP of worldwide storage channels at IBM, told CRN that it is possible for a reseller to succeed in building its own datacentre. One of IBM's key resellers in the US built its own datacentre and it is making money out of it.
"However, it is size dependent and you need the right costs base," said Herzog. "It is also a different billing model, because the business model is different. If you are a reseller today, most of what you sell to your end users is software or a system. If you build a datacentre, whether you are going to do managed hosting or cloud services, your billing is weekly.
"So your business model shifts, which affects how you do your accounting and it affects your cashflow. You will not be billing clients for a million-pound deal; selling a datacentre deal will be billed as an ongoing service."
"It depends on your outlook," said Lawrence Jones, CEO of UKFast. "Many years ago we were spending millions of pounds as one of Telecity's biggest customers. We went on to be described as the biggest customer Telecity ever lost at that time.
"We had hundreds of racks with them, but the datacentre was continually going down and the service we got was very poor. So we decided we needed to take ownership of that.
"Customers are very important and the service we were giving them was appalling at times and we had no control over it. We had control over our other services, such as telephone support, but we could not control the datacentre element."
Jones said UKFast opted to lay out nearly £5m for its first datacentre, which could be justified because it was saving £2m in fees that would have gone to Telecity.
Continues on next page...
Infrastructure provider says international sales now make up 51 per cent of its revenue
Suzanne Chappell of TMS plans sailing venture after selling Oxfordshire-based TMS to acquisitive Chess
Withdrawal of credit insurance by some providers a 'reflection' of current challenge facing IT sector, according to MD Steve Soper
SMART's UK managing director joins Lenovo to boost SMB business