Understanding the intricacies of data center construction costs is pivotal in making informed decisions for your enterprise in today’s hyper-competitive business landscape. Indeed, data centers are the lifeline of modern enterprises. Specifically, the average cost to construct a commercial data center availability center is between $10 million and $12 million per megawatt, with the majority of expenses incurred during the initial megawatt deployment.
Failing to understand, plan and optimize those costs can have dire financial repercussions, potentially resulting in budget overruns, resource misallocation, potential security vulnerabilities, increased maintenance costs and compromised financial stability. Careful consideration of all cost components is imperative for successful data center implementation and preserving your company’s financial health.
So, as these corporate giants navigate the shifting tides of the business world, they’re confronted with a challenge that’s anything but trivial. They must answer the call to action, to seize an opportunity that could redefine their future—the opportunity to construct an on-premise data center in Vietnam as a strategy for cost optimization as well as a competitive edge.
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Are you one of the decision-makers within your organization, determined to make informed choices on data center construction?
Is your large enterprise operating across various sectors, including manufacturing, finance, services, healthcare, or education?
Does your business have numerous users and servers, demanding storage and processing of vast datasets?
If so, this article is 101 % tailored for you. It will equip you with invaluable insights into the intricacies of data center construction, offering in-depth cost analyses.
I. Key costs to Build an In-house Data Center
A. Infrastructure Costs
- Land and Building Construction Expenses: Acquiring land and constructing the physical facilities are among the most substantial expenses. In Vietnam, the cost of land can vary significantly depending on location. For instance, land prices in Hanoi and Ho Chi Minh City are considerably higher than in other regions. According to land brokers – In Hanoi, land costs can range from $200 to $400 per square meter in the suburbs, whereas prime locations can go as high as $1,000 per square meter.
Construction expenses can range from $1,000 to $1,500 per square meter, depending on factors like design complexity and materials used. - Energy-Efficient Solutions: Implementing energy-efficient technologies and practices can significantly reduce operational expenses. Vietnam’s warm climate provides opportunities for efficient cooling systems, and investment in green energy sources, such as solar power, can further cut energy costs. Implementing energy-efficient technologies, like modern cooling systems and renewable energy sources, can lead to annual savings of 20% or more on energy costs.
B. Equipment and Technology Costs
- Essential Equipment: The cost of servers, storage devices, and networking equipment is a crucial consideration. Many businesses opt for leasing these assets to spread costs over time. However, purchasing equipment can provide long-term savings, especially if there is a clear understanding of future capacity needs.
Large enterprises may spend between $5 million to $20 million or more on essential hardware and networking equipment, depending on the scale of the data center. Leasing equipment can reduce upfront costs while increasing operational expenses over time. - Comparison of Purchasing vs. Leasing: Leasing equipment offers flexibility, while purchasing may require a substantial upfront investment. It’s essential to evaluate the total cost of ownership (TCO) over the equipment’s expected lifespan to make an informed decision.
C. Security and Safety Costs
- Security Measures: Ensuring the security of data center facilities is paramount. Costs associated with surveillance systems, access controls, and security personnel can vary based on the level of security required. Cutting-edge security systems may require an initial investment of $500,000 to $1 million, depending on the level of protection required. Data breaches can cost businesses millions in fines and reputational damage.
- Effective Management: Properly managing security measures can minimize costs. For instance, advanced access control systems can reduce the need for physical security staff, resulting in cost savings.
D. Management and Maintenance Costs
- Day-to-Day Operations: The daily management and maintenance of a data center encompass staff salaries, routine equipment checks, and utilities. Efficient management practices, such as remote monitoring and preventive maintenance, can optimize these ongoing costs.
E. Energy Efficiency Costs
- Energy Consumption: Data centers are notorious energy consumers. However, investing in energy-efficient technologies, such as advanced cooling systems and efficient server configurations, can lead to substantial savings. In Vietnam, where electricity prices can fluctuate, this becomes even more critical. Implementing energy-efficient technologies might cost around $500,000 initially but can yield annual savings of $100,000 or more.
- Long-Term Benefits: Reducing energy consumption not only cuts costs but also aligns with global sustainability goals, contributing to a positive corporate image.
II. Project Management Costs
- Project Management Costs: This includes the salaries of project management personnel, project management tools and software, and necessary project documentation.
- Cost Evaluation: This involves conducting cost research, creating cost sheets, and determining the necessary funds for specific project aspects.
- Resource Management: This includes creating work schedules, allocating resources such as personnel and equipment, and monitoring performance to ensure efficient resource utilization.
III. Regulations and Licensing
- Regulatory Research Costs: This includes the funds required to research and understand all regulations and legal requirements applicable to the project.
- Licensing Fees: This covers the fees and expenses related to obtaining licenses from government agencies or specific regulatory bodies
- Compliance Costs: If measures need to be taken to comply with regulations (e.g., system improvements or process enhancements), these costs should be considered.
Costs associated with regulatory compliance, including permits and approvals, might range from $100,000 to $500,000. Non-compliance can result in costly penalties and delays
IV. Contingency and Disaster Recovery Costs
- Contingency Plan Development Costs: This includes salaries and resources allocated for developing contingency plans, including risk identification, recovery plan design, and preparation for emergency situations.
- Investment in Backup Systems: This encompasses the costs associated with purchasing and installing backup hardware and software, as well as maintaining them.
- Readiness Maintenance Costs: This involves maintaining the readiness of the data center or infrastructure to ensure it can handle unforeseen events, including regular testing and maintenance.
Building robust backup and disaster recovery solutions can range from $1 million to $5 million, depending on data volume and recovery objectives.
These costs ensure business continuity and protect against potential losses during downtime.
V.The Potential of Land in Vietnam as a Competitive Strategy
A. Benefits of Building Data Centers in Vietnam
Vietnam’s Geographical Location and Land Potential
Vietnam’s strategic geographical location in Southeast Asia offers proximity to major markets. Land availability, coupled with its competitive prices compared to regional counterparts like Singapore or Hong Kong, makes Vietnam an attractive destination.
According to the World Bank’s “Ease of Doing Business” report, Vietnam is strategically positioned in Southeast Asia, making it an ideal gateway to regional markets like China, Thailand, and Indonesia (1).
Vietnam’s geographical location provides businesses with a central hub for serving customers across Asia, contributing to a competitive advantage in terms of reduced latency and improved service delivery.
B. Land Availability and Competitive Prices
A report published by Jones Lang LaSalle (JLL) (2), a leading real estate services firm, states that Vietnam offers competitive land prices compared to regional rivals. As of 2021, the average land price in Ho Chi Minh City was approximately $1,500 to $2,500 per square meter, significantly lower than in cities like Singapore.
This affordability makes Vietnam an appealing destination for companies looking to establish data centers without incurring exorbitant land acquisition costs
C. Logistical Advantages in Prime Locations
A study conducted by PwC (3) , a global consulting firm, highlights that prime locations in Ho Chi Minh City and Hanoi may command slightly higher land prices but offer strategic logistical advantages.
These advantages include proximity to major airports, seaports, and transportation networks, reducing the cost and time associated with transporting equipment, staff, and data center resources.
Additionally, being strategically located within or near key business districts can enhance a data center’s accessibility to clients and partners
Key Takeaways:
In the increasingly fierce battle across all industries, alongside technological advancements, cost control remains a top priority. Every business understands the significance of this. What you need may not always be found just around the corner. Vietnam presents a cost advantage that is too significant to ignore. It’s a land where possibilities converge with pragmatism, offering decision-makers a perspective that could be a game-changer. Whether your business is rooted in the heart of Asia or across the globe, leveraging Vietnam’s cost advantages for data center construction is a strategic move. At USDC Technology, we are here to guide you. Our expertise transcends geographical boundaries, and we understand the nuances of the market.
Sources:
(1) https://documents1.worldbank.org/curated/en/646871468132885170/pdf/Efficient-logistics-a-key-to-Vietnams-competitiveness.pdf
(3) https://www.pwc.com/vn/en/publications/2020/pwc-vietnam-dbg-2020.pdf
