Why ASPs, SaaS, and other Service Providers Should Think Twice Before Building a Dedicated Data Center

In my view of the shared data center market, there are the following five broad classes of service providers:

•Colocation
•Hosting
•Managed Services
•Software-as-a-Service (SaaS)
•Cloud Computing Services and Storage

Colocation and hosting are, in general, space intensive services that justify construction of a stand alone data center. The remaining three generally can be launched and grown to profitability with a relatively modest amount of space.

Further complicating the decision of how big a data center should be is the reality that larger data centers cost less per rack than smaller ones. These issues often create internal conflicts for smaller scale service providers.

Building too big a data center can be counterproductive for a service provider if their own needs to not consume the space and they are forced into new product offerings, such as colocation that do not fit with their core competencies.