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Types of Data Center Business Model [How They Make Money]

Data Center Business

Do you need a detail explanation of how a data center business model works? If YES, here are 3 types of data centers and how they make money.

A data centre is a facility that centralizes an organization’s shared IT operations and equipment for the sole aim of storing, processing, and sharing data and applications. Since these facilities house an organization’s most important and proprietary assets, data centres are very crucial to the continuity of daily operations.

Some years back, these data storage facilities were highly controlled physical infrastructures, but the public cloud has greatly changed that model.

Aside where regulatory restrictions mandates an on-premises data centre without internet connection, most modern data centre infrastructures have moved and improved from on-premises physical servers to virtualized infrastructure that supports applications and workloads across multi – cloud environments.

What Does a Data Center Looks Like?

The architectures and requirements of data centres are known to vary greatly due to use and intentions. For instance, a data centre built for a cloud service provider like Amazon satisfies facility, infrastructure and security requirements that greatly vary from a completely private data centre, such as one built for a government facility that is dedicated to securing classified data.

But irrespective of classification, a working data centre operation is achieved through a balanced investment in the facility and the equipment it houses. Since data centres are known to house an organization’s most important data and applications, it is very pertinent that both facility and equipment are secured against intruders and cyber attacks.

Currently, there are over 7 million data centres around the world and almost every business and government entity builds and maintains its own data centre or has access to someone else’s, if not both models.

Also, there are varying options available in this modern age, such as renting servers at a collocation facility, using data centre services run by a third party, or using public cloud – based services from hosts like Amazon, Microsoft, Sony and Google.

3 Major Data Centre Models Used in the United States

Just like it was stated above, there are different models used by data centres in the United States, and the architectures and requirements of each of these models tend to differ greatly from another. Naturally, there are pros and cons to each data centre model and they are properly explained below.

1. On – Site Data Centres

In this particular data centre model, managers take charge of their own data centre at their own location. According to experts, an on-site data centre improves efficiencies for some business needs.

Indeed, it also comes with maintenance requirements and it can be more difficult to scale this investment up or down: any wrong step and the cost of this model can be much higher than other choices. Also note that every activity and easiness attached to cloud computing makes it seem like on – site data centres are outdated, but there are a couple of different reasons why companies may choose to own their own data centre.

For instance, some companies have static requirements and perform a good amount of processing on an ongoing basis, and they have invested in the data centre capacity to do that.

With time, these businesses might make changes to the data centre, but it ends up being more expensive to go into a leased facility or into the cloud unless there is a good reason to do it, such as changes in operations or technology. Insurance companies and banks are a good example of businesses and industries that use this data centre model for a long time – they’re part of the organization’s core capabilities and are considered to be a strategic advantage.

Also note there are companies that work with large data sets, like oil and gas firms. Moving those large data sets around to different locations – like into the cloud – is very expensive and time – consuming. There are also businesses whose workloads aren’t designed for cloud or can’t be virtualized, such as applications written in COBOL for mainframes.

Altering those applications and replicating that software in a different environment tend to be a very large and expensive undertaking. Although, at some point, legacy applications such as this will end up being rewritten to run in virtualized or cloud – native environments when the needs justify the expense and risk of doing so.

2. MTDCs

MTDCs provide businesses with the ability to pay for infrastructure as a utility instead of managing the data enter in – house. Note that even complex enterprise resource planning (ERP) environments with millions of dollars tied up in customization might not actually justify establishing and owning a private data centre.

At this point, it may be ideal for them to move it into a hosted facility and buy space, power, cooling and connectivity from the MTDC. And, since it is normal route for major public cloud, service and content providers to also have a presence in MTDCs, enterprises can connect directly to them.

Have it in mind that this can significantly reduce latency and user experience, and simplify their planning by having their public and private clouds, and carrier connectivity, under a single roof.

3. Cloud Computing

From a business perspective, the Data Centre industry seems to be warming up better to the use of cloud over time. Note that when an organization transfers its workload to a cloud environment, it is different than simply converting to virtual machines (VMs).

Enterprise data centres are renowned for supporting many different applications, and this can mean hundreds or thousands of VMs. Have it in mind that it can be quite challenging to manage this new virtualized environment while also making sure of high security and availability.

Adding automation and orchestration tools tend to effectively enhances operational efficiency and can turn multiple VMs into a private cloud. And with resources being agile and easily available, it works well for any workloads the business may need to deploy.

Under this model, also note there are private and public cloud environments and they also differ in several ways. When a company decides to use a private cloud environment, the company has the advantage of absolute control. Also internal operating costs may be much lower than the monthly charges from using a public cloud depending on the way the data centre services are used.

Also note that transferring to a private cloud is a lot easier from a security and management perspective than moving to a public environment; it is common practice for the enterprise for the most part. The public cloud, on the other hand, is a rental environment that provides much of the same facilities seen in private cloud.

However, the next wave of applications is typically rewritten as cloud – native applications to run on specific types of public platforms. Public cloud are known to move companies completely out of the infrastructure business, and might provide better security than small or mid – sized enterprises can manage on their own.

But it is very crucial to note that regulations can be an issue: the regulatory environment may not have caught up with what is possible with public cloud. For some companies, there are many regulatory issues to surmount before moving to a public cloud. That’s why many banks, for instance, often host private clouds in their own facilities.

Another issue with public cloud is that it lacks standardization across cloud platforms. Cloud vendors have their own ways of doing things and it can be very hard to change to another vendor down the road. Putting software into a different cloud environment can be very daunting and expensive.

If you have very large datasets in the cloud, it can be hard and expensive to move them into another facility. Also, according to experts, cloud forces managers to give up a certain amount of control in terms of service level agreements. Once a public cloud fails, managers have to know about backup and recovery plans. Once he or she has made a commitment to the public cloud, it may be impossible to move back.

4 Ways How Data Centers Work and Make Money

With massive amounts of cable running through the facility and a confusing array of ports and plugs to manage, how data centres work can be a confusing topic for anyone who isn’t used to those systems. Data Centres are more or less a hybrid business made up of real estate, technology, and service.

They function like hotels where you rent a room (server) for as long as you need to host your website. The hotel offers everything you need, housekeeping, room service and laundry (networking, power, and maintenance), while you pay for the convenience. Below is a breakdown of how these facilities work and the services they render to generate income.

a. Infrastructure As A Service

Data centres normal provide equipment to customers who don’t want to or cannot invest in building their own facility for private use. The client then pays for what they use and have the added benefit of being able to use more hardware as the demand increases.

Note that the infrastructure offered normally consists of storage space, hosting services, servers, firewalls etc. The service provider is then tasked with the maintenance and upgrade of all the equipment letting the customer focus more on developing software or application to use that infrastructure.

b. Software As A Service

According to reports, it is often cheaper to purchase software just when you need it than to buy a lifetime licence especially if buying for many people for example in a company. Presently, in this age, you can access software as a service through your web browser without installing them on your devices, thus, allowing people to easily collaborate as it allows easy data sharing.

Data centres are renowned for offering software such as word processors or spreadsheet programs in a similar way. Note that it also does not mean that they have to make the software themselves but they can offer discounted packages for existing software like Google Docs or Office 365 etc.

c. Network As A Service

Aside from just offering equipment, a data centre can also offer network services like phone services over the internet (VoIP), Virtual Private Networks (VPNs), private telephone network for use within a company (Private Branch Exchange) and Unified Communication.

This is good for startups that are looking to access enterprise level network hardware without costs of getting technical expertise to setup or maintain similar services for their needs. The service is billed on a pay as you go basis.

d. Platform As A Service

Note that this service is mainly for developers as it offers a sustainable environment for them to build and deploy applications. The data centre provides a platform that supports certain programming languages and one that caters for most of the configuration of servers and networks. This also allows developers to specialize on their code, build quickly and ship early.

Also note that a developer can scale up their application easily as resource demand increase especially since they don’t have to bother about upgrade costs. The expense of getting more access to hardware through the different packages offered by this service tend to be less than when the developer purchased the hardware and set it up for themselves.


In conclusion, note that a lot of companies use more than one data centre model. A company might decide to use public cloud to enable self – service access to computer resources, for instance, while it runs proprietary, business – critical applications in an on – site data centre or an MTDC.

However, different companies choose different needs, and they use different data centre models to meet them. There are several alternatives available today, and anyone can customize the investment strategy and the migration path to implement a combination of hardware/software approaches.

Cloud is becoming more popular, MTDCs are becoming much more capable, and regulators are trusting off – premises solutions more. The only option is to use the best model for the task at hand.