Skip to Content

How to Start a Data Center Business

Data Center Business

Do you want to start a data center company? If YES, here is a complete guide to starting a data center business with NO money and no experience plus a sample data center business plan template. 

A data center is a facility with a group of networked computer servers that organizations of all sizes use to remotely store, process or distribute information.

Its set up is highly unique and delicate, requiring the services of professionals. The reliability of a data center cannot be overemphasized; a basic data center will have switches, routers, storage systems, servers, multiple cables and so on, to ensure the efficiency of such a set up.

The location where the data center would be set up also matters as one would need to look for a place without the possibility of flood. There are two options to choose from when considering a location for a fully functional data center. The first option is building from scratch; while this option is seen as the best way to go, it is also the most financially intensive.

The set-up of an industrialized data center requires it’s housing to have strong structures that can carry the weight of the super computers and also have proper ventilation to regulate the temperatures of the servers. When building the structure, one has to factor in these parameters.

Leasing or buying a building is cheaper, however the architectural design of the building itself may not be conducive for massive machines, heat and so forth. There are standards stipulated by the Telecommunications Industry Associations (TIA), which must be met before a data center is approved.

  • Tier I basic standard has to have Uninterruptible Power Supplies (UPS) and Generators, and no redundant backups. Due to maintenance work, this type of set up is subject to being offline for at least 28hrs in a year.
  • Tier II is the next standard with redundant components, uninterrupted power supplies, routers, air conditioning, only processing one channel of distribution, meaning that when technicians are in operation from time to time, this server can have about 22hrs of being offline in a year.
  • Tier III is concurrently maintained, this means that technicians can go to work in maintaining this center without any power outage. This data center has enough back up lines capacity through different routes estimating outage to 95 minutes each year.
  • Tier IV is the most current standard; this set up can actually withstand at least one aspect of its components failing, guaranteeing less than 25 minutes of outage per year.

With the sensitive nature of the data center, one may wonder why the servers would be out at any point in time, meaning that once servers are out, proper work cannot be done by some organizations.

This is the reason why certain organizations like the Banking and Financial Sector or Telecommunications companies would prefer to have at least two data centers at different locations, where one serves as the backup in case the other goes offline for maintenance or any other reason.

Of course there are organizations that may not need this real-time access to data all the time, as such an organization can still operate even when the servers are down, to later update its files when the servers come back up.

Companies can either choose to build their data centers at a particular office within their building, or at another location. This means that the level of physical security needed to keep the place guarded from external threats has to be high.

Some of the threats of setting up a data center are the need to secure both the software used and the physical facility. This security is against terrorists, hackers and the likes. The information within the walls of a data center cannot be left unguarded as lots of people, institutions, organizations and even governments can feel the negative effect of a security breach.

So when thinking of setting up a data center, one must decide whether the purpose is simply for an Internet Data Center or a Cloud Data Center, in whichever case the question will be how large does the business what to go.

What type of accounts does it want to handle, today the simple set up of a data center is to create hosting and storage for websites, but the scope of what could be achieved by a data center is well beyond that.

Steps to Starting a Data Center Business

1. Understand the Industry

With the continuous advancement in technology and the need to digitize our world, the industry of Data Center services will always be on the rise. The global market for this type of business was estimated to have gone beyond $5Billion US Dollars, with the united states of America as one of the top users of Data Centers, they account for above 25% of the global market.

The Financial and Banking Institutions account for most of the demand for this kind of solutions because of the sensitive nature of their business. Today money can be transferred, invested and moved without the instrument of cash.

With the use of credit cards, debit cards, pins and other forms of digital financial services, it is no wonder this segment would require this service. Other Financial Services like Foreign Exchange, Stocks, Bonds, Trusts and various other financial instruments have to be up and running twenty four hours of the day. This can only be made possible by properly established data centers.

Another segment currently seen as the fastest growing in this industry is the Telecommunications Industry. Our mobile devices are now our world placed on the palm of our hands. There has to be a data center that takes care of distributing and supplying the much needed data to enable user experience on these devices.

It has now gone beyond the simple work of making and receiving calls, now we can stream movies online, send and receive emails, send messages through multiple mobile and web applications, and so forth. This has become the world we live in, so the demand for more efficient ways to manage data continues to increase.

When it comes to the data center business itself, power stands to be one of the major areas where finances will be directed to in order to make such a service effective.

The need for constant power supply cannot be over emphasized when it comes to setting up a data center facility. Power Distribution Units (PDU) would have to be carefully considered when looking to set up a business like this.

There must be multiple channels of power supply for the equipment; it is advisable to have a transformer, stand by generators and Uninterrupted Power Supply (UPS) system available.

Let me explain to you how important this is. Imagine for a moment that a particular data center currently holding data for a major bank in the country goes offline because of power failure. It means that no transaction will take place as long as the power is out at the data center.

Now remember that money is always moving 24 hours of the day, and someone is likely transferring money with that bank, purchases are being made either by credit cards, debit cards or other electronic means, currency exchange is going on, and trades are being made.

Think of the major calamity that would take place if that mega computer goes off for one minute. Thousands, if not millions of transactions would be interrupted, changing the proper outcome of such activities. So if one is going to set up a Data Center, there must be access to constant power supply.

The need for data centers is growing every day, but the work needed to establish a proper data center for high profile clients is much. It is a financially intensive business to set up and run effectively, though the industry is booming.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

Every company that handles large amounts of information would need a place to store, process and distribute their data. A simple computer hard drive, with no matter how many gigabytes will never be enough to take all the information that is being created by these enterprises, hence the need for a data center.

Whether the company chooses to set up its own data center or outsource it, the reality remains that there is much safety in developing a facility for keeping data.

So when it comes to organizations that need the services of a data center, we first of all call on the Banks and other Financial Service Organizations.

Like we said earlier, money is always moving, the amount of information being communicated every day in the financial world cannot be reduced to simple storage devices. It will take a much more sophisticated apparatus to deal with the real-time demands of the financial world.

Another organization in crucial need of this service is telecommunications companies. Data is transferred and processed every day, and all that information must be stored and processed in a facility dedicated to such an activity. Having this kind of facility ensures that the company can focus on all the other services it provides the public.

Governmental Agencies, Healthcare Agencies, Educational institutions even law firms are just a few other organizations that will require the use of a data center.

3. Decide What Niche to Concentrate On

You can choose the exact aspect of the data center business you want to specialize in and stick to it or you can do much more than just one thing. There is the internet based data center that offers their servers to companies who want to be online.

Basically when you visit a website, that website is brought to you by another computer called the server, it is almost as though you are accessing another person’s computer that remained open for you, as long as you want to be in it.

That is kind of how the “Server-Side” is when it comes to webhosting. The company’s web page is hosted on this server; the server of course is the property of your service provider which is the data center. So you could choose to be a simple web hosting data center where multiple companies and individuals can host their websites on your server.

Another niche you can create for yourself is to provide both the internet based data center and cloud based data center for a singular company. Depending on how big the company is, you alone can build the facility that would house the servers of that company.

The building itself may be yours, but the servers belong to the company, you could hire the services of Information Technology experts to constantly update and maintain the servers as well as provide proper security for the facility. In return, the company pays for the services you render.

Another niche you can focus on is to build a data center that provides its services to multiple businesses. Your facility would provide Housing, Rackhousing, Dedicated Servers, Managed Servers, Cloud hosting, private cloud, live servers and so on for these companies.

Another niche you could create for yourself is helping companies build their own private data centers within their building or at another location different from their offices.

Some companies would not want to leave such delicate information in the hands of an external person for fear of theft. They may want to build one for themselves and your company can help them do that and train their staff to be able to maintain it.

The Level of Competition in the Industry

The level of competition in this industry is high as more and more companies are looking for reliable data centers to help with the ever increasing technological evolution.

The challenging thing about competing in this business is the issue of trust and capability. The technology required for this type of business is always evolving, meaning that companies would want a data center that has room for further upgrades when new technology is introduced into the industry.

Companies that can brag about the use of current technological upgrades that have overshadowed the previous standard would have a chance at winning clients.

In a world where new technologies are always being produced, it will be well to remain up to date on the latest technology, with the aim of incorporating such into your data center. Although this would be very expensive, but it will give your clients the peace of mind to run their business.

4. Know the Major Competitors in the Industry

Well-known brands in industries like these offer a type of model to pay attention to, whether with the intention of emulating or with the intention of doing the direct opposite of what they are doing so as to create your own niche. Truth is that these organizations have worked so hard to be known as industry standards in this business. Their stories will definitely serve as a catalyst for your own drive and success.

Some of these brands are;

  • Microsoft
  • NSA – America
  • QTS Metro
  • IO New Jersey
  • Terremark Worldwide
Economic Analysis

Setting up a data center business for a large or medium sized organization is very financially intensive. Of course if all you want to do is web hosting for clients, that is a different scenario, all you need is constant power supply, a computer that stays on all the time, with the necessary software and technological knowhow to keep it running.

Of course you would have to be an IT Professional or you will need to get an IT Professional to work with you in setting this up. This type of data center may not be so financially demanding.

But if you are talking about doing more than just web hosting, then there’s a lot of work to do and a lot of things to consider. First of all, the location of the building will be the major concern. The area would have to be a secure place where the threat of flood or harsh weather conditions will not be present.

Erecting your building from scratch or utilizing one that’s already there would also prove to have its own ups and downs. After you finish with the building, you would have to deal with getting the equipment for your data center.

You would have to think of cooling system for your server and a way to tackle fire if it ever happens as heat is one of the major things to look out for in a data center. The next thing you have to think about after the equipment and cooling system is security.

All these things will pull a lot of money from you, supposing you want to go large scale. But should you prove to be a reliable service provider; your clients will definitely pay handsomely for your excellent service delivery.

5. Decide Whether to Buy a Franchise or Start from Scratch

Unfortunately there aren’t too many data centers that are into franchising. This is because of the security risks that go with the business.

The truth of the matter is that if a Data Center is looking to sell, it would definitely not be looking for an upstart in the industry, because it would have already been keeping the information of its clients over the years, so handing all that information to a company that is just starting up in the business can be a great risk.

They would have no way of knowing for sure whether the new company will be up to the task of securing the sensitive information on the servers.

So going to purchase a data center that is already up and running, as an upstart, is not very wise. Your company may not have the necessary experience in hosting such class of information.

Even if you hire professionals that have been in the business before; they still do not know how to work as a unit within your own organization. So there would be issues when every individual tries to find their synergy within this new eco system.

In this regard, starting from scratch seems to be the sure way to go in this type of business, choosing rather to start small and grow big, building experience along the way. As you build credibility and trust through the years, so will you build your client base. This will give you the much needed value to even begin to acquire other failing data center businesses.

6. Know the Possible Threats and Challenges You Will Face

The major threat to this kind of business is security, whether physical or cyber. The information within these servers can bring down organizations and so should be kept with the most up-to-date cyber and physical security measures. One who desires to set up such a business should not compromise on security.

The world is so “digital” these days that it is possible to steal a person’s identity, use their vital information to buy, sell and do all other kinds of damages.

Or when it comes to organizations, should an external hacker gain access to the company’s vital information, they can move funds, or alter various digital instruments that makes the company operate efficiently. This is one of the highest levels of sabotage a large enterprise can experience. The need for security cannot be over emphasized when thinking of going into a business like this.

Another major threat to this kind of business is negligence. If the onsite staff are not diligent in maintaining and keeping the equipment up and running at optimum levels, various things can begin to go wrong without the knowledge of the onsite staff.

For example one may not detect smoke coming from fire that may be generated from the heat and sparks of certain wires or cables.

Should the place burn down, that would mean the loss of all that information. Fires of course have been sited to be one of the major threats to this kind of business. Onsite staff must be vigilant in all their duties to ensure that fire outbreaks or other glitches like server failures and the likes will not occur.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

sole proprietorship or partnership is the best type of business registration one can get for this type of business, if you are looking at a small scale venture. However if you are looking to go into the big leagues, you have to register your company as a Limited Liability Company.

Get a board of directors, lawyers and the likes, because handing such sensitive information and services for large enterprises comes with its challenges. You would need all the help you can get should things not go as smoothly you expect.

8. Choose a Catchy Business Name from the ideas Below

  • Aviant
  • Global Cloud
  • RedJewel
  • PowerHouse

9. Discuss With an Agent to Know the Best Insurance Policies for You

Only an inexperienced person would get into a business like this without knowing the proper insurance policies to acquire. When one is dealing with such delicate information, one needs to have protection in case the unexpected happens.

Every business is prone to the unexpected whether by human or non-human errors. Below are a few insurance policies you can apply for in this type of business;

  • Data Center Insurance
  • Business Insurance
  • Cybersecurity Insurance
  • Workers Compensation  Insurance
  • General Insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

There may be no strong need for you to have Intellectual Property Protection except with that of your logo or brand in this type of business. You are not going into the business of developing new technology that you may need to patent as yours. You are simply using the inventions created by others to render a service.

11. Get the Necessary Professional Certification

You are not required to have any type of professional certification before you can put together a functioning data center. But if you do not have the technical know how to do the day to day running of the business, you will definitely need to hire people who have been trained for this kind of thing.

Do not hire those who simply claim to know, go for the ones who have actually gone for training as they would be dealing with very sensitive things. But if you want to be the one dishing out these services yourself, you would need proper training at various institutes.

In this type of business, it’s not so much about the certificate; it’s about the real world knowledge of how data centers work and how to properly maintain them. So get certified if you want to be the one running the data center yourself or hire certified professionals.

12. Get the Necessary Legal Documents You Need to Operate

There would always be a set of documents required to run this business. These documents keep you on the right side of the law, so you can be free to run your business without the interruption of the law or government. Please do not assume that these are all the documents you need as you would need to do your own research.

Some of the legal documents you would need to run a business like this are as follows.;

  • Certificate of Incorporation
  • Employer Identification Number
  • Trademark Registrations
  • Business Plan
  • Business Personal Property tax (If Necessary)
  • Insurance Policy
  • Operating Agreement for LLCs
  • Online Terms of Use
  • Online Privacy Policy Documents
  • Company Bylaws
  • Business License

13. Raise the Needed Startup Capital

Even when setting up a data center for something as simple as web hosting, there are a set of pricey equipment you will need to purchase. I would not suggest you get fairly used equipment because the quality of equipment you use will affect the efficiency of your data center.

The equipment and facility are usually the things that take the highest financial responsibility, not just for putting together but also for maintaining it.

However, setting up a data center to take care of global enterprises would be even more costly, so it will be very advantageous to know how to generate funds for such a venture. These are a few ideas on how to raise money for your Data Center Business;

  • If you have saved up enough money, you could use that.
  • You can sell property to start the data center business.
  •  Sell shares of your company.
  • Get loans from family and friends.
  • Get a loan from banks.
  • Receive investment from partners, investors or business angels.

14. Choose a Suitable Location for your Business

You need a well secured area where there is no chance of flood. Clients would not have to visit your data center so there would be no need to locate your data center at a commercial district.

In fact, it should be some distance away from busy city life, but not too far away from civilization that security would now become an issue. It should be at a place that has access to constant power supply, as it has been said that huge data centers consume electricity fit for a small town.

15. Hire Employees for your Technical and Manpower Needs

With the list of heavy equipment needed to run this type of business, not to mention the wires, cables, routers, cooling and security systems. It would take something like a small community to keep a large scale data center running smoothly.

Below is a list of professionals needed to keep such a business running;

  • IT Professionals
  • Security Guards
  • Lawyers
  • Administrators
  • Sales and Marketing Official
  • Chief Executive Officer
  • Accountants
  • Cleaners
The Service Delivery Process of the Business

The Data Center business revolves around businesses wanting to keep their vital information within a remote server for use from time to time or just for storage purposes. Usually, the company contacts the data center representatives. After all agreements are made, the necessary network connections are made between the company and the servers in the Data Center.

Whenever the company needs this information they access the server remotely and take whatever they need, the same applies to when they want to store away information. As long as the Data Center is the Service provider of the company, they continue to pay for the service.

16. Write a Marketing Plan Packed With ideas & Strategies

  • Attend expo’s and seminars or workshops with the aim of networking
  • Employ the services of Marketers
  • Use  the internet and Social Media Platforms
  • Do Promos and discounts.

17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

Below are a few ideas to help boost awareness about your Data Center Business;

  • Content Marketing.
  • Billboards.
  • Branded Cars.
  • It’s mostly a digital business, so advertise on your own website
  • Encourage the word of mouth approach.