How Much Does It Cost to Build a Server Room on Your Own Premises?

From an IT perspective, company leaders have three choices: keep mission critical systems on their premises, in a data center, or not own IT equipment at all and shift to cloud systems. This fundamental decision often has implications that last for years. Naturally, cost is a key decision factor.

Server room for 40 racks. Photo: Tõnu Tunnel.

Obtaining a data center service quote is straightforward, and cloud costs can be researched through similar organisations. However, the cost of building server rooms is more complex. Our team has experience in this, so we’ve done the groundwork for you. Below, you will find the cost of constructing a modern, future-proof, and energy-efficient server room, the steps involved, and the duration of the process. A well-built server room successfully passes audits for reliability, energy efficiency, and security.

What Do We Mean by Server Room?

It's important to differentiate between server rooms and data communication rooms, which have far less stringent requirements. The latter often lack steps ensuring energy efficiency and high availability, leading to lower costs. These rooms typically have only racks, and at best, air conditioners and UPSs. They often involve compromises in reliability and cost-effectiveness. Moreover, actual energy consumption is often not clearly understood, as it is typically included in general electricity usage.

Cases where data communication rooms slowly evolve into server spaces are not uncommon. Thus, the costs spread over time, and the total expenditure remains unknown.

A well-built server space, designed to last at least ten years, includes rooms specifically constructed for this purpose, with redundant power supplies (like backup generators) and cooling systems, robust fire prevention solutions (approved by the national organisations responsible for this area), and monitoring and security systems. Regular maintenance and auditing of all systems ensure safety, reliability, and business-supporting certifications.

Deciding Whether Your Organization Needs Server Room

The decision starts with a risk analysis, assessing service expectations, devices serving IT systems, and acceptable risks. For instance, is a few hours of service downtime acceptable, or is 24/7 reliability without deviations expected? If continuous operation is required, redundant support infrastructure, like communication and power connections and cooling systems, is essential. For in-house operations, anticipating growth is crucial, as expanding server space and its supporting infrastructure later can be complex and costly.

"A company I know built a server room on the fifth floor of an office building. When the rent and space became unsuitable, they wanted to move. The landlord demanded everything be moved, including the server room. Moving it wasn't possible due to the continuous operation of services. So, they stayed there for 15 years, renting additional spaces nearby. Eventually, they bought new equipment and built new server room at a new location, allowing the move," shares Kert Evert, an experienced server room builder in Estonia.

"A common scenario for growing organisations starts with one rack, which becomes two, then three. Soon, they realize they need more cooling capacity, so they upgrade it. Then, electrical capacity becomes insufficient, requiring another upgrade. This snowball effect continues. Every building has physical limitations, beyond which expansion is impossible. So, if you're building in-house, you must accurately gauge your growth potential or simultaneously construct a system that can accommodate future growth," explains the development manager of the largest data center in the Baltics.

The Server Space Building Process

As usual, it all starts with a brief, which should originate from the organisation itself. For instance, the decision might be that four 6 kW racks are sufficient (realistically operating at a maximum of 4.8 kW, as usually only up to 80% of the workload is considered). "The alternative is to overestimate the capacity, opting for 8 kW racks, but this means significant extra costs as electricity and cooling systems that won't be fully utilized for a long time are built. The investment is immediate, and running more powerful equipment is more energy-intensive, leading to lower system efficiency ratings and a larger IT ecological footprint," explains Evert.

Once the brief is set and decisions are made, the design phase begins. This phase covers energy, cooling and ventilation, UPS sizing, fire safety solutions, security systems, and backup power decisions, such as diesel generators with fuel tanks. Also, consider the broader building requirements, both structural and fire safety-related. If there’s a project manager in the organisation who deals with this daily, designing server space in an office building takes about six months. This is because the final result comprises several sub-projects, each drawn by a specialist from a different field.

The next step is validating the project, usually involving hiring an external consultant to ensure all aspects have been considered and the outcome meets standards. For instance, consider the impact of short circuits on the server space. What happens if a kettle in the office kitchen shorts out? How does it affect the IT equipment?

After validation comes procurement, typically more complex than design. While the project might be compiled by five or more specialists, now the procurement process requires finding the right person to review and assess the incoming offers, ensuring they align with the project. An alternative is to delegate this task to the project manager, who must be versed in various fields, a rarity. Another option is hiring an external consultant for this job.

Once the procurement is complete and the best suppliers are selected, one can finalize the design, considering the specific products chosen. This stage also determines the final cost.

Why Is the Cost Known Only at This Stage?

The price depends on the chosen products and their required systems. "For instance, you might choose between different UPSs, and the one that seems most suitable lacks short-circuit protection. This requires adding a separate electrical panel. If it's not possible to add the panel, you'll need to choose different UPSs with short-circuit protection, which costs more," illustrates Evert. The active planning phase can ultimately take 9-12 months. It might be shorter for smaller server spaces, but the necessary steps remain the same, whether you have 4, 40, or 400 racks.

Following the Design, Comes the Construction

The construction schedule is derived from the finalized project, the equipment, and installers' delivery times. "For example, the waiting period for UPSs can be 3-6 months. So, finding a supplier who can deliver the equipment to the construction site at the right time to avoid work stoppages is crucial. Synchronizing all equipment suppliers is a challenge but achievable," shares Evert.

Then begins the construction, whose duration depends on the server space size and chosen equipment. In an ideal world, this is the simplest phase, as all nuances should have been addressed during the design. "Using a 3D model, problematic areas where different systems clash or don't fit together are already identified and resolved," advises the server space expert.

During construction, also consider the costs of various experts who oversee specific tasks and certify them.

"Certainly, there will be decision points during construction that require swift resolution. Here, the project manager's knowledge might not suffice, and experienced consultants may be needed. Any delegation of responsibility usually involves significant costs," adds Evert based on his experience.

Server Space Certification

For organisations with international ambitions, this is now fundamental. The certification process starts with planning and ends with the inspection of the operational server room. For example, to obtain an EN 50600 certificate for a data center, the facility must operate flawlessly for at least six months. Obtaining a certificate usually requires hundreds of pages of documentation and significant costs. Also, ongoing expenses for maintaining certifications, such as conducting audits, should be included.

Running Costs

The final cost of server space should include its ongoing management expenses. One of the most important components is the regular testing and maintenance of the support systems. For instance, a power generator is only useful if it's regularly serviced, checked, and guaranteed to be operational. Also, ensure periodic fuel replacement, even when the load is low.

Regular maintenance usually involves contracts with various partners who visit the site according to their agreements. Include in the running costs the salaries of the personnel managing the server space, and since someone always needs to be on hand, at least two overlapping experts should be found.

Total Cost

The following table provides an overview of the costs associated with managing a modern server room with 4x6 kW racks (accommodating approximately 75-100 devices, such as servers, storage, network equipment) over a 10-year period. The prices are indicative, exact numbers naturally depend on project specifics.

From this, it can be generalized that the construction cost is around €850,000, while the rest is the cost of operating the data center over 10 years. Note that the smaller the server room, the higher the cost per kW or MW.

In the world of data centers, it's generally accepted that building a 1 MW Level 3 (or Tier III) data center costs approximately €10-12 million for larger projects (according to data from DC Byte, a company focusing on data center market analysis). Prices were already declining before COVID, but subsequent crises have driven them up again.

To assess the feasibility of self-building, it's advisable to compare it with alternatives. For example, purchasing the same capacity of service from a top-tier, certified data center is about 40-50% cheaper.

Ultimately, the choice of solution usually depends on the organization's needs, risk analysis, and the possibilities of their own premises. We are happy to assist in calculating total costs and compiling comparative tables that take various details into account.