In the digital age, data centers stand as the backbone of the internet, housing the servers and other infrastructure that keep our digital world running smoothly. However, the financial viability of operating a data center is not normally disclosed.
What are the various costs associated with running a data center, the revenues they generate, and the payback period for these substantial investments?
Let’s review!
Construction Costs
Building a data center is a significant financial undertaking. On average, construction costs can range from $600 to $1,100 per gross square foot or $7 million to $12 million per megawatt of commissioned IT load. These figures can skyrocket depending on the location, scale, and technological specifications required. For instance, a 700,000-square-foot, 60-megawatt data center in Northern Virginia, the world's largest data center market, could cost roughly $770 million to construct.
Operational Costs
Once a data center is up and running, the operational costs come into play. The average yearly cost to operate a large data center ranges from $10 million to $25 million. This includes expenses for hardware, software, disaster recovery, continuous power supplies, networking, and ongoing maintenance of applications and infrastructure. Energy consumption is a significant portion of these costs, with data centers consuming an estimated 240-340 TWh globally in 2022.
Revenue Generation
Despite the high costs, data centers can be quite profitable. The global data center market was forecast to bring in $344 billion in 2024, with projected annual growth rates indicating a market volume of $624.10 billion by 2029. These figures suggest that, while expensive to build and maintain, data centers are crucial and lucrative components of the global economy.
Payback Period
Determining the payback period for a data center investment depends on various factors, including construction and operational costs, as well as the revenue generated. The payback period is calculated by dividing the initial investment by the annual cash flow. However, specific figures for data center investments can vary widely, and calculating an exact payback period requires detailed financial data for each facility.
While the costs of constructing and operating data centers are substantial, the demand for data processing and storage continues to drive the industry's growth. With careful planning and management, data centers can not only recoup their initial investments but also turn a profit, contributing significantly to the digital economy's infrastructure. The key to profitability lies in efficient design, energy management, and scaling operations to meet the ever-increasing demand for data services.
