4.3.2 Costs of building and operating a cloud data centre

restrictions. This analysis shows that there is only an insignificant statistical relationship between the number of data location restrictions and the location of cloud data centres. 57

In the case of the public-cloud services considered in this study, the cloud service provider might have to build new cloud data service centre in additional locations to meet demand. These costs would then be ‘spread’ across all the public cloud service users. In 2013 Intellect UK58 reported that the UK dominated the European data centre59 market with around 60 per cent of market share. They suggested that data centres contribute over five per cent of GVA and turnover was growing at 15 per cent per year. Their assertion that increasing demand for digital data means that the UK sector is poised for further growth must be questionable following the UK decision to exit the European Union.

Interestingly, in the light of the Intellect UK assertion of the majority of servers being located in the UK, Leviathan Security Group suggest that the cost of services to users provided from cloud data centres located in the UK and Ireland are significantly higher than from centres located in Belgium, Germany and the Netherlands. This assertion is examined later in this chapter.

Leviathan also report price competition within mainland Europe is fierce and DigitalOcean’s Amsterdam-based data centre is reported to have the cheapest 1GB ($0.015 / hour) and 2GB ($0.030 / hour) worldwide pre-instance pricing60. This would rebuke the views of some commentators that suggest cloud services can be obtained more cheaply elsewhere in the world61 .

Intellect UK reported that as well as regulations related to cross border data flow some companies, particularly financial services, require low latency - very high speed transactions that require the kind of connectivity that can only be met by a combination of proximity and high bandwidth. The location of cloud data centres might also be affected this requirement in serving Europe’s leading financial centres.

4.3.2 Costs of building and operating a cloud data centre The Copenhagen Economics study of construction and operations of two data centres in Mons Belgium (the first constructed between 2007 and 2009 and became operational in 2010, the second was constructed between 2011 and 2014) provides a valuable insight to

57 Using Pearson’s correlation coefficient. 58 Intellect UK. 2013. So what have data centres ever done for us? http://www.techuk.org/component/techuksecurity/security/download/1858?file=So_what_have_data_centres_ ever_done_for_us.pdf&Itemid=181&return=aHR0cDovL3d3dy50ZWNodWsub3JnL2luc2lnaHRzL3JlcG9ydHMvaXR lbS8xODU4LWRhdGEtY2VudHJlLXB1YmxpY2F0aW9ucw== 59 The Intellect study focuses on all types of data centres, not just cloud data centres. However, cloud data centres and data centres are similar in terms of infrastructure. Both store data with servers and other equipment in a single location. Cloud service providers use data centres to house cloud services and cloud-based resources. For cloud-hosting purposes, vendors also often own multiple data centres in several geographic locations to safeguard data availability during outages and other data centre failures. Data centres are typically run in-house by the IT department of a single company. http://www.businessnewsdaily.com/4982-cloud-vsdata-center.html 60 Linode, with a data centre in the UK was reported as matching the DigitalOcean offer. 61 Barrett B. 2015. Amazon’s new unlimited cloud storage is absurdly cheap. Wired. http://www.wired.com/2015/03/amazon-unlimited-everything-cloud-storage/

construction and operational costs for two cloud data centres. Figure 24 provides an overview of construction and operating costs.

Figure 27 - Construction and operational costs for the Mons Google data centre

Data Centre 1 Data Centre 2

Construction

2007 to 2009 2011 to 2014

Total Costs

Goods and services €270 million

€120 million

€280 million

€125 million

Labour and capital costs

€150 million

Construction jobs per annum 500

Operational costs per annum

Operating costs per annum

€36 million €155 million

500

Not yet operational

Employee FTEs

Estimated employee costs62

350

€29.5 million

Electricity and other costs

€6.5 million

Source: Derived from Copenhagen Economics. 2015. The economic impact of Google’s data centre in Belgium. Currency converted at prevailing rates in July 2015.

Intellect UK suggests slightly lower construction costs of €130 million for a ‘large data centre’, but this assertion is provided without reference to the source63. They also estimate higher running costs for data centres of €78 million per annum, this assertion is also not sourced.

Intellect UK suggest the cost of power is between 25 and 60 per cent of the total operating costs at data centres, the source of this assertions is not referenced. This figure is considerably above the 17 per cent documented at the Google data centre. In a separate report Intellect UK report that electricity consumption at a very large data centre could cost €3.9 million a year64. This figure appears to be similar to the Google Mons study65 . However, as highlighted later, electricity costs vary considerably across EU Member States.

62 Eurostat telecommunications labour cost per FTE in 2008 for Belgium lc_ncostot_r2 63 Intellect UK. 2013. Ibid. 64 Intellect UK. 2013. Data centres and power: Fact or fiction? 65 According to Google their global data centre operation electrical power ranges between 500 and 681 megawatts. Google Green Infographics. https://environment.google/approach/#/datacenters/infographics. The highest level of power consumption is reported to be 150 megawatts at the Inner Mongolia Information Park owned by China Telecom. The tenth most power hungry is the Tulip Data City in Bangalore, India that consumed just over 80 megawatts. Intellect UK. 2013 ibid. Report that the average very large data centre may consume 30GWh of power in a year.

The location of data centres will be affected by a number of factors including the availability and cost of appropriate skills, climate and electricity costs (and or the availability of low carbon energy). These key components in construction and operational phases are presented graphically in Figure 25.

The remainder of this section considers these costs before using the constituent elements to produce a model to forecast cloud data centre costs in EU28 Member States.