Cost Benefit Analysis of Edge Micro

Data Center Deployments

White Paper 223

Revision 0

by Victor Avelar

Executive summary
Several IT trends including internet of things (IoT) and
content distribution networks (CDN) are driving the
need to reduce telecommunications latency and
bandwidth costs. Distributing “micro” data centers
closer to the points of utilization reduces the latency
and costs from the cloud or other remote data centers.
This distributed data center architecture also provides
physical infrastructure benefits that apply to any small
data center regardless of the latency requirement. This
paper explains how micro data centers take advantage
of existing infrastructure and demonstrates how this
architecture reduces capital expenses by 42% over a
traditional build. Other benefits are discussed
including shorter project timelines.
 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 2

Introduction The increasing consumption of digital services through our mobile devices, our
homes, our offices, and countless other applications (i.e. manufacturing, mining, oil
& gas, etc.) is changing the way data centers are deployed. As more and more de-
mand is placed on data centers for these services, data takes longer to reach its
destination. In general, the further the distance from the data center, the longer it
will take to deliver its digital services and with increased bandwidth costs. Placing
data centers closer to the point of use is known as edge computing. An example of
this is EdgeConneX, a company that deploys colocation data centers on the edge
of the network to reduce latency and bandwidth costs 1 for their customers. For
more information on this topic see White Paper 226, The Drivers and Benefits of
Edge Computing.

This paper establishes why micro data centers are best suited to support edge
computing over other alternatives such as server rooms and traditional data cen-
ters. First we explain the drivers that favor the adoption of micro data centers, then
we discuss the IT technologies that make single-rack micro data centers possible,
and then we highlight the capital cost advantages of micro data centers (physical
infrastructure only) compared to centralized data centers. Finally, we propose a fu-
ture micro data center architecture that could replace traditional enterprise data
centers for certain applications. Though not the subject of this paper, micro data
centers are also effective solutions for branch office environments. For information
on this topic, see White Paper 174, Practical Options for Deploying Small Server
Rooms and Micro Data Centers.

In this paper we define a single-rack micro data center 2 (Figure 1) as a self-con-

tained, secure computing environment that includes all the storage, processing,
and networking necessary to run applications. They ship in a single enclosure and
include all necessary power, cooling, security, and associated management tools
(DCIM). Micro data centers are assembled and tested in a factory environment.

Figure 1
Examples of micro data
centers

Drivers of “Drivers” motivate or prompt some action. There are four main drivers of micro data
center adoption to support edge computing applications, over alternatives such as
micro data server rooms and traditional data centers. We discuss each of these drivers in the
centers following subsections.

1 http://www.edgeconnex.com/company/news-events/in-the-media/acg-research-produces-white-paper-
the-growing-value-of-content-at-the-edge/
2 Micro data centers can also be in the form of a prefabricated module in the form factor of a shipping
container but in this paper, we focus specifically on the single-rack form factor. See White Paper 165,
Types of Prefabricated Modular Data Centers

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 3

• Scalability
• Speed of deployment
• Reliability
• Outsourcing to the cloud and colocation

Scalability
Scalability is a strategy to conserve capital by paying only what you need, when
you need it. A lesson learned from the “dot com” bubble of the early 2000’s when
oversized data centers were built for an expected IT load that never materialized.
Micro data centers can more easily be “stepped and repeated” to accommodate
growth in IT gear as the need for more compute arises. Once fully utilized, another
one is deployed in the same facility or in a different facility depending on the availa-
ble electrical, space, and bandwidth capacity. Their standardized, prefabricated
nature along with smaller kW increments is fundamentally what makes them a highly
scalable solution compared to traditional “stick-built”, purpose-built data centers.

Speed of deployment
Some businesses encounter situations where they need to deploy a computing so-
lution quickly. Since micro data centers are a complete physical infrastructure solu-
tion (including the IT gear and, sometimes, the software), it becomes feasible to
significantly decrease a project timeline compared to a traditional data center or
server room. This is because micro data centers eliminate the need to design,
specify, procure, and integrate a group of disparate components. The speed with
which you can deploy a micro data center is strongly dependent on how standard-
ized it is. The more standardized the micro data center, the more likely it is to be a
stocked item. However, as the kW capacity of a micro data center increases, the
less likely it is to be a stocked item given the higher carrying cost. Larger IT de-
ployments (e.g. 1MW) still require purpose-built or colocation data centers. None
the less, a micro data center will always be faster to deploy compared to a tradi-
tional data center or server room. In some cases, configuration tools (Figure 2) are
available to quickly and easily customize standard solutions by allowing users to
change power, security, and IT equipment to an enclosure. A rules-based configu-
ration engine should check for incompatibilities between components and, when
complete, an order can be created.

Figure 2
Example of a micro data
center configuration tool

Reliability
In general, the reliability of a data center is undermined by the extent to which its
critical systems are customized. This is why a standard-model vehicle, is more reli-
able and less costly than a custom-built, one-off vehicle. While larger data centers
could be standardized, it’s much easier and practical to standardize smaller ones.
This is a key reliability advantage of micro data centers. For more information on
this topic see WP116, Standardization and Modularity in Data Center Physical Infra-
structure.

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 4

One of the ways designers increase the reliability of traditional “one-off” data cen-
ters is by adding redundant systems. When geographically distributed, such as
with edge computing, data centers also gain reliability improvement through geo-
graphic redundancy with the use of automated workload mirroring and orchestra-
tion 3. This is analogous to distributing the storage drives of a RAID array across
the country and using software to recover data if any of the drives fail. In terms of
data centers, the virtual machines, and their data, are preserved in much the same
way. The smaller the data centers get, the more distributed, less oversized, and re-
silient this array of data centers becomes. This is another key reliability advantage
of micro data centers.

Outsourcing to the cloud and colocation

CIOs who decide to move their IT gear from on-premises data centers to collocation
facilities, or who decide to outsource applications to cloud providers, are still left
with a certain amount of IT gear in corporate and branch offices. Micro data cen-
ters are ideal in these cases to support this IT gear because of their small footprint
and ability to be placed in an open office area. This allows the existing data center
or server room space to be converted to office space, or leased out. For example,
the cabinet in Figure 3 could be mistaken as office furniture but is actually a micro
data center in an office environment. For more information on this topic see White
Paper 256, Why Cloud Computing is Requiring us to Rethink Resiliency at the Edge.

Figure 3
Example of a micro data
center in an office envi-
ronment

IT enablers “Enablers” are things that make it possible or easier to accomplish something.
There are three main information technologies that enable the use of micro data
centers. The drivers to deploy micro data centers, described above, are independ-
ent of IT enablers. We briefly explain these technologies and describe how they
simplify and or reduce the cost of micro data center deployments.

• Hyperconverged IT
• Compaction
• Virtualization

Hyperconverged IT
If micro data centers were deployed with disparate IT parts (i.e. servers, storage ar-
rays, network switches, management software, interconnecting cables, etc.), the in-
tegration of all these pieces would limit the “speed of deployment” advantage of mi-
cro data centers.

At a basic level, hyperconverged IT refers to the integration of compute (i.e. pro-

cessor), storage (i.e. hard disk drive), and networking resources into a single pack-
age (i.e. rack, chassis). When all of these parts are integrated as a single solution,

3 Geographic redundancy means that multiple data centers are deployed a far enough distance from
each other such that downtime in one, doesn’t affect the other (i.e. no common cause failure).

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 5

you improve the speed of deployment for the entire micro data center. In addition,
IT reliability improves and, to a certain extent, the amount of physical space occu-
pied is reduced because the converged stack is designed as a single solution from
the ground up.

Compaction
Although there is some degree of compaction in relation to hyperconverged IT, the
compaction we refer to here is the result of technological improvements in IT equip-
ment. For example, the continuous reduction in transistor size has decreased the
size of the chips in IT equipment while simultaneously increasing performance.
Data storage has also seen significant compaction, especially with the advent of
solid state drives. All of this compaction in footprint, with simultaneous improve-
ment in performance, has made it possible for a single rack of servers to process
the same IT workload as 13 racks of servers 8 years ago 4.

Virtualization
While compaction makes it possible to consolidate 13 racks of gear into a single
rack, virtualization is what allows administrators to harness all of that compute
power across various workloads. Virtualization can refer to server, storage, and
networking and it is this abstraction of all three that allow geographically distributed
micro data centers to appear as a single physical data center.

Capital cost The biggest capital expense advantage that micro data centers have over building
a traditional centralized data center, is that they can typically run off of a building’s
advantages existing physical infrastructure. In many cases, existing buildings have spare
power capacity to support a micro data center both from utility and emergency gen-
erator power. In other words, micro data centers can utilize the “sunk costs” in fa-
cility power (e.g. switchgear), cooling (e.g. chillers), and core and shell construc-
tion, making it less capital intensive than building a new data center.

There are also some tax benefits associated with micro data centers. Since they
are typically considered "business equipment" as opposed to a "building improve-
ment", they can be depreciated over a shorter life. White Paper 115, Accounting
and Tax Benefits of Modular, Portable Data Center Infrastructure, provides more de-
tails on this subject.

Analysis methodology
We performed a capital cost analysis of a data center architecture deployed with
micro data centers, and compared it to a traditional centralized data center. For
this analysis, we used the same data center capital expense model as that used by
the Data Center Capital Cost Calculator TradeOff Tool shown in Figure 4. The tool
estimates the capital cost of materials, labor, and design for each subsystem in a
data center. For the centralized traditional data center, we used the data center
cost value shown in the results section of the tool. We compared this traditional
data center to 200 micro data centers (single rack 5 kW/rack) distributed through-
out various buildings. Note that this doesn’t mean you would need 200 buildings
since more than one micro data center could be housed in a single building.

The micro data center capital cost was estimated based on micro data centers
available on the market today. For the micro data center, we eliminate the capital

4 Based on data from https://www.spec.org/power_ssj2008/results/ comparing performance per U at

100% utilization from 2008 and 2015-2016.

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 6

cost (materials, labor, and design) of the subsystems that are typically present in
buildings (sunk cost). These subsystems included core & shell, raised floor,
switchgear, and generator.

Figure 4
Data Center Capital Cost
Calculator model used for
estimating traditional data
center capex

Assumptions
Table 1 provides the pertinent assumptions used in the capital cost analysis. The
“Environmental and security” cost component includes cameras, temperature, hu-
midity, and smoke sensors. The inputs shown in Figure 4 provide other details for
what is included in the traditional capital cost.

This analysis also assumes that the applications running in a traditional data center
can be partitioned across multiple micro data centers interconnected by a wide
area network (WAN). This “logical” data center is enabled by hyperconverged in-
frastructure and low latency links between the individual micro data centers. There
are some applications that may not be compatible with this type of architecture. We
discuss the possibility of this type of architecture in the next section.

Cost component Traditional data center Micro data center

200 micro data centers
Rack density and quantity 200 racks at 5 kW/rack
at 5 kW/rack
Power & cooling redundancy 1N 1N

Table 1 DX CRAC cooling unit Perimeter with condenser Row-based with condenser
Assumptions for Containment type Hot aisle Full (front & rear)
traditional vs. micro data
center capex analysis Core and shell cost $1615/m2 ($150/ft2) $0
Total UPS capacity 1.2 MW capacity double 1.6 MW capacity double
(with monitoring) conversion online conversion online
Environmental & Security Yes Yes
Fire suppression Pre-action sprinkler NOVEC1230 canister

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 7

Findings
The capital expense for building a single centralized data center rated for 1MW of
IT load is $6.98 million or $6.98/watt. The capital expense of 200 5kW micro data
centers is $4.05 million or $4.05/watt. Micro data centers represent a 42% savings
over a centralized data center. Note that if fire suppression was removed from
traditional and micro data centers the overall savings would increase to 48% sav-
ings. This is because the pre-action sprinkler system cost in the traditional data
center is significantly less than the NOVEC clean agent system assumed in the mi-
cro data center.

The UPS in the micro data center has more total UPS capacity than the traditional
data center. When building a single 1 MW data center, the UPS is typically over-
sized by 1.2 times the IT capacity. However, when the UPS is distributed across
200 racks, a 1.2 oversizing factor results in a 6 kW UPS, which may not be enough.
Because of the load diversity effect, the UPS capacity in a distributed architecture
should be slightly higher to accommodate occasional rack densities above the 5
kW/rack average. In this analysis we used an 8 kW UPS. The diversity effect is one
of the drawbacks of distributed architectures in general. Despite this drawback,
distributed architectures bring an advantage over traditional data centers in that
they are highly scalable.

Micro data centers are inherently scalable because one can deploy them in their
entirety only when needed. In the case of this analysis I can deploy them 5 kW at a
time. This “pay as you grow” approach conserves cash flow and is especially use-
ful in branch office type of deployments.

A future micro The introduction of hyperconverged infrastructure and its management software has
made the concept of a software defined data center (SDDC) easier to implement.
data center In essence SDDC brings some of the benefits enjoyed by internet giants to enter-
architecture prise companies 5. Micro data centers take the SDDC concept a step further by dis-
tributing the compute, storage, and networking resources across different geo-
graphic locations, as opposed to placing all the IT gear in a single centralized data
center.

This concept of managing workloads across multiple data centers is not new and is
used by a few cloud service providers including Amazon and Google. 6 However,
the idea of applying SDDC to distributed micro data centers and managing them as
a single logical data center is new for enterprise companies that don’t have the
scale of internet giants. An example of this type of distributed computing is Qarnot
Computing. This company processes information on distributed micro data centers
and uses the waste heat of the micro data centers to heat residential homes.

This data center architecture has the potential to save enterprises significant capital
expenses as demonstrated in the analysis above. Another benefit is lower operat-
ing expenses in terms of specialized IT admins dedicated to storage, networking,
and compute. Hyperconvered infrastructure abstracts these three resources into a
single hardware stack doing away with specialized hardware equipment for each
resource. All the distributed micro data centers act as a single data center that
provide IT services similar to a utility.

5
“The aim is to do what the webscale cloud providers do, but instead of having to build it from scratch,
hyper-convergence puts an enterprise cloud in a box as a turnkey appliance.”
6 http://allthingsd.com/20130613/what-is-the-software-defined-data-center-and-why-is-it-important/
http://searchsdn.techtarget.com/tip/Facebook-Google-use-SDN-to-boost-data-center-connectivity

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 8

One major unknown, and risk, for this future data center architecture is the effect of
network latency on the distributed micro data centers. Google uses dedicated
“non-public” fiber links between its data centers to allow data flow between them.
This is cost prohibitive for typical companies, therefore, the links between micro
data centers will need to be made using “public” WAN connections and with
enough bandwidth for the applications they support.

Methods of There are three basic ways you can deploy small data centers:

deployment 1. Build it from scratch by specifying, buying, and assembling individual parts
2. Build it with a preconfigured solution and assemble the parts
3. Build it using a micro data center which comes prefabricated and fully as-
sembled

In moving from the first method to the last method you encounter more standardiza-
tion and fewer choices in the design of the data center. Users who require custom
color schemes, special electrical outlet configurations, specific cooling system, etc.
may need to use method number one. Furthermore, you have the choice of buying
the entire solution from a single vendor or separate parts from multiple vendors.
Buying the entire solution from a single source means that you need a bid from
each vendor (a minimum of two bids required), while buying 6 separate parts (e.g.
rack, power, cooling, storage, compute, and networking) from separate vendors
means at least 12 bids required. Then all the parts must be integrated which may
cost extra if you use an integrator.

The trend in the IT industry is toward standardized hyperconverged IT infrastructure

that is easy to deploy and operate. If you plan on using a hyperconverged IT solu-
tion, we believe it’s logical to deploy your physical infrastructure using micro data
centers. The intention of this method is to deploy the entire solution, including the
IT compute, storage, and networking gear, as a single module. This method in-
creases the predictability of the installation, operation, and overall reliability of the
data center.

Conclusion The benefits of distributing micro data centers are that they scale as needed, re-
duce computing latency, and reduce the risk of bringing down the entire data cen-
ter operation (i.e. reduce single points of failure). Similar to a distributed IT archi-
tecture, if more capacity is needed in the future, another micro data center is
added. Standardizing these micro data centers results in further benefits including
reduced deployment time, simplified management, and lower maintenance and
capital costs.

About the author

Victor Avelar is a Director and Senior Research Analyst at Schneider Electric’s Data Center
Science Center. He is responsible for data center design and operations research, and consults
with clients on risk assessment and design practices to optimize the availability and efficiency of
their data center environments. Victor holds a bachelor’s degree in mechanical engineering from
Rensselaer Polytechnic Institute and an MBA from Babson College. He is a member of AFCOM.

Cost Benefit Analysis of Edge Micro Data Center Deployments

 Schneider Electric – Data Center Science Center White Paper 223 Rev 0 9

Practical Options for Deploying Small Server Rooms and Micro Data Centers

Resources
White Paper 174

Types of Prefabricated Modular Data Centers

White Paper 165

The Drivers and Benefits of Edge Computing

White Paper 226

Accounting and Tax Benefits of Modular, Portable Data Center Infrastructure

White Paper 115

Why Cloud Computing is Requiring us to Rethink Resiliency at the Edge

White Paper 256

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Cost Benefit Analysis of Edge Micro Data Center Deployments