What Is A Data Center? (2024)

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In today’s cloud-everything era, it’s easy to forget that computing power still boils down to physical infrastructure—and that infrastructure needs to live somewhere. While the nuts and bolts of networking have evolved over the last several decades, they remain rooted in rooms full of servers, storage drives and more. These physical locations that house network infrastructure are data centers. Dive into data centers with us in this article and get the essential information on these vital facilities.

Data Center Defined

Data centers are defined as physical places that house and run networking components and infrastructure, including servers, firewalls, switches, routers and storage systems, and all the electrical utilities associated with these parts. These resources enable an organization to power computing needs and business applications.

The data center is the central hub from which an organization’s information technology (IT) operations and data processing generate and it has evolved as technology has gone cloud-ward. Historically, data centers were privately owned environments on a company’s physical premises. Today, many organizations leverage virtualized infrastructure that is pooled across multiple environments. However, even if your business runs everything in the cloud, your computing power ultimately derives from a data center somewhere physical.

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Why a Data Center Is Important

Data centers are important for several reasons, which are listed below.

Supports Business Applications

Few businesses today operate without any applications. A business application is anything from customer relationship management (CRM) to enterprise resource planning (ERP) to human resources (HR) platforms. If your business is too small to need these applications, it’s likely you use communication apps like Slack or project management apps like Asana. Even if all you use is email, that’s still an application that requires computing resources to power it—and those resources are all housed in data centers.

Supports Data Storage and Management

Organizations have had to process more and more data as the number of computing devices exploded in business environments over the last 20 years. Every corporate endpoint like a cellphone or laptop delivers data to a business and that data needs to live somewhere. Data centers—whether businesses run their own on-premise, lease equipment elsewhere or use a cloud provider—keep corporate data retrievable and manageable.

Keeps Data Safe

Data centers, if protected properly, contain many layers of security to keep data safe. From biometric scanners to alarms to human security staff, data centers leverage all manner of tools to protect the hardware that stores an organization’s data. Aside from physical protection, data centers also connect to external networks to access security solutions such as firewalls, failover, load balancing and intrusion protection.

Serves as the Foundation of Modern Business

You’re hard-pressed to find an organization or government today that doesn’t rely on a data center in some capacity. The nature of the digital world means businesses must run modern, secure IT environments that completely depend on data centers. Even organizations that are entirely cloud-based pay cloud providers to secure and supply their computing power and those cloud providers deliver that power through their data centers.

Offers Flexibility and Scalability

If organizations choose a data center model run by a third party off-premise, they can adjust their storage and infrastructure needs more easily than if they had on-premises data centers. By opting for colocation or managed data center services (more on those below), businesses skip the steep up-front costs of setting up their own data centers and they leverage the flexibility of paying for the storage and data capacity they need in the moment. These models allow organizations to expand and shrink capacity as needed—resulting in cost savings.

What Comprises a Data Center?

Data centers are made up of the following components:

  • Servers: Servers are computing machines that process, store and manage data. They have high processing power and much more memory than a typical computer. While there are varying types of servers, two common types are rack servers (stackable in racks) and blade servers (more modular and stackable in thin layers in a chassis).
  • Types of storage: Organizations will choose different types of storage in the data center depending on the size of their data and the speed of access they require. A storage area network (SAN) connects servers to storage and is useful for storing structured data. A network-attached storage (NAS) system is useful for remote file serving and runs like its own server, making it better for storing unstructured data.
  • Routers: A router is a gateway between computer networks that passes data packets along the right routes.
  • Switches: A switch is hardware that connects multiple devices in a network together and sends data packets among those devices.
  • Data center facility: The facility itself that houses all the networking equipment also contains batteries for backup, generators, cooling systems like fans, thousands of cables and uninterruptible power supplies (UPS).
  • Software-defined networking: Software-defined networking (SDN) technology emerged around 2011 and is applied to traditional networks in data centers to control the hardware via software. It allows IT administrators to make changes to the network from a software-based interface without having to go into the data center physically to configure or provision resources.

Types of Data Center Services

Organizations today have their choice from a variety of data center services.

On-premises

The most traditional of data centers, this type is defined as a privately owned data center on an organization’s physical site. It is likely made up of one or more rooms that contain all the aforementioned equipment and it requires one or more IT people to run it. Organizations that opt for on-premises data centers must buy and manage their hardware and software—a model that is falling out of favor increasingly with business leaders today as the cost-effectiveness of the cloud model grows in popularity.

Colocation

A “colo” data center offers a model where organizations lease physical infrastructure from a third party. The colocation provider houses the data center infrastructure themselves and businesses pay to use and access it. With colocation, you pay for connectivity and power—and you have to maintain the hardware yourself—but you don’t have to worry about physical security. Some colocation providers will offer hosted options in which organizations pay them to manage their infrastructure for them.

Managed Data Center Service

This model is also known as “managed data center support service,” “data center managed services” or “data center as a service”. As with colocation, a third party houses the data center infrastructure. This provider is often a managed services provider (MSP) that may act as an outsourced IT expert for an organization. MSPs will vary their managed data center offerings, but they commonly provide hardware maintenance, storage, backup and disaster recovery. Some MSPs will take on the full range of duties of an IT person managing an on-premises data center for their customers.

Cloud

Organizations pay cloud providers, such as Amazon Web Services (AWS) or Microsoft Azure, to access virtual infrastructure and purchase computing power through the cloud on an as-needed basis. The cloud providers own the data center infrastructure and maintain and manage all of it. In comparison to colocation, the cloud model doesn’t allow users to lease any infrastructure. In the past, using cloud providers for networking needs seemed risky as users have no physical access to the data center equipment nor control over the security, but major cloud providers have made massive investments in security over the years to offer highly secure infrastructure.

Edge

Edge data centers are smaller facilities that house computing and storage resources geographically closer to where those resources are used. These facilities are often used to deploy applications quickly as their proximity to users means lower latency and higher bandwidth.

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Bottom Line

Whether it’s on-premises, owned by cloud providers, leased or fully managed, the data center is the powerhouse of modern business. It hosts and safeguards the essential hardware and software that drive every digital transaction, customer interaction and task. It is the physical hub for the technology that shapes our world in the cloud.

As electrical and computer engineering have evolved to condense more processing power and storage into smaller, more efficient machines, data centers have enjoyed modernization. Today, organizations have a range of choices when it comes to data center infrastructure—with virtual machines and software-defined solutions improving the utilization of hardware. While emerging technologies make it difficult to predict the future of the data center, one thing is likely to remain true: every digital instance is founded in a synapse in a data center.

Frequently Asked Questions (FAQs)

What is a data center in simple terms?

A data center is a physical room or set of rooms that contain networking equipment. In a data center, you’ll find routers, switches, servers, storage systems, power supplies, cables and cooling systems that support modern computing needs and safeguard data.

What is the purpose of a data center?

The purpose of a data center is to centralize all the equipment required to power an organization’s IT environment—and, subsequently, its ability to operate business applications and digital communications technology.

How do data centers make money?

Data centers themselves do not make money; the owners of the facilities and data center equipment make money off the space and hardware by leasing them. This model is known as colocation. In a similar but different model, an MSP makes money by charging customers to store, manage and protect their IT networks in the MSP’s data center.

What Is A Data Center? (2024)

FAQs

How do data centers make money? ›

How do data centers make money? Operators of data centers may choose to lease out space or computing power to customers as a way to finance data center operations.

What are the four main types of data centers? ›

Data center needs vary depending on their structure, physical limitations, density requirements and more. Here are four common data center types including onsite, colocation facilities, hyperscale, and edge data centers, as well as their use cases and industry trends.

What is data center vs server? ›

Data Center is a type of self-hosted deployment. The primary difference on a technical level in a comparison between Data Center vs Server is that Data Center permits multiple application servers running in parallel. Server only permits one application server.

What is the difference between a cloud and a data center? ›

Availability: In an on-premises data center, an organization has complete control over their infrastructure, which can be good or bad. In the cloud, availability is protected by service level agreements, which may provide better guarantees than an organization can in-house.

Who owns the largest data center? ›

Digital Realty owns arguably the largest data center footprint in the world with more than 300 facilities across 25 countries on six continents, along with more than 45 million square feet of data center space.

Why are so many data centers being built? ›

As businesses deploy SaaS tools, they trigger demand for public cloud IaaS solutions from Google, AWS, Microsoft Azure, and others as well as uptick in demand for yet more colocation leases. When capacity is in short supply, more new data centers are planned.

What are the disadvantages of a data center? ›

Cons of data centers
  • Limited capacity: While data centers offer many benefits, they're limited by their capacity. ...
  • Limited accessibility: A data center can only be accessed from within your corporate network. ...
  • Total cost of ownership: Building and maintaining a data center takes time and money.

What is the purpose of a data center? ›

A data center is a facility that provides shared access to applications and data using a complex network, compute, and storage infrastructure. Industry standards exist to assist in designing, constructing, and maintaining data center facilities and infrastructures to ensure the data is both secure and highly available.

Who uses data centres? ›

Enterprise Businesses: Large corporations and enterprises often require data center services to store and manage their critical data, applications, and IT infrastructure. These businesses may need colocation services, cloud services, or managed hosting solutions.

Which company has the most data centers? ›

Amazon Web Services (AWS), the cloud computing service of Amazon.com, is the largest cloud service provider and data centre company worldwide. The organisation has 32 cloud regions and 102 availability zones in operation, with plans to launch 4 more cloud regions and 12 more availability zones.

How much do data centers cost? ›

For the sake of argument, we can start with a figure of $1,000 per square foot. A 1,000 square ft. data center would then cost $1 million on that basis. A data center of the size that Facebook or Google might use would cost from $250 million to $500 million.

Can the cloud run without a data center? ›

What's important to note here is that the cloud needs physical servers in physical data centers. Because these take up (physical) space, we could theoretically run out of cloud storage if people stopped building data centers.

What is the profit margin in data centers? ›

Data Center Industry Revenues to Grow at a CAGR of 18%-19%

The operating margins could go up from 40% to 42%. ICRA pointed out that the ROCE (return on capital employed) will be modest because the data center companies are usually spending big for capex as capacity ramp-up happens over a significant period of time.

How are data centers financed? ›

Some of the most common data center financing options are: Service contract, such as colocation. Real estate lease. Sale/leaseback.

What is the revenue of data centers? ›

Revenue in the Data Center market is projected to reach US$416.10bn in 2024. Network Infrastructure dominates the market with a projected market volume of US$239.70bn in 2024.

How much does it cost to run a data center? ›

The cost of running a large data center can run from $10 million to $25 million annually. Typically, 42 percent of costs go to hardware, software, disaster recovery, and networking costs. The remaining 58 percent goes to building infrastructure such as cooling, taxes, and labor.

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