Data Centers are created for accommodation of a large amount of IT equipment used for storage and processing of essential data and applications. A data center is made up of servers, routers, uninterruptible power supplies, fire control equipment, external network connections, storage sub-systems, firewalls, cooling systems and backup generators. While some data centers are created and purchased for personal use of one organization, other data centers have rental options open to various organizations for storage of data.
In Africa, the Nigerian data center industry is one of the rapid-growing markets. Investments in the sector are acquired by digitization, rising e-governance, increased demand for data services and improved infrastructure. GlobeNewswire’s Nigeria Data Center Market Investment Report 2021-2026 states that over 90 percent of Nigeria’s data is stored abroad owed to the preference of public institutions to host their data abroad. Currently, there are 11 data centers in Nigeria and notwithstanding the strive to meet predicted increase in demand and investment of over USD200 million in data center operations, the present capacity utilization of existing data centers is not up to 30 percent.
Building data center spaces require high capital and quality time.
Recent regulations enacted by the government for betterment of local data hosting project that companies and government Ministries, Departments and Agencies (MDAs) will ensure development of personal data centers or lease space provided by data center infrastructure providers. The decision to acquire or build a data center will involve identification of suitable commercial real estate, negotiation of the land and building purchase, conduction of due diligence, development of the data center, staffing, collection of development permits and operational licenses, installation of the appropriate infrastructure, security and others. These construction steps require quality time and high capital although it gives companies control and better security regarding access to the facility.
The steps and phases of constructing a data center require quality time and high capital although it gives companies control and better security regarding access to the facility. However, leasing space from a data center provider leads to avoidance of actual difficulties with requirement of little time and lesser capital. Usually, companies and government parastatals do not have required technical workforce and resources for management of a dedicated data center space for a whole year.
Leasing data center space has more advantage over building a data center.
The problem of management is solved by leasing data center space as provision of manpower and resources required for seamless management of the data and IT needs of businesses is catered for by the vendors. Also, there are usually regular introduction of disruptive technologies to foster changes in business operations. Technologies like AI, machine learning, and big data analytics have a new set of requirements that are best provided, maintained and managed by data center providers. It has been proven that there are more advantages to companies leasing data center spaces compared to building and operating a data center.
In Nigeria, there are no specific laws governing the leasing of data center spaces, however it is important that potential investors in the data center sector consult proper advice from legal practitioners with professionalism in real estate, intellectual property, data security, taxes, corporate and commercial, energy infrastructure financing and construction, regulatory compliance and dispute resolution. Some major legal and business terms to put into consideration in data center leases include licensing which is done by the National Technology and Development Agency; rental; space size and equipment, and others.
There should be legally addressed considerations before lease.
Other necessary considerations for data center leases include service level agreements, cooling, power, data capacity, humidity, and connectivity. Maintenance and repair for identification of the party responsible for maintenance and repair of the data center infrastructure; term and renewal for assurance of stability and security of tenure; liability, data protection and security, indemnification, intellectual property and other significant clauses need to be legally addressed. Recommendations include legal and regulatory framework, sale and lease buy back, tax incentives and cheaper power solutions.