Leasing Data Center Space: An Introduction For Retailers

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Originally published in Retail Law Strategist — The Problem-Solving Tool for Retail Law - Winter 2012.

For many retailers, the efficient and continuous operation of information technology (IT) infrastructure is mission critical. Online shoppers are expected to spend $327 billion in 2016, up 62 percent from 2011 levels, and one recent study showed that a one-second delay in website performance translates into a 16 percent decrease in customer satisfaction. According to search engine Bing, a page delay of only two seconds means a 4.3 percent revenue loss. And on top of all this, a retailer’s store management and accounting depends upon critical IT equipment.

Retailers have developed several strategies for managing their critical IT equipment. Many retailers continue to house their entire IT infrastructure inside their headquarters or other office space. Some larger retailers have built their own stand-alone data centers. However, the growing trend among businesses — including retailers — is to outsource this infrastructure, and in many cases an outsourcing strategy will involve leasing data center space. A data center is a physical place that houses a computer network’s most critical systems and related power, cooling and security infrastructure. It can be as small as an “IT closet” and as large as an entire building. The purpose of this article is to describe three common strategies for leasing data center space, highlight some of the advantages and disadvantages of each strategy and describe some of the unique legal issues that may arise.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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