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This Decision Will Make or Break Your Company's Data Infrastructure Building an infrastructure to support data needs is a critical component of a business's operations, but is it best to build, buy or partner in its creation?

By Rajeev Goel

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Data processing infrastructure has become the lifeline for a wide variety of businesses. For example, a recent Amazon Web Services outage temporarily shut down some of the world's largest and most well-known enterprises and services, including TicketMaster, Roomba, Venmo, DoorDash and Spotify, as well as Amazon's own Prime Video.

Outages are a risk that these companies take by utilizing a public cloud option, but there are also a number of benefits to outsourcing that may tip the scale in that option's favor. As with many technical decisions that a business executive may face, choosing whether to build, buy or partner on infrastructure is critical, the pivotal question being, "How do I invest in an infrastructure that best suits my needs?"

The answer, of course, is that it all depends. Every business has unique needs that are answered in a range of infrastructure choices, and it's critical to consider both risks and benefits before choosing them. Ultimately, the best decisions often lie in a strategic mix of factors, including business needs, growth trajectory, finances and more.

Related: The Cloud Market is Becoming Commoditized. Here's What That Means for High-Tech Companies Aiming to Disrupt Healthcare.

Public cloud

The public cloud offers a reliable, agile alternative for startups requiring immediate computing and reporting solutions. This option has recently gained traction in the business world, as it allows enterprises to explore, test and validate innovative ideas and/or new workloads and then quickly scale up as needed. Major players in the public cloud space include Amazon, Google and Microsoft.

The benefit of these services is that they require no initial capital investment to utilize and offer both ease of use and rapid implementation speeds. However, if users fail to properly manage these resources, hosting fees may become exorbitant. In other words, as customers scale, costs scale as well.

The public cloud represents a robust early-stage option. For smaller, venture-backed companies, raising capital is obviously very expensive: Choosing a public cloud with no capital investment is both a cost-effective and useful option when the supported technology is new and evolving and the necessary resources, storage and network bandwidth are not yet fully understood. That last factor is why many high-growth companies opt for this infrastructure, as it can be the best solution for those with unpredictable transaction volume. The public cloud also provides flexibility (servers can be more easily scaled) and freedom from being locked into specific hardware.

When a business first opens its doors or is going through an initial growth phase, public cloud alternatives can prove to be an invaluable resource. However, it's important to consider when to move off of it and into private cloud infrastructure once scale, reliability and cost dynamics have all changed significantly as a company matures.

Related: With Rising Costs and Vendor Lock-Ins, Is a Cloud Exodus in the Making?

Private cloud

When a business outgrows the public cloud, or is seeking greater control over network construction and reliability, the private cloud may be a suitable alternative. Moving into this space is typically influenced by business-specific factors, such as the volume of data and transaction processing, an ability to forecast volumes, the need for increased reliability or uptime and lower costs of capital. This route also significantly impacts financials, as it represents a major fixed cost in scaling a business (as opposed to a public cloud setup) but lower total costs.

In today's digital economy, speed and efficiency in data processing can be a major competitive advantage, and a catalyst for utilizing a private cloud option. Our company, for example, processes more than 1.1 trillion advertiser bids every day, generating more than 3.3 petabytes of data over that time. As we scaled, it made sense to establish fixed costs within an environment capable of scaling in sync with our business.

With a private cloud option, a decision must also be made about whether to leverage a third-party provider or own and operate the hardware. Colocation centers are data centers that provide the physical space and hardware to support an infrastructure, and this option is a fixed cost based on an initial investment designed to handle set traffic volume.

At PubMatic, we built our own global, private cloud infrastructure to better optimize and control all layers of the infrastructure stack (including network, hardware and software), allowing us to operate more efficiently and generate better outcomes for our customers.

Related: 5 Healthcare IT Trends Entrepreneurs Should Watch in 2022

As a business scales, its infrastructure needs will evolve. Particularly in enterprises where data processing speed and efficiency can serve as a competitive advantage, business and financial executives should be involved in their organization's infrastructure strategies. As a leader, you must not only evaluate the pros and cons of all computing options to determine which best aligns with needs, but also consider what the triggers are to shift from one path to the next as you scale up.

Rajeev Goel

Entrepreneur Leadership Network® Contributor

Co-Founder and CEO

Rajeev Goel is co-founder and CEO of PubMatic. Under his leadership, PubMatic has grown and matured into a publicly traded enterprise with more than 600 employees and 14 offices around the world. Goel is a serial entrepreneur with experience navigating large enterprises.

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