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Colocated data centers uncut: Avoid these costly errors

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Is colocation pricing set in stone?

Colocation pricing yields a lot more to customer demands than you might expect, so don't choose a provider purely on price: Negotiate.

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Your colocation provider will probably become an integral long-term partner to your corporate IT team, so it is crucial to negotiate a contract with the right terms with the best price.

Here, some colocation providers answer common questions about colocation pricing, service-level agreements (SLAs) and more.

How much clout do I have in negotiating colocation pricing?

Colocation providers are opening up more as colo adoption increases, giving the customer more influence on the deal. A full data center is a better deal to operate for colocation providers, so it isn't in their best interests to be rigid on terms, said a representative from GlassHouse Technologies Inc., a Southborough, Mass.-based IT consulting firm.

Flexible, negotiable colocation contracts take many forms. It can mean giving one customer the same SLA as others, but at a shorter contract length. Or colos might offer different customers the same platform and infrastructure, but at different costs, to sign newcomers.

Colocation providers reported offering a Tier 3 facility space as Tier 2 to bring in new customers or new applications at a lower price point. Some providers might throw in managed services or cloud hosting for free in hopes of growing their service relationship with the customer.

"Pricing is important -- not lowest cost, but the structure around pricing that will work best for their requirements," said Bryan Chong, vice president of midmarket sales for Digital Realty Trust Inc., a San Francisco-based data center provider that operates 12 colocation centers globally.

Retail colocation customers -- those with smaller footprints in the colocation center -- are savvy about wholesale colocation contracts and want to align their bill with their actual usage, he said.

For example, retail colocation customers used to pay for a power circuit no matter how much power they used. Today, they can demand metered power, even if they only run a few cabinets.

But be warned: "Not every offering is the same, and it's still very much a buyer-beware situation," said Chris Crosby, CEO of Compass Datacenters, a Dallas-based company that has built dedicated data centers for colocation providers.

While good real estate location and building design are step one for a successful colocation facility, the company's knowledge of IT operations is what will keep uptime, power usage and security at peak performance for the long run.

"A lot of money is coming into the colocation market that isn't savvy. The real estate model of colocation is out of date," agreed Robert McClary, senior vice president and general manager at Fortrust, a colocation data center operator based in Denver. IT teams should drive data center decisions and talk with a colocation provider to get a sense of how it integrates the management and monitoring tools at its disposal, rather than just looking at their brochure or website.

"System management tools and good design mean nothing in clueless hands -- expertise is a big factor. You can't design around human error, nor can software fix it," he said.

Colocation customers nearly always put strong SLAs on the must-have list for negotiations.

"A bad experience with a previous provider's service means they'll push for a stronger SLA this time," Chong said.

To simplify management and uptime assurances, corporate IT often wants a single SLA that applies to their on-premises and colocation-hosted workloads, and cloud-based applications.

"Enterprise CIOs really care about managing risk and therefore place a large value on corporate IT," said Ian McVey, head of systems integrators at Interxion Holding NV, a carrier-neutral colocation provider in Europe.

The time and money spent on moving out of a colocation provider's facilities are prohibitive, but that doesn't mean you can't change providers. Sometimes a colocation user will leave because they are unsatisfied, often due to an outage or because the old provider ran out of power and the customer couldn't grow any more, Chong said.

Multisourcing colocation providers gives enterprise IT shops more flexibility without the stress, man hours and complications of moving into a new colocation facility.

"Enterprises can take advantage of the [provider] marketplace without being locked into one vendor," McVey said. This is especially true for companies that might want colocation providers with niche strengths and aren't as concerned about simplifying SLA management or contract management.

Vary the contract length to suit your needs as well, Chong advised. If you're interested in building out new applications around a specific project with a small footprint, ask for a contract of one to three years. If you're moving a large infrastructure into the colocation center, the contract will probably be for 10 years, but you can host isolated projects elsewhere and under different contracts depending on their needs.

This was first published in February 2014

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Essential Guide

Colocated data centers uncut: Avoid these costly errors

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