A data center is the heart of a modern enterprise, providing computing, storage and networking resources necessary to support varied and demanding enterprise applications that drive the business. Traditionally, a business builds, equips and operates its own data center -- and might even support multiple data centers constructed in strategic regional or global locations. But traditional, full-featured data centers are complex and expensive constructions with finite resources. Sometimes a business simply can't afford to build, operate or expand such a capital-intensive investment. Rather than build and operate a private data center, a business can choose colocation, opting to rent or lease data center capacity offered by a remote colocation provider and access the colocation across a WAN, such as the internet.
Colocation is IT-focused and intended to provide some level of data center support to client businesses. At the lowest level, a colocation provider -- or simply a colo -- maintains and offers clients access to basic facilities, including physical building space, power, cooling, physical security and telco access for WAN support. Clients simply rent or lease space in the facility, but move in their own computing, storage, networking, other gear and personnel. This model eliminates the expense of building and operating a data center facility, though the client business owns and operates the IT equipment.
Colocation providers might go further by also hosting the computing, storage, networking, software tools and expertise needed to operate a complete data center. Such hosted or colocation providers offer complete platforms for client businesses in need of data center resources but that choose not to build or equip their own data center facilities. An ultimate expression of colocation is managed colocation, where the provider operates a fully equipped data center and simply rents access to provisioned resources, such as virtual machines, and even applications and services, such as backup services, running in the colocation facility.
Colocation providers can often be quite distant from the client business, making it challenging for the business to send IT personnel to work with gear located in the colocation facility. Travel is expensive and time-consuming, and might not be practical in an emergency situation when a service or system requires immediate attention. Providers frequently offer remote hands services, using the providers' IT personnel to conduct an array of services -- such as moving cables, changing gear configurations, cycling power and rebooting, removing or installing gear -- at the clients' request. Remote hands don't apply when the colocation provider owns and operates the gear -- that's just the provider's own IT team doing its job.
Colocation is attractive as an IT service because it helps businesses solve problems or achieve results that might be too expensive or complex for the business to accomplish by itself.
There are four principal drivers for adopting colocation: cost, performance, compliance and services.
Cost. A full-featured data center is expensive. A new data center can take years to build and cost a business tens of millions of dollars to construct the building, purchase and deploy gear and install WAN fiber -- not to mention yearly operating costs for electricity, maintenance and taxes. Even a business that makes the investment in one full data center is usually reluctant to afford a second. Thus, using a colocation provider can shift significant financial burden from the business. Consider some cost-driven uses for colocation:
Performance. Today, businesses require a global presence, but a global presence also means global access to applications and data. A single data center is hard-pressed to support the demands of global users. Even when a business makes the investment in costly network bandwidth, physical realities of network latency, congestion and connectivity can lower workload availability and performance for remote users -- potentially affecting user satisfaction and workload use. Colocation enables businesses to get workloads and data closer to users in different geographical regions to maintain adequate workload performance without the need to build new facilities.
Compliance. Global businesses also face increasing government regulatory demands that affect the way applications are used, and the way application data is managed and secured. A single data center might not satisfy the data residence requirements of some nations or other political and economic blocks. As with performance, colocation can help a business to satisfy prevailing regulatory requirements without the need to undertake additional large and costly constructions by engaging the colocation offerings of a provider already operating in the target geopolitical area.
Services. Finally, a single traditional data center is a single-point-of-failure vulnerability for the business. Fires, earthquakes, floods and storms, and even man-made accidents or disasters, can bring connectivity and facilities disruptions -- to power and cooling, for example -- which can affect the availability of critical applications for all users. The best way to handle disaster recovery is through redundancy. Colocation is a cost-effective and logistically efficient means of building DR redundancy in critical workloads. The colocation facility can be used as a warm site -- effectively a backup or standby site. But it can also be a hot site that carries part of the application's compute load.
The emergence of cloud computing has brought some confusion to colocation. Cloud computing and colocation are increasingly used interchangeably, though this is entirely incorrect. Cloud computing offers many of the same use cases as colocation. The principal difference is the way the technologies are positioned. A cloud is designed to offer IT resources and services that are entirely managed by users but owned and operated by the cloud provider -- the cloud is computing as a utility. Colocation has a far more traditional bent, offering physical facilities and resources that client businesses can employ for their own purposes. It's possible to operate a private cloud in a colocation data center, where the cloud software stack can be deployed to gear architected to support the cloud stack, and IT administrators can craft the varied private cloud services needed by the business. It's not possible to operate a colocation business from a cloud.
Colocation works because it fundamentally provides a client business with a cost-effective remote computing presence in politically or geographically strategic locations without needing to build and equip a physical facility. The facility -- and often its computing resources -- is already supplied by the colocation provider and can be used for myriad purposes.
However, there are numerous pros and cons involved with colocation that every business should carefully evaluate before making a colocation commitment. Beyond the beneficial issues of cost, performance, compliance and services, there are several additional colocation benefits to consider:
Although there are appealing benefits to colocation, there are also common drawbacks that affect client businesses and their ability to work with the colocation provider. Typical pitfalls include the following:
Making the move to a colocation provider might seem straightforward, but the process of adoption is rarely quick or easy. Although the initial investment is far less than a new data center, it's a business decision that must be approached cautiously because colocation agreements pose long-term commitments and constraints. Client businesses must perform extensive due diligence to select the most appropriate colocation provider, site and terms to fit current and future business needs. Here are some common challenges to consider:
Colocation providers are frequently classified as wholesale, retail or hybrid. The three terms generally denote the scale of the colocation offering and the client market for which it is intended.
In the world of physical goods, buying wholesale typically means buying in volume -- but at a sometimes-considerable cost savings. A wholesale colo basically offers a fully provisioned and equipped facility for the dedicated use of a client business. In effect, the client rents the entire colo -- or a significant portion of the overall facility -- which includes the maintenance, power distribution, connectivity, uninterruptible power supplies, auxiliary generators, fire suppression and other elements of a full-featured data center.
Wholesale colocation only makes sense for the largest businesses where IT equipment would require 1 megawatt or more. Wholesale can be a suitable option for large businesses that require a significant IT presence in a strategic location but opt not to make the investment in constructing or maintaining a building -- for financial, legal or other reasons. For example, a large U.S. business might prefer to rent a wholesale colo in Asia for AMEA operations rather than undertake the financing, permitting and other regulatory challenges of building and owning a major asset in another country.
In terms of physical goods, buying retail means buying in small quantities through stores or other distribution means. The buyer can pick and choose much smaller quantities as needed, but the cost of the goods is typically higher because of the additional distribution network involved. A retail colo allows a client business to rent space and gear as needed, often allowing the client to place its own equipment in racks within the facility.
Retail colocation offers flexibility and cost management, and the facility expenses are shared across the entire client base. This makes retail colocation preferred for most small to midsize clients, but the retail space is shared -- not dedicated -- and some means of partitioning and securing the facility are critical.
Hybrid colocation typically involves a mix of managed retail colocation and cloud interoperability. The idea is that a client business might choose to embrace managed, software-defined colocation and then use public and private cloud capabilities that are facilitated by the colocation provider, essentially using the colocation provider as an on-ramp to cloud computing.
Planning and research are essential to successful colocation initiatives. The stakes can be high. A typical retail colocation contract can last from three to five years, while a wholesale colocation agreement can run from five to 15 years. Even short-term contracts can be devastating for businesses that pick inadequate colocation partners, so due diligence can help client businesses determine the best provider for their unique needs now and well into the future. Common considerations when selecting a colocation provider include the following:
Colocation providers can vary radically in their offerings and services. Clients can lease huge bare-bones, empty data center space or rent servers and other resources that are owned and managed by the providers. Clients can do everything themselves or use an array of potential services offered by a provider. Such a diverse array of choices make uniform cost comparisons between providers almost impossible, but there are cost and pricing considerations that can help business leaders avoid costly mistakes in colocation selection.
Facility vs. managed. Leasing space in an empty data center colo isn't necessarily cheaper than renting capacity from a managed colocation provider. Leasing a facility will typically work on a square footage or square meter basis and will often include finite power and cooling per rack. Power and cooling demands beyond the provider's default capacity might carry a power and cooling surcharge. Still, the business must purchase gear, move it into the facility and then deploy, configure, test and maintain the gear. Some colocation providers might also be able to rent gear to the client. Gear rentals carry additional costs, but the DIY model remains.
Alternatively, a business can adopt hosted colocation that includes the gear and might also include some OS licenses -- though software licenses are often options. In this case, the provider owns the building and gear and the business is simply renting servers or racks. Costs are typically expressed in terms of fractional racks, or U space. For example, a managed colo might rent a full rack -- 42U -- for a given monthly cost. Managed colocation is similar; however, costs might be further divided into virtual machines on shared or multi-tenant servers -- unless the clients are renting entire servers in a single-tenant mode.
Power. Power might be included with default colocation pricing, but there can be power surcharges for usage over the default amount. Some providers might employ separate power billing methods, such as per kilovolt ampere or a metered amount for the actual power used. Redundant -- A/B -- power might be included by default, but it might also be offered as an option that incurs extra costs. If power usage is expected to increase dramatically over the life of the contract, let the provider know, and it might be possible to arrange stepped power pricing for the contract term.
Services. Colocation typically doesn't include services. Whether a DIY space or managed colocation, it's usually up to the client business to deploy gear or use provisioned servers and VMs. Providers might offer deployment and setup -- a.k.a. rack and stack -- services that can be cost-effective if there aren't enough staff to send to the colo or the cost of setup exceeds the cost of the provider's services. This is usually a one-time setup fee. Other services include remote hands, which usually carry a billable hourly charge.
Connectivity. The colocation facility will typically provide accommodation for multiple telecom providers, but selecting bandwidth offerings and connecting to a preferred provider is usually a task handled by the client, with additional connection and connectivity costs shouldered by client businesses. Connectivity costs might be rolled into a hosted or managed colocation agreement, though redundant connectivity might carry additional recurring fees for more than one telecom provider. Colocation providers are increasingly offering transitional services to public clouds and can extend some amount of public cloud infrastructure into the colocation facility. One example is AWS Direct Connect, which enables the colocation provider to provide high-speed connectivity to the AWS cloud.
Location. The quintessential rule of all real estate is location, location, location. More desirable locations, such as urban centers and sites close to major infrastructure such as airports and multiple highway interchanges, might carry a premium cost for real estate. These sites also tend to offer more connectivity options at lower costs. Remote sites farther from transport and other infrastructure can offer less expensive real estate but pose more expensive transportation costs. The cost of a colocation provider should justify the reasons for having it.
Consider the need for other location amenities such local parking, office space, meeting rooms and food and beverage services. Not all colocation facilities provide amenities, and some might charge for certain ones. For example, a colocation site in a major city might charge for parking and have challenges loading and unloading, while a remote site might offer plenty of free parking and readily accessible loading and unloading.
Hidden fees. Read the fine print. Although major fees, such as leasing and power costs, are readily understandable, many other fees might be more difficult to see -- such as setup and change fees, redundant power or other availability features, backup and data protection services and network bandwidth and connectivity fees. Review the primary service agreement and SLA carefully and look at service guarantees, including uptime guarantees. SLAs that rely on best effort and other nonspecific availability terms might pose significant costs in terms of downtime and lost business. Understand how SLAs are measured and be sure that such measurements are transparent and readily reported to clients.
Colocation promises an array of compelling benefits, but choosing a provider can bring anxiety and new concerns to the business. Unlike public cloud computing, which uses a pay-as-you-go model, colocation requires a contract that can lock clients into a colo relationship for years. Choosing the right provider and understanding the many details and exceptions to the relationship can make the difference between success and failure.
The relationship between a colocation provider and its clients is governed by the SLA. Understanding the SLA and negotiating the SLA terms to suit the client's specific needs are key to a successful colocation experience.
Clarity is the most effective tool for approaching an SLA. A client business should have a clear picture of why they need colocation and the benefits that such a relationship should provide before ever looking for a provider. If business and IT leaders know what's needed upfront, it's much easier to examine any contracts and agreements to ensure those needs are met, or frame discussions to address those needs. Basic due diligence is also crucial when considering a provider and SLA. Beyond the actual uptime promises for power, network, cooling and other equipment, take the time to evaluate factors such as the following:
Now it's possible to compare the provider's offering to the businesses' needs, and businesses can move forward to negotiate the contract to address any unmet needs. If the provider can't address any outstanding contractual concerns, it's probably best to keep looking. No deal is better than a bad deal.
Once a satisfactory deal is struck and the relationship is proven, the contract will eventually come up for renegotiation and renewal. The renewal process typically involves extending the contract term, adjusting the colocation space or gear, making changes to any contract deficiencies and considering other available value-added services that the provider might offer. Thus, renewal should start long before the current contract expires, with the client considering changing needs and goals. Those client-side changes can then be brought into the renegotiation discussion. Clients can also consider cost-saving strategies such as re-racking gear to reduce floor space and extending contract terms for longer periods.
Still, even the most carefully negotiated agreements with the most accommodating colocation provider can end in disappointment with missed guarantees, rising costs and fees or poor performance. When the provider is unable or unwilling to resolve client concerns, it might be necessary to end the colocation relationship. But unless a client can make a solid case to invoke a termination clause of the contract, the result can be considerable contractual costs and even litigation.
Ending a colocation contract typically starts with a careful review of all agreements to verify the roles and responsibilities of both the colocation provider and the client. Document and detail every event or circumstance where the colocation provider is believed to be failing its contractual responsibilities. Outline every effort to address the problems and document those efforts with dates, times and persons involved. The goal is to bring the provider to the table to fix deficiencies or renegotiate the contract.
If the problems persist, it might be necessary to bring legal action with attorneys well-versed in technology service contract litigation. At this point, the goal is still the same: Get the provider to live up to its commitments under the colocation agreement.
Ultimately, it might be necessary to invoke a suitable termination clause under the prevailing colocation agreement and proceed to terminate the contract. This means an end to the current colocation relationship, and it will be necessary to find another provider. The time, effort and potential disruption involved for such a shift can be considerable, so it's important to exhaust other avenues of remediation before dumping the provider.
The colocation industry continues to change and evolve, bringing new capacity and capability to meet enterprise computing needs. Several noteworthy colocation trends are emerging for 2021 and beyond.
Hosted and managed colocation is becoming more granular and flexible. Providers can readily rent as little as 1U -- a single server -- for short monthly terms, though long-term discounts will inevitably make longer commitments more attractive to clients.
Colocation is increasingly being used as an on-ramp to the public cloud, enabling traditional data center-based businesses to transition from local data centers to colocation data centers. Then they can easily transition workloads from the colocation data center to a public cloud and back for faster and more workload deployment alternatives.
Finally, colocation is supporting more specialized use cases, including distributed data networks, high-throughput data processing tasks and edge computing where moving compute power closer to data sources can speed performance and reduce latency.
18 Dec 2020