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Hidden colocation cost drivers that add up

These unexpected charges and fees can balloon colocation costs for enterprise IT organizations.

Every colocation deal involves a detailed contract and service agreement, but the true colocation cost is buried...

in myriad supplemental charges and fees in the fine print or price sheets.

Colocation facilities free IT organizations from the burden of owning and operating data center space, saving major capital construction costs. But the base price listed on your colocation contract often doesn't tell the whole story of value-added services and support-level expectations. Unanticipated fees can lock the business into an agreement that isn't nearly as cost-effective as imagined. There are ways to recognize and avoid hidden colocation costs.

When it comes to colocation deals, there is absolutely no substitute for due diligence. Consider the value-added services and support level that are most appropriate for the business, as well as what happens when you need more. Are there cost penalties, for example, or will excess support requests simply go unanswered? Read the contract, service-level agreement (SLA) and any price lists or addendums carefully. Ask the provider directly about any costs or fees that weren't covered, such as early termination.

When you select a colocation provider, don't be afraid to start small and expand services later, and don't hesitate to negotiate for the most cost-effective services. You can often negotiate services and support costs, and competitive providers want to talk when a long-term contract is on the line.

If the colocation provider offers references, be sure to contact the references and ask pointed questions about service, support and costs.

Setup and change costs

IT services and facilities rarely stay the same for long. Colocation tenants routinely engage new services, change existing services and discontinue unneeded services. Any change can cost money. Colocation providers typically charge a setup fee when a service is first configured and a change fee each time they must alter established services. Setup and change fees are in addition to monthly costs incurred by additional equipment or services.

Colocation providers can charge a setup fee when you lease additional servers. For example, the provider adds cross-connect fees for interconnecting racks or interfacing to telecommunication providers, registering a newly leased server in the domain name system, or allocating an IP address from the provider's pool. Storage and network bandwidth additions -- to accommodate the added server traffic -- could cost you. Some providers also charge for adding monitoring or reporting. Change fees may apply when downgrading or discontinuing equipment or service usage.

Many providers do not clearly explain any setup or change costs, and totals for those incidental fees don't get listed in colocation providers' cost quotes. Change fees can add up, especially if you're just getting started with colocation. Try to negotiate a number of 'free' changes, especially if you're engaging long-term services or plan to add services over time.

Uptime costs and policies

Colocation facilities are not created equal, and they are certainly not infallible -- unless you're paying a hefty premium for higher-tier availability. Sign on for service levels or options that meet your company's regulatory compliance or mission-critical workload requirements. Colocation providers support SSAE 16 or SOC 1 and SOC 2, for example.

Uptime negotiations are simpler if the business tenant provides and maintains its own gear and the colocation provider maintains responsibility for the facility, power and cooling. Uptime assurances mean redundant power, such as independent utility feeds, or a redundant diesel generator along with the associated A/B switching configuration. There can also be independent redundant connectivity providers with associated switch gear to manage. Large data center spaces might also provide redundant cooling equipment. All this comes at a price. Understand those costs up front and how the colocation company factors those services into its SLA.

For hosted or managed colocation providers that also supply gear and managed services, uptime promises extend from facilities to IT equipment. Ensuring the availability of that gear and services -- especially during provider maintenance windows and technology upgrades -- enormously complicates an SLA. There may not be a provision to back up or migrate workloads before scheduled maintenance windows, taking down hosted workloads unless the colocation tenant intervenes.

The provider's SLA is one of the best places to check availability and exceptions. As one example, colocation provider Mosaic Data Services clearly notes that it will replace faulty hardware within one business day, and will try to replace the faulty hardware within four hours of identifying the problem. But this doesn't include software-related tasks such as rebuilding accounts from backups or reloading the operating systems or applications. With potential downtime, tenants must conservatively select the workloads to outsource to colocation, or opt for colocation providers that guarantee higher availability levels.

Network setup and fees

Colocation providers typically supply a domain name and IP address from their resource pool to tenant equipment in limited quantities. If you exceed the original allotment, prepare to pay. New colocation tenants easily underestimate resource needs, or migrate to the provider faster than expected and incur charges.

Network costs depend on the bandwidth and connectivity type, such as copper or optical cables. New York Stock Exchange's Liquidity Centers colocation facilities, which are located in Mahwah, N.J., list copper connectivity fees of $2,500 for a 1 Gbps port and $10,000 for a 10 Gbps port. The company charges $2,000 to $32,500 for optical network connections depending on the bandwidth and facility path. Investigate whether bundling copper connections, optical connections and IP addresses may yield savings on the overall colocation cost.

Managed colocation providers charge additional fees for options like firewalls and virtual private network setup, as well as access to malware scanning, antispam, and security monitoring that affect enterprise network traffic. These fees may not seem onerous individually, but the monthly cost of multiple network services adds up.

Anticipate future growth needs for infrastructure-centric resources like networking. It's often worth negotiating additional complementary domain names or IP addresses, discounts on a managed service bundle, or a discount for an extended contractual obligation.

Know what kind of colocation you need

All colocation demands some amount of service and support, and many add to the colocation cost.

Traditional space, power and connectivity colocation: Building management and local technology specialists can play a vital role in timely problem diagnosis and resolution. A technician available on-site will address potential downtime by replacing or cycling power to a server. These techs are called "remote hands."

Hosted or managed colocation services that supply the servers, storage, network equipment and other systems: A rich suite of services and support includes managed reporting, managed security, monitoring and alerting, and other tasks. Each of those premium services carry a separate fee.

Basic technical support is usually included, but baseline support can limit response times and communication avenues. Enterprise-level support with more communication options and faster response times usually requires a unique quote to each prospective tenant.

Backups and data protection costs

Backups, snapshots and other forms of workload protection are critical for the enterprise, but rarely included under basic colocation fees. Some enterprises lease additional space in colocation facilities to implement a backup scheme, but the additional gear, software and service costs can prove prohibitive and difficult to manage remotely.

Many colocation providers offer backup options as a managed service. As one example, CenturyLink promotes managed backup services based on Symantec NetBackup, which touts file- and folder-level backups and restores, encryption at rest, two-week retention and replication to a secondary site.

Colocation providers can charge additional fees for exceeding backup service limits. If you take this route, find out if services are available at all of the provider's data center facilities, and if the company restricts backup bandwidth, storage capacity and retention periods. You should find a service that fits the business' disaster recovery and compliance expectations. For example, short retention times won't serve long-term or archival backup tasks -- possibly compromising regulatory compliance. It is also worth verifying that the tenant receives notification when backup cycles complete.

Test restoration operations periodically to ensure that the provider's managed service -- which comes at a cost to you -- performs as expected.

Next Steps

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This was last published in November 2015

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Essential Guide

Manage colocation costs to avoid billing surprises

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