Your primer to colocation pricing and rack space rightsizing

Even with structured pricing methods, there's a lot to consider when making colocation infrastructure purchases. Account for future hardware needs and spend flexibility.

Colocation is a time-tested way to help organizations establish IT resilience. However, your budget often determines how you select a provider and rack space -- usually, greater capability requires more spending. Such a decision should account for future infrastructure needs, which services the vendor provides and what reporting metrics are available.

There are two main approaches to colocation pricing: per rack, which includes some amount of power, or just straight per kilowatt, which includes a multiple to account for the used space.

"There are, of course, nuances to both of these, and you do see hybrids of these, but those are the two main avenues," noted Dan Thompson, an analyst at 451 Research.

Ensuring that you get good return on your investment is a matter of perspective, because colocation is a form of insurance. This makes it more of a conversation about reliability, as the main goal is to have a data center without any downtime.

Colocation is an ideal option if you decide to have a third party manage data center and facility operations, do any maintenance, and keep the gear online -- at least, at the rack level.

Colocation is an increasingly competitive market, and this pushes vendors to find innovative and customer-friendly ways to differentiate themselves, said Abhijit Sunil, an analyst at Forrester Research.

"We found that the pricing is often competitive, and add-on services such as remote hands services are often right-sized to suit the needs of clients and affect the pricing," he added.

Sunil said there are also many specific workloads you may choose to move into colocation facilities, such as high-performance computing and AI. These migrations require unique infrastructure, and the leading colocation players in almost all major markets can now provide the hardware.

It actually behooves the data center provider to not have contracted capacity that isn't being used, because that's capacity they could be selling.
Dan ThompsonAnalyst, 451 Research

One of the major benefits of colocation, and a reason why your IT department might migrate, is interconnection.

"This adds to the cost benefit in favor of colocation players who have, in recent years, stacked up interconnection capabilities. For example, Equinix is notably vocal about how customers look for these when choosing colocation vendors," Sunil said.

Eye electric consumption

You should also figure out your spend in terms of electrical consumption, which is different from colocation pricing. Ultimately, you must have access to their utilization numbers to see how much power you're using.

Getting the right amount of power is a key challenge, because rightsizing a load is an art.

"Companies notoriously overestimate how much power they'll need," and, therefore, contract for more than their actual requirements and, ultimately, pay more than necessary, Thompson said.

"It all comes down to knowing your IT gear and workload demands, which is usually the realm of the more sophisticated enterprises and not small businesses," he added.

The common approach is to just add up all the power draw numbers on the back of your equipment boxes and say that's your load. However, that's often a maximum demand number, and companies rarely -- if ever -- hit that number beyond startup.

Many of the retail colocation providers can work with you to evaluate their loads to right-size the infrastructure as a service.

"It actually behooves the data center provider to not have contracted capacity that isn't being used, because that's capacity they could be selling to someone else who might take other services beyond just colocation," Thompson said.

"My advice to companies would be to find a data center provider that will work with you to help determine your power needs and current utilization, plus where the infrastructure is headed," he said.

It is also prudent to consider whether some of these workloads may move to the cloud in the near term or whether you plan to consolidate them in any way.

Futureproof rack space

Space requirements are somewhat easier, because you can physically see how much space your gear takes up, but you should also be aware of future space requirements.

Companies should account for how cloud is reshaping infrastructure spending -- and, possibly, colocation pricing. Similarly, other trends, such as virtualization, make colocation choices more complicated. These are questions that you should pose to the colocation provider to see if they can help guide or make the right decision for your team.

"Many retail providers have cloud products themselves and offer 'contract portability,'" Thompson said.

This means if you move the workload to their infrastructure, the provider lets you shift your spending to different places within their portfolio. This approach can be very helpful as your team or company works through digital transformation.

"That would make me, as a buyer, way more comfortable with a multiyear contract, knowing that I can continue to change and adapt my infrastructure," Thompson said.

Sunil also noted one other consideration that may be important to some organizations: sustainability.

"In terms of cost benefits, sustainability has started to play a huge role; many colocation players are able to strike long-term contracts with energy companies for green energy -- passing onto customers a lower cost, as well as price certainty," he said.

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