This content is part of the Essential Guide: Manage colocation costs to avoid billing surprises

Dodge sneaky colocation costs by monitoring your bill

Colocation fees can pile up if you're not savvy. Negotiate with your provider and predict the scale of your organization to avoid surprises on your next bill.

The technology market may move quickly, but for many IT teams, there's one item that always tops their to-do list: cut costs.

Colocation can eliminate the steep costs organizations face when they need to build and maintain their own data centers. Colocation costs can be sneaky, however -- especially if your organization lacks a transparent relationship with the provider.

To avoid surprises with a colocation bill, recognize these common fees that go unnoticed.

Cabling and cross-connect fees

A stumbling block that can occur early in the colocation process is whether you must pay to cable your equipment together. Does your colocation vendor hire a third party to cable the equipment, or do they do it themselves and charge you later? It's important to discuss these details upfront.

"[Cabling] often just gets left out and it's never clarified who is responsible for having the cabling guys there," said Kelly Morgan, research vice president of services at 451 Research. "That's something that should be brought up early."

An electrician will typically need to do a certain amount of cabling. If your company is responsible to hire someone to cable the equipment, ask the colocation provider for recommendations. It is in the colocation provider's best interest that the cabling is done properly, since they show their colocation facility to potential customers. Colocation customers can also plug in the servers themselves. In that case, make sure the equipment faces the right way in the hot and cold aisle configuration, and that it's neat -- it will reduce the chances of a technician accidentally unplugging the wrong cable in the future.

If [remote hands] mistakenly shut off an important server that takes your website or a certain function offline, they can cost you thousands of dollars, which is a potential risk for the business.
Harmail Chathadirector of global data center operations, Groupon

Be aware of colocation costs such as cross-connect fees, which can be enforced if you interconnect racks, interface to telecommunication providers, register a newly leased server in the domain name system or allocate an IP address from the provider's pool.

"Cross-connect fees are something we watch very carefully," said Laz Vekiarides, CTO of ClearSky Data, a an enterprise storage startup and colo customer in Boston, Mass. "A hundred dollars here, $100 there, you have to keep track ... because they can add up very quickly."

Organizations can negotiate cross-connect and cabling fees out of their contract, but this depends heavily on the scale of the business. Colocation providers likely will treat retail and wholesale customers differently.

"With wholesale, you're operating at a much bigger scale, and providers are more than willing to work with you and negotiate with you on certain charges," said Harmail Chatha, director of global data center operations at Groupon, which he characterized as a wholesale customer. "You have more functional control as a wholesale customer. With retail, the provider imposes more restriction on what you can do within that space."

Remote hands fees

A remote hands service delegates the task of addressing inconvenient minor issues in your colocation space to a technician hired by a third party, so your IT staff can focus on more important internal tasks. Although this service can be convenient, it invokes other questions to consider.

First, decide whether the service is necessary for your organization. Unless the infrastructure supports your most important business applications, some downtime may be acceptable until a technician can handle the issue, which eliminates the need for remote hands services.

If you decide that the service is right for you, contact your provider and ask what is included in the remote hands package and how it is priced. Get as much detail as possible -- and in writing. For example, if their facility has an issue such as a power outage, are you required to pay for the remote hands service to restart all your servers? Since a remote hands service is usually charged by the hour, it can be unclear what is covered within that time.

"You don't know if you're getting charged an hour for something that takes [a remote hand] five minutes," Morgan said.

As with many outsourced jobs, when you opt into remote hands services, the quality of the work may suffer.

"If [remote hands] mistakenly shut off an important server that takes your website or a certain function offline, they can cost you thousands of dollars, which is a potential risk for the business," Chatha said.

To avoid errors, research the background of technicians that perform the remote hands service. This will give you a sense of their skill sets, and if they're likely to make a mistake.

Inspect your SLA

Before you sign on with a colo provider, look closely at your service-level agreement (SLA) to avoid any surprises. An SLA can be filled with jargon, so it may be worthwhile to hire a lawyer that specializes in data centers -- especially with mission-critical environments that are more than just a couple of racks.

"It's worth paying that extra upfront to get a lawyer to look [the SLA] over, and it also signals to the colocation provider that these firms know what they're doing," Morgan said. "A lawyer can often build into the contract a bit more transparency requirements you wouldn't otherwise get."

Predict your future needs

The best time to sign a contract with a colocation provider is when you understand how your organization will scale. If your organization's needs change before a contract runs out, that's problematic. But if you sign a short-term contract when your organization needs a long-term contract, it can result in higher fees -- up to 10% to 15% higher once the first contract ends, Morgan said.

"It was hard for us in the beginning because we were just a small company and didn't have a good idea of our future needs," Vekiarides said. Now, three years into the relationship with their colo providers, he regrets not signing three-year agreements at the offset. "I think we would've saved ourselves some money," he said.

With longer agreements, providers are more likely to offer reduced colocation costs. But the recompetition period -- the time when a contract ends and your company decides whether to extend or not -- is also a good time to renegotiate.

"We find that the best leverage we have with the vendors is during the recompetition," said Jake Azachi, senior director of enterprise IT at AAMC, a nonprofit healthcare organization and a colocation customer. "Even though we're considered a medium-sized company, our 40-some-odd thousand dollars a month is important to [colo providers] and it's a very good leveraging tool."

Next Steps

What to look for in a colocation SLA

Find the right fit when it comes to colocation

How to move servers to a colo facility

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