The availability of colocation space is rising across primary and secondary markets in the United States. The colocation data center market expects to grow at a 14% compound annual growth rate between 2019 and 2026, providing organizations considering outsourcing their data center with the luxury of having options to consider. However, the challenge for most organizations is not the identification of available space for colocation, but in the evaluation of those options, their true costs, and in developing a plan to successfully migrate to an outsourced facility.
Organizations evaluating colocation for a portion or all of their data center should consider the following three best practices: Preparation, Creating the Right Cost Model, and the Design Process.
Complexity is increasing in determining the price of colocation services. Companies should avoid making the common mistake of soliciting pricing solely on a per-rack basis. Although the per-rack cost is an important factor, it does not provide a full perspective on the true costs of colocation. Prior to soliciting pricing or information from vendors, be prepared with the following information:
- Number of Racks: identify how many racks you require both on day 1 and for growth. Use the migration as an opportunity to optimize your floor layout, consolidate, and minimize your leasable footprint in the colocation facility (see: design process)
- Density per cabinet: the amount of power consumed per cabinet, which should be expressed in kW per rack (kW/rack). Most facilities have different pricing tiers depending on the density of your cabinets (with higher densities costing more) and it is important to evaluate the benefits and costs of high-density racks (higher cost per rack) vs. lower density (lower cost per rack but more total racks required)
- Audit and Compliance Requirements – your colocation provider will need to support your audit requirements and have the infrastructure in place to do so.
- Remote Hands Needs – because colocation facilities are offsite, you will likely utilize remote hands support from the colocation facility for things like tape swapping, patching, etc instead of having technicians travel to the site to perform that task. Estimating the amount of support you will need will help you negotiate costs associated with this work.
- Connectivity – Another critical mistake many organizations make is waiting to develop their connectivity plan until after they choose a colocation facility. The number of carriers, cross-connects, cloud on-ramps, etc will have a significant impact on your cost and those costs will vary depending on your provider and the services they offer. Have this information developed in advance of your search to ensure you develop a full cost perspective for the site
- Latency Requirements for Critical Applications – With successful application performance measured in milliseconds, the move to an offsite facility can create latency. Understand latency requirements for your critical applications in advance of your search so you can test and evaluate the impact of a move prior to executing an agreement.
Creating the Right Cost Model
Most customers we work with are surprised by the total cost of completing a move to colocation. This is largely driven by improper expectations; the cost per rack to lease colocation space sets the customer’s cost expectation when the true cost of migrating is much more complex.
Costs for colocation facilities typically divide into two categories: Monthly Recurring Costs (MRC) and Non-Recurring Costs (NRC). An evaluation of both cost categories, as well as institutional costs of migrating to a colocation facility, are essential to accurately calculate the expense of moving your data center to colocation.
Calculating the cost per cabinet MRC at a colocation facility is typically transparent and often includes the power and cooling needed to support that cabinet. Colocation facilities will often have different MRC charges based on the density profile of the cabinet, with the MRC increasing for higher density equipment. As mentioned, many owners focus their cost evaluation on the cost per cabinet MRC, but it is important to evaluate all MRC and NRC fees to develop a full cost perspective. Example cost components of a colocation rental agreement and associated migration include:
The utilization of onsite technicians for hands-on support of your equipment, or remote hands, is important when your data center is offsite. Remote hands work can include cabling and wiring, racking and stacking, inventory auditing, tape swapping in storage devices, and other options. The work is billed hourly or contracted per ‘bundle’ of hours. A bundle could be as little as two hours per month to as much as 10 hours per month. At $150 per hour, this service increases the monthly cost up to $1,500 or more depending on the size of the environment.
It is critical that an organization thoroughly evaluate connectivity costs when developing a financial model for colocation facility expenses. Each telecommunications provider that you need to connect to at the colocation facility will require a monthly cross-connect fee (MRC) of $100-$250. This basic connectivity can be simple, but additional requirements of cloud connections can escalate this cost quickly.
For example, if you need a direct connection to Amazon Web Services (AWS), you first need to evaluate if your colocation provider has the direct- connect, or cloud on-ramp, in their facility. If they do not, you will first pay a cross-connect fee in your colocation facility so you can connect to a separate facility that has the AWS direct-connect. To make the connection and enable data transport between your colocation facility and the AWS direct-connect location, you could require a 10Gb metropolitan area network connection. At the AWS direct-connect location, charges include a cross-connect fee (MRC) for both the meet-me-room (connecting you from the metro connection to the colocation facility) and a second cross-connect (MRC) fee to connect to AWS. Potential costs associated with your cloud on-ramp connections can be summarized below in the table below.
|Your Colocation Facility||Cross connection to two network providers||$500|
|Your Colocation Facility||Cross connection to 10Gb metro network||$250|
|Your Colocation Facility||10Gb metro network connections to AWS direct-connect facility||$3,000|
|AWS Direct-Connect Colocation||Cross connect from 10Gb metro network at meet-me-room||$250|
|AWS Direct-Connect Colocation||Cross connection to AWS||$250|
|Total Monthly Recurring Charge||$4,250|
Build Out Costs
The build-out of your space in a colocation facility can be a considerable expense and will vary based on your provider and your preferences. For example, some colocation provides lease raw whitespace with available power and cooling. Your organization will be responsible for all costs to build out the whitespace to your preferences, including the procurement of cabinets, containment, power distribution, structured cabling, security, and more.
Certain colocation providers will offer to build out this space on your behalf and charge the cost back to you over the lifecycle of your lease. However, with the trend toward shorter lease contracts in colocation facilities, this is not typically attractive for owners.
Moving to a colocation facility requires complex migration planning. Your existing data center needs to remain operational while the new data center in the colocation facility is built out, brought online, and tested. To minimize the disruption of moving systems and applications, most organizations procure swing equipment for the colocation facility. Swing equipment enables some or all of your data center environment to be replicated at the colocation site and run in parallel with your current facility. Swing equipment typically includes networking, storage, and compute and once tested and validated, allows your organization to steadily migrate workloads to the colocation facility without a dramatic ‘lift and shift’ effort.
Organizations evaluating the financial impact of moving to a colocation facility need to include the swing equipment into their cost model, as the equipment is procured before the current data center shuts down in order to enable an efficient migration between the two facilities.
While swing equipment is part of your new IT environment, most organizations still choose to physically move a portion of their IT assets from their current data center to the colocation facility. To minimize operational risks, owners often move current assets during multiple off-hours segments. The criticality of data center equipment requires that specialized resources are engaged
There is rightfully a significant effort undertaken between a company and their chosen colocation provider to negotiate the lease terms of the colocation agreement. However, there is still much work to be completed after terms have been reached to develop a design and site readiness strategy that will support migration to the outsourced facility. Many customers mistakenly believe that the colocation facility will handle all design aspects of their space for them, but this is rarely the case. While the colocation will provide access to power and cooling infrastructure, the strategy associated with the whitespace plan (rack layout), power distribution, aisle containment, and network cabling typically fall onto the owner.
A move to colocation often involves equipment upgrades, higher levels of virtualization and consolidation, and rearchitecting of network topologies like the move to spine and leaf. These changes make the design process for your colocation space a critical effort. Owners seeking to control their costs should:
- Seek to minimize their total rack footprint. This effort involves balancing total maximum density (in kW per rack) with the functionality of equipment placement and the capacity of the power and cooling systems in the space
- Create energy-efficient designs. Many colocation providers will have a Power Utilization Effectiveness (PUE) factor in their charges to you. If your space is designed with energy efficiency in mind, this factor can yield cost savings.
- Effectively predict growth and associated cabinet layout impacts, as it will assist in pre-negotiating right-of-first-refusal to that space at a lower rate.
The colocation space you are moving into will require construction, whether by you or the colocation provider. This will require Construction Documents – drawings and specifications that illustrate the work to be provided by the contractors on site. Some owners will have expertise on staff to provide planning and design for their colocation space, but if this expertise does not exist, owners should plan on engaging a design resource that has experience in mission-critical facilities and in supporting clients through a relocation process.
Colocation is not a small undertaking. With the right resources and help, it can be a smooth migration.