The market for colocation data centers has seen tremendous growth in recent years and shows no signs of slowing. According to Gartner, colocation spending is expected to increase from $53.9 billion in 2016 to $74.5 billion in 2020. While most companies make the move to third-party data centers for operations-related reasons (redundancy, increased network capacity, launching new applications), cost remains a critical factor for key decision makers. Colocation offers immense savings compared to building a private data center, but there are a number of factors to take into consideration when calculating prospective colocation costs.
The power demands of colocation equipment make up a substantial portion of any colocation costs. Different colo providers offer a variety of ways to purchase power (by the circuit, by the kilowatt, or as metered power), and the price of these plans is generally influenced by the facility’s power usage effectiveness (PUE). More energy efficient data centers can pass their efficiencies on to customers, providing better pricing on electricity and cooling. Customers should keep in mind that local building and electrical codes may restrict power usage, so a provider’s advertised upfront costs might not reflect the actual amount of usable power. When pricing a colocation data center, it’s important for customers to keep in mind that their power needs may increase in the future, so they should make sure a facility meets their potential growth needs.
All the talk about power and connectivity needs often overlooks the very physical nature of colocated servers. Every server has to be slotted into rack space somewhere in a facility, and while modern servers take up comparatively little space, there is only so much room available in the data floor’s cabinets. The number of cabinets needed is a major component of colocation pricing. Using narrower blade-style servers can help companies cut down on their colocation costs because each unit will take up less rack space. However, they should always keep in mind that different servers may have different power requirements, which could affect cabinet deployment.
Interconnections are everything in a colocation data center. One of the prime benefits of these facilities is the ability to connect to a variety of ISPs and cloud service providers. The number and type of connections needed for each server could greatly impact pricing. Ordering numerous cross connections to build a low-latency multi-cloud environment could increase upfront costs compared to a simple backup colocation solution. Direct connections to outside providers through services like Microsoft Azure ExpressRoute could also impact pricing.
Much like real estate values and cost of living, colocation pricing can vary greatly by region. Major tier 1 markets in the Northeast and the West Coast are generally more expensive than smaller markets located in the South or the Midwest. Depending on a company’s colocation needs, they may be able to take advantage of reduced costs by choosing a facility located in a growing market.
Remote hands technical support is one of the most valuable benefits of colocation. A good remote hands team functions as an extension of the customer’s IT department, which is particularly handy when a server needs to be reset at 2 am on a Sunday. Technical support is also helpful when equipment needs to be redeployed or migrated. Colocation facilities typically offer these services as part of a package that provides a certain number of hours per month.
Colocation data centers are frequently used as backup solutions for mission-critical operations and data. Given the high demand for this service, most facilities provide backups for their own systems, building multiple layers of redundancy into their operations. Fully redundant, fault-tolerant backup power and cooling solutions can increase colocation costs, but they provide peace of mind and reassurance that even in the event of a natural disaster or power failure, critical systems will remain online.
Along with rack space and electrical power, bandwidth is one of the finite resources available to data center customers. Even a massive hyperscale facility can only accommodate so much traffic before performance suffers. Data centers control bandwidth demands through pricing packages, offering higher traffic volume for customers willing to pay extra. Colocation customers must decide how much bandwidth they need for their current operations, but should also keep in mind how much they expect those needs to increase in the future. This can help them to select a colocation facility that will have the capacity to accommodate future growth with limited upfront costs.
Colocating with a third party data center gives customers access to computing resources that were once only available to large-scale enterprises. Whether a company is looking to scale network capacity or expand its service reach, colocation data centers can provide them with reduced costs compared to building new infrastructure from the ground up. By keeping a few key factors in mind, customers can find cost-effective colocation solutions that meet their existing and future needs.