Colocation Pricing Series Part 1: The Main Components of a Quote
6 min read
In this three part series, we’ll navigate the opaque world of data center colocation costs. We will discuss the basic elements of a colocation price quote, outline the main services, and identify the various pricing structures and major pitfalls.
Few industries are more confounding than data center colocation. On the surface, it sounds simple: buyers are looking for a physical environment to store their IT equipment and sellers are seeking to fill their data centers with customers. Put them together and … problem solved. Right?
Not quite. The industry is plagued by unnecessarily slow and complicated procurement processes, and foremost among them is delivering accurate and digestible colocation pricing. The industry uses different pricing structures and each vendor uses terminology in slightly different ways, making pricing hard to comprehend. This not only hamstrings the consumer but also reduces the amount of time that sales reps at data center companies can spend selling their unique data center solutions.To that end, in this three part series, we’ll navigate the opaque world of data center colocation costs. We will discuss the basic elements of a colocation price quote, outline the main services, and identify the various pricing structures and major pitfalls. As you will find in Part Two and Part Three, comparing colocation costs can quickly get complicated and confusing. It’s our goal to eliminate this confusion and provide you with what you need to drive an optimal decision.
Part 1: The Main Components of a Quote
Before we get into the elements of a price quote, we want to warn you that arguably the biggest mistake that colocation customers make is assuming that what you see is what you get, and that each vendor is including the same items as others in a base price.
When discussing the main services you will be charged with, we’ll hint at some pitfalls. Look to Part 2 and Part 3 of our post for the more details around avoiding unexpected costs or challenges. Remember that colocation is an allocation of service, not a physical product.
MAIN SERVICES AND QUOTE COMPONENTS
“The biggest mistake that colocation customers make is assuming what you see is what you get”
So what are the main services you’re buying and components of a quote? Broadly speaking, we can break these components, down into three simple categories: space allocation, power allocation and interconnection. We have also included additional hardware and services that you, as a customer, may expect or assume is in your price quote. More often than not, colocation quotes do not clearly identify what is included and what is not, so it’s important for you to complete due diligence to understand your Total Cost of Ownership (TCO).
- SPACE ALLOCATION: Space allocation is inclusive of the physical environment in which your equipment resides. However, this doesn’t necessarily mean that it also includes the actual racks other other equipment you expect. You may see a charge as $/sq or as a one time charge for space.
- POWER ALLOCATION: Power allocation is the dedicated amount of power that will always be available to you and will enable your equipment to run. However, the actual mechanisms for how your equipment plugs into the electric grid are not always included. Your base rent will most often be calculated using your power allocation, while your power expenses will most often be calculated off of actual usage.
- INTERCONNECTION: Anything that has to do with how the data within your equipment is transmitted, to other parts of the data center or to your outside networks, will fall under interconnection. Your quote may have an upfront cost and monthly cost related to interconnection.
- PHYSICAL HARDWARE & CUSTOM SERVICES: Space, power, and interconnection are only services charged for the allocation of each. Colo providers may also offer hardware that can or must be purchased separately. Most colocation data center providers also provide optional on-site services such as rack-and-stack services, remote hands, and security to customers.
- NRCs and MRCs: Your quote will break out costs into two types – NRCs and MRCs. This stands for Non-Recurring Costs and Monthly Recurring Costs. In short, NRCs are one-time,upfront fees you have to pay to get started – like an onboarding or setup fee. MRCs are the costs you pay related to your ongoing usage of the services.
In Part Two of our colocation costs series, we will explain how your pricing model can affect your Total Cost of Ownership.