Choosing the Best Provider: Understanding Colocation Pricing

Server colocation can help you to reduce IT costs considerably.

The data center colocation industry generates tens of billions of dollars in revenue. Furthermore, analysts forecast that the field will generate $432.14 billion by 2025.

The emergence of new technologies such as 5G networks and the Internet of Things is driving the demand for advanced data solutions. Industry experts predict increasing investment in data center colocation moving forward.

As time passes, firms become increasingly reliant on technology. Resultantly, the use of data center colocation services is expanding rapidly.

Colocation enables firms to share server space with other tenants. In doing so, companies save resources—and revenue. However, it helps to know a bit about colocation pricing and how to find the best service provider.

To learn more about choosing the best server colocation provider, keep reading.

What Is Colocation?

Server colocation enables companies to share data center space. In other words, the service provides a space for businesses to make use of and install IT equipment.

The colocation space might lie miles from the tenant’s main offices. Meanwhile, the facility will maintain typically its own IT support staff.

The IT staff members will make sure that your server equipment functions correctly. They’ll also keep your gear safe by ensuring the proper environmental conditions.

However, server colocation also frees companies from operational and technical limitations. It enables companies to control costs, support, uptime and server security.

Usually, a server colocation arrangement is solely for a company’s physical IT infrastructure. In some rare cases, however, a company might also deploy IT personnel on-site at the colocation space.

Furthermore, these facilities offer varying types of services. Accordingly, you can customize your rack features based on your needs.

For example, firms may need varying amounts of rack space. A company’s servers may also have differing power demands. Colocation services also provide cooling solutions for different kinds of server equipment.

Colocation spaces are secure sites. Furthermore, they offer enhanced network connectivity. More importantly, they provide companies with network resiliency.

Types of Colocation Services

There are two types of colocation services—wholesale and retail. Wholesale colocation is ideal for large corporations and data center service providers.

With this arrangement, your colocation space is separate from other tenants. In this way, a service provider increases security.

Meanwhile, retail colocation is a better solution for startups and small-to-midsized enterprises. This kind of arrangement is a turnkey service.

Resultantly, firms can set up retail colocation quickly. The colocation service provides resources such as racks, powers, PDUs, network connectivity and IP addresses.

A colocation service sells rack space in units. Typically, you’ll see a unit referred to as “U.” For example, you might see a reference to either a 1U, 2U or 4U rack space.

A unit equals the thickness of a server. A server measures 1.75 inches.

A firm with minimal computing needs might consider a 1U rack space. However, larger companies may require a quarter, half or full rack. These accommodations can house more substantial server systems.

For instance, a quarter rack equals 10U of colocation space. Most small businesses and startups choose the quarter rack option.

Top Benefits of Server Colocation

Today, colocation enables firms to maintain peak performance. Some companies maintain in-house IT operations. This kind of arrangement provides more internal access and control.

However, servers are complicated. They’re also expensive to set up and maintain.

Furthermore, an in-house data center requires staff to maintain the equipment. However, the limited skill or availability of IT personnel can result in an increase in downtime. Colocation services enable companies to overcome these kinds of obstacles.

Colocation services are more efficient compared to maintaining an in-house server system. They also decrease energy consumption. Furthermore, server colocation is flexible and scalable.

Since the colocation service specializes in server management, you’ll enjoy increased security and decrease downtime. In addition, you’ll enjoy both increased physical and network security.

These kinds of services create several layers of threat detection and security. They also monitor equipment 24 hours, seven days a week with CCTV and on-site personnel.

Furthermore, colocation operational costs are predictable. These services typically charge consistent fees for rack units, power and bandwidth.

Some colocation services may include consulting in the service agreement. With these kinds of benefits, colocation makes it easier to keep IT costs within budget.

Businesses can lose thousands of dollars per minute and hundreds of thousands per dollar hour due to network outages. A colocation service can help you to overcome these kinds of risks.

Choosing the Best Colocation Services

There are thousands of colocation services around the world. Accordingly, it helps to have a few pointers when searching for a reliable colocation service.

You’ll need to consider factors such as available space and power at the facility. You’ll also need to consider points such as available connectivity and security.

In addition, you’ll want to consider what kind of support a potential colocation service provides. After evaluating several colocation services, you’ll have a better idea of how to make a colocation pricing comparison.

However, finding the right colocation service is about more than price. You’ll need to start the process by thinking about your needs. When looking for a colocation service, you’ll need to think about your IT needs now and in the future.

There are a few ways that you can make sure that you get the most value for your investment in a colocation service. Firstly, avoid bargain discount services. Cheap colocation prices are usually a sign of poor service.

By checking out the rates of other colocation services in your area, you can get an idea of the average going rate for rack space. It’s also helpful to ask for referrals from trusted professional peers. You also want to select the best payment structure to meet the needs of your company.

Early-Stage Colocation Planning

It’s important to understand that you’re not leasing a server when you use a colocation space. Instead, you’re deploying your own equipment. Accordingly, you’ll need to buy the hardware for your network.

If you have a smaller budget, you might balk at the thought of purchasing network hardware. However, you’ll no longer have to pay an equipment lease once you purchase your equipment.

The cost of service varies greatly. An entry-level server might cost as little as $600. However, a more powerful server that costs $1,000 or more may serve your needs better.

The cost of quality colocation leasing can also vary greatly. One U can cost anywhere from $50 to $300 per month.

Rack components are 19” wide and 1.75” tall. Most servers require between 1U and 4U of rack space.

However, many colocation services will only sell a minimum of a quarter rack of space. Some services may lease 1U. However, the availability of 1U spaces is dwindling.

Evaluating Startup and Operating Costs

Deployment can cost anywhere from $500 to $3,000, depending on whether you outsource the task. With a standard colocation service level agreement (SLA), you’d usually deploy your own equipment. However, some colocation services offer on-site hardware deployment.

With this kind of service, you can ship your equipment to the colocation service. The service will then deploy the equipment for your company.

In the colocation industry, this kind of deployment service is called Rack and Stack. The colocation provider will charge a one-time fee for the service.

Some colocation services also offer on-site troubleshooting. They’ll maintain your equipment for an additional fee.

You’ll also need to consider the cost of powering your server equipment. Power can represent a significant expense for maintaining your network.

Colocation services may use one of several types of billing methods. For instance, a colocation service might use a per-unit billing model, where they charged a certain amount per kilowatt.

Alternatively, the service might charge a flat fee for a certain amount of power. The colocation service would then charge an additional fee for any extra power that you use over that amount. Finally, a colocation service provider might charge for power using a metered power usage fee model.

Planning for Peak Performance

One of the top benefits of a colocation service is the ability to connect directly to an Internet Service Provider (ISP). Your office connection may max out at 50 Mpbs. However, a data center connects directly to the ISP service.

A colocation service also invests in high-end fiber optic cables. Accordingly, a colocation data center can achieve data transfer rates of hundreds of thousand megabits per second.

Fiber optic cables allow colocation services to achieve maximum interconnectivity. Also, the skill and expertise of a colocation service enable them to provide a lower cost of ownership compared to maintaining your servers in-house.

With this in mind, you’ll want to consider the speed and latency of data traveling through a colocation service’s network. Speed and latency can also refer to the time it takes a server to respond to a query.

The cost of fiber networking is decreasing over time. As the price of fiber cable falls, colocation services can achieve higher speeds.

You’ll want to look for transfer rates measured in Gbps. For example, you might see transfer rates expressed as “10 Gpbs.”

This expression means that the colocation service transfers data at 10 gigabytes per second. You may even see a data transfer rate of 100 Gbps.

Understanding Colocation Pricing Models

A colocation service might use one of several pricing models borrowed from the real estate industry. These models are Triple Net (NNN), Gross and Modified Gross.

The NNN pricing model typically starts with a base price expressed in $/kW. It will include your proportional share of operating expenses for the building.

Also, the colocation service may sub-meter your monthly personalized Critical Load Consumption. In that case, you’ll pay this expense directly.

A colocation service may also charge a Cooling Factor. Here, you’ll pay a fee based on your Essential Load.

If you have smaller computing needs, the colocation service will most likely calculate your fee with a gross pricing model. This model is a flat rate that includes the additional cost for items such as power consumption or operating expenses.

For smaller businesses, the gross pricing model is much easier to digest. It’s easy to keep an eye on your monthly operating costs with this model.

However, it’s essential to understand that the vendor is assuming the risk of cost volatility. For this reason, they may use a gross pricing model that incorporates the worst-case assumption for operating expenses.

Choosing the Best Colocation Services

When looking for the best server colocation service, there are a few things that you want to consider. These items include:

• Data capacity
• Flexibility
• On-site support
• Reliability
• Site security

You’ll also want to consider a potential service provider’s online reputation.

As you search online for information about a provider, you’ll want to look for remarks about the service’s uptime and security performance. You also want to look for a potential provider’s certification and history of audit compliance.

Usually, a colocation agreement lasts one to three years. Accordingly, you’ll want to make sure that you select the best service provider for the job.

The most important part of selecting the right colocation service is assessing your current needs. With that information, you’ll want to look for an affordable, scalable server colocation solution.

Make Informed Decisions With the Latest Information

Now you know more about choosing the best colocation provider. Hopefully, you have the information that you need to make an informed colocation pricing comparison.

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