Colocation Data Center Facilities: One Size Does Not Fit All - Part 1

Sean P. Brady is Managing Director of Cushman & Wakefield.

When it comes to site selection for a colocation (colo) data center facility, the old saying “do your homework” rings true for companies large and small in all types of industries. Once the decision has been made to pursue a colo facility, it is important to understand that not all third-party colo data centers are created equal. This is the first of a two-part series focusing on how to forecast a company’s unique needs with the goal of lowering costs and improving efficiencies.

The industry has gone through a tremendous consolidation and major corporations have also sold their data centers to these providers and converted those buildings to colo facilities, which are all designed differently. In 2015, $5.7 billion of data centers sold, 2016 included $7.65 billion of sales; and in 2017, the volume almost tripled to $20.36 billion.

Potential users need to do their “homework” including having the IT consultant and the IT staff evaluate how to consolidate the number of current cabinets. The goal with this step is twofold: one is to reduce the company’s space requirement, and the other is to increase the company’s power draw to four kW per cabinet or greater. The reason is because this is how the third-party providers design their Tier III data centers (i.e. - invest their money) and then achieve their expected return on their investment. If tenants are below 4 kW per cabinet, they will achieve an above market rent; if tenants are at 4 kW or above, they should achieve market rent or below. There are other factors that can affect the rent, such as the number of cross connects the tenant has, work allowance and free rent for the transaction. That said, if the tenant is over 4 kW, most operators in the market should be aggressively pursuing this occupancy provided the tenant has good credit.

The next step is to estimate future cabinet, power and cloud needs. The four options to plan for are:

More than half of the companies in the market today plan to reduce their space and power needs over time, expecting to move some or almost all of their software and/or applications to the cloud due to the rapid changes occurring in this sector. Third-party providers get questions on reduction of power and space and migration to the cloud on almost every transaction - be it large or small. Depending on the industry, tenants should assume they will put 10 to 30 percent of their software/applications in the cloud; companies need to plan for it when selecting a provider and negotiating these contracts to improve efficiencies and potentially lower future colocation costs.  Moving to the cloud more often increases your costs so you need to have some additional important reasons for moving to the cloud, like speed to market or flexibility for more or less power and space.

Selecting the right operator who provides the tenant with the proper contract flexibility and in-house services to lower colocation and cloud costs are the critical issues. Some of the important features and services that the tenant needs to investigate are Megaport/ixReach/PacketFabric or like services to create a private and secure connection point to point on an Ethernet between two megaports or like service for access to many cloud providers is what the tenant needs available in the facility today. This software defined network (SDN) simplifies network services for the data center provider and user. Finding a third-party provider that offers PacketFabric/ixReach/Megaport in its facility is important for current and future flexibility. If a company is already using AWS, then finding an operator that has a port or Point of Presence (POP) in the data center will be the most cost-effective solution. If the provider does not have a POP, then the user’s second most cost-effective option is one of the four mentioned above.

For potential users that are unsure of what cloud provider to use, it is ideal to choose a facility that has the PacketFabric/Megaport/ixReach/Console service. Providers that have this web portal service in some or all of their facilities will still allow the user to get to most all cloud providers around the globe. It also provides a very cost-efficient and secure redundant connection for a company’s disaster recovery solution, with some having 100 percent uptime backed in their SLA. As the cloud services industry is expected to grow 15 to 20 percent for the next three years, tenants are well served to make their best, educated guess on how much they may or will use in the future so the tenant can plan the layout of the cabinets so they can give back space in the future.

The second part of this series will address the benefits of rent portability and new services, such as BMS/DCIM.

Opinions expressed in the article above do not necessarily reflect the opinions of Data Center Knowledge and Informa.

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