Managed Services
Almost all colo providers offer basic smart hands services like reboots, cable or tape swaps, and server builds. More comprehensive managed services vary widely by location and provider. While some of the largest national data center providers supply large colo suites very affordably, they often lag behind mid-sized providers in tailoring managed services to meet specific customer needs.
Enterprises requiring advanced managed services, especially for private cloud, disaster recovery as-a-service tools, or security solutions (like denial-of-service mitigation), should carefully vet the providers’ expertise in providing those services. Some colo providers deliver managed services executed by their own badged staff, while others bring in third-party firms to more effectively deliver managed services, which can reduce “one-throat-to-choke” service-provider accountability.
Because control, audit, and compliance are often cited as due diligence categories favoring colocation over public cloud, users with specific concerns around those topics should verify the services proposed to address their concerns as delineated in the RFP. Users in highly regulated industries, like financial services, health care, energy, and utilities, should inquire about references as well as specific audit and compliance programs related to their industries.
Seeking Stability
Users should determine if there are any financial stability risks for prospective colo providers. Several of the largest providers are publicly traded, so their quarterly financial statements can be easily reviewed. Most other national providers also have manageable debt levels — in many cases having raised hundreds of millions in equity to fund their data center portfolio growth.
Local and regional colo providers often warrant further study, even though colo providers rarely go out of business. Review each provider’s financial statements as provided in their proposals, engaging internal financial analysts to assist in underwriting the financial strength of the provider if necessary. Discerning users should also evaluate the industry experience of the colo provider’s senior management.
Dollars Making Sense?
No evaluation of colocation proposals is complete without a detailed financial analysis of costs. Enter the proposed line-item costs for space, retail power circuits, cross-connects, managed services, and other miscellaneous fees into a multiyear spreadsheet summarizing the aggregate costs for each finalist provider. PUEs and electricity rates vary among facilities, especially if the candidates are served by different utilities, so metered electricity costs at the planned consumption levels, increased by the appropriate PUE multiplier, should also be included.
Users should project each candidate’s proposed economic terms by year over the contract term using multiple growth scenarios, ideally a “most likely” base case plus “low-growth” and “high-growth” models. Since many enterprises are uncertain how much of their computing might be migrated to public cloud over the next decade, they should evaluate the relative costs of different facilities and proposals under differing quantity models.
Experienced advisors can prepare comprehensive multiyear pricing comparisons across multiple growth and contraction scenarios, providing valuable tools for the user’s selection and budget approval processes. (Additional strategies around colocation cost containment and contract negotiations will be discussed in the final article of this series in next month’s issue.)
Incentives valuation should also be included in a cost comparison, especially when comparing proposals in different geographies, since applicability and value of sales tax incentives, electricity rebates, or property tax abatements can be tie-breakers in the decision process. For example, one of the most attractive data center markets in the Chicago area straddles two counties with significantly varying property tax rates and abatement policies.
Advisor Role
Third-party advisors who are experienced in colocation procurement can provide valuable insight in evaluating colocation providers and proposals. Experienced advisors understand the relative strengths and weaknesses of various providers and provide perspective on the providers’ approaches to scalability and problem-solving. In addition to conserving the project team’s time, advisors can prepare sophisticated scoring and ranking models of colocation facilities, the providers, and the specific proposals submitted during a project.