How To Navigate the RFP Process for Colos

Motivational speaker Anthony Robbins once offered the wisdom that questions provide the key.

“Successful people ask better questions, and, as a result, they get better answers,” he said.

Analogous to his comment, a strategic request for proposal (RFP) process will provide the crucial information needed to properly evaluate and compare colocation candidates, lead to the selection of the optimal solution, and create the leverage needed for the subsequent contract negotiation phase.

The RFP process combines distinct phases, including obtaining nondisclosure agreements, preparing the RFP documents, distributing RFPs to selected candidates, and answering questions about project requirements.

Maintaining Confidentiality

The RFP process typically begins with the execution of a mutual nondisclosure agreement (MNDA) with each of the prospective colocation providers, protecting both the enterprise customer and the provider against the unauthorized distribution of confidential information during and after the project. The customer’s legal counsel should prepare an MNDA for delivery to the prospective colo providers. The MNDA draft should be relatively impartial to avoid lengthy negotiations between the parties’ counsels at the outset of the procurement process.

How Many Candidates?

Most enterprises that have carefully defined their needs and the preferred geographies for their data center placement distribute four to six RFPs to prospective providers. Choosing fewer recipients often leads to what is known as the "fear of missing out” (FOMO) — on a better deal. Choosing a larger number of candidates tends to introduce too many variables that are difficult to reconcile in ranking the proposed solutions unless the user has valid reasons to choose multiple geographies or delivery paths that are not yet determined before distributing the RFP. Similar to the axiom “measure twice; cut once,” users should prioritize their requirement specifications during project scoping (the subject of the first article in this series), then select the candidates that can best meet those needs for RFP delivery.

"A strategic request for proposal (RFP) process will provide the crucial information needed to properly evaluate and compare colocation candidates, lead to the selection of the optimal solution, and create the leverage needed for the subsequent contract negotiation phase."

Timing

Most enterprises with colocation requirements seeking a private cage or suite delivering up to 1 MW of critical power and standard managed services should allow about three weeks from RFP issuance to receipt of the proposal. Larger, more complicated deployments involving multiple, iterative rounds of questions and answers can stretch the RFP process to four to six weeks.

Users should request clarification questions from the prospective providers within one week after distributing the RFP, and project team members should be ready to respond quickly with clear answers that encourage an accurate — and competitive — proposal. If questions identify an obviously unclear request in the proposal, users should respond with a clarification answer to all colo candidates to which an RFP was submitted.

RFP Templates

The project team should designate one member to coordinate the preparation of RFP documents while also seeking input from the team. RFP templates are widely available on the internet and can serve as a starting point in the process, but they tend to be relatively generic and not tailored to enterprise-class data center projects. Comprehensive IT consultants, like Gartner, can also provide RFP templates to their subscriber clients.

“The RFP is a clearly defined way to get what should be consistent answers from several providers to whatever questions are most important to you,” said Bob Gill, research vice president for Gartner. “I’d suggest starting with more questions than you may feel you need. You can always pay less attention to certain answers, but you are not likely to get another opportunity to get the 'official' answer in exactly the same context again.”

Providers are inclined to be more competitive in their initial responses to each specification outlined in the RFP knowing they are subject to elimination when competing with other providers. Later in the process, they are less inclined to agree to favorable contract language on terms not clearly addressed in the initial proposal.

Enterprises can also engage specialist data center procurement advisors who have developed detailed RFP templates on hundreds of comparable transactions. These templates can be modified to suit each client’s particular needs and can range anywhere from 10 to 30 pages.

Project team input creates a more comprehensive RFP document, addressing all needs identified during project scoping.

RFPs should request adequate physical space for the initial deployment and projected expansion over the contract period.

RFPs should verify adequate cooling capacity for current and future needs given projected growth in cabinet densities.

RFP Functions

Most RFPs serve two main functions: introducing the user’s needs and asking for a detailed proposal of services to meet those needs. In a world where sometimes “every hammer sees a nail,” it can be helpful to first explain the enterprise user’s data center challenges and then define the detailed requirements. This invites colo providers to be innovative in proposing solutions to meet the customer’s needs.

For example, a user could disclose an overall plan to procure a 1,000-kW private colocation suite for a seven-year period during which its power needs will increase by 40% in year three when an on-premises data center is decommissioned followed by shrinkage of 10% per year thereafter as applications are moved to a public cloud. This detail should prompt each colo provider to reply with creative solutions to reduce upfront build-out costs or ongoing occupancy costs yet provide contracting and managed services flexibility.

Ask for initial physical space to meet expansion needs over five to 10 years. If significant expansion or shrinkage in space or power over the primary contract term is required, it should be stated clearly upfront. If the colocation candidates have large buildings or campuses and your computing architecture allows aggregation of multiple suites or cage spaces, you can request less dedicated physical space upfront for future growth if the initial suite can be supplemented by optional expansion space. Include “swing space” for the installation of phased hardware before older gear is decommissioned and moved out.

The desired quantities of critical power and related cooling should be stated for each year of the initial contract term and renewal option periods, along with specifications around systemic redundancies and intended reliabilities for the planned facility. Any required or preferred certifications should be specified too.

The desired contract term and related renewal option periods should be outlined, as well as key terminology definitions to be used during the proposal process. Potential contract flexibility, such as multilocation migrations or space-to-services shifting, should be requested if desired.

Telecom networks, including the number of redundant carriers, any specific carriers, and dark fiber services should be described. Any desired cloud direct-connect circuits, multi-cloud interfaces (like Megaport), or international peering arrangements should also be specified.

Requesting the Proposal

While discussing all aspects of RFP content is beyond the scope of this article, the RFP should seek answers and supporting information to the following general questions.

Physical

• How large (in square footage and number of cabinet positions) and where within the data center is the suite or cage proposed for the project?
• Will cabinets be placed on a raised or slab floor? If raised, what is the height?
• How will the suite or cage be demised (hard wall, plexiglass, metal caging, etc.)?
• What office areas are proposed for customers' on-site staff, if specified for the project?
• What is the base building construction (e.g., concrete tilt-panels), and does the colo provider occupy the entire building?

Reliability

• Has a tier certification from Uptime Institute been obtained for the data center? If not, what tier does the colo provider feel most closely conforms to the facility design?
• Since many enterprises seek Tier III reliability, are there colocation data center design principles or systemic redundancies incompatible with concurrent maintainability?
  

RFPs should ask about types of suite or caging walls demising customer premises.

RFPs should ask about security infrastructure controlling access onto the property and into customer suites.

“vXchnge maintains greater than seven nines of uptime reliability, and most of our sites have 100% uptime with over seven years in business operating these data centers” said Ernest Sampera, chief marketing officer, vXchnge. “What's important is how and what does the data center provider do to maintain this audited availability record? Ask about maintenance operating procedures [MOPs] and standard operating principles ... which answers the 'how?' Many colos provide space and power, but few have published reliability uptime metrics, which should be reviewed and built into the RFP process.”

Electrical

• What are major electrical system component redundancies, starting with utility and flowing downstream to power distribution units?
• Are all common distribution circuits supported (single- and three-phase from 20- to 100-A sizes)?
• What UPS module size is utilized?
• If N+x UPS architecture is the standard design throughout the data center, can full-suite customers obtain 2N UPS as an available alternative for a surcharge?

Cooling

• What is the maximum electrical density available to all cabinets across an entire suite or cage as requested in the RFP if equally populated (distributed maximum density) or for only 10 to 20 adjacent high-density cabinets within a larger cage/suite (cabinet maximum density)?
• Is cold- or hot-aisle containment available?
• Is computation fluid dynamics (CFD) modelling available for the anticipated load deployment? (If your cabinet max density exceeds 20 kW, request a CFD model from the provider.)
• Can cooling density be increased incrementally later in the contract?

Efficiency

• What is the design PUE at approximately 80% capacity utilization?
• What is the current actual PUE in the data center as well as the physical occupancy and load utilization factor?

Monitoring

• What DCIM tools are used at the data center, and, of those, which offer customers remote visibility into operating conditions within their suite?

Certifications and Compliance

• Which third-party certifications have been obtained for the data center?
• What audit and compliance assistance programs are available?
• Is an annual quantity of compliance staff time included in the colo proposal, and how are additional hours charged to the customer

Managed Services

• What managed services are available to be performed by the colo provider’s personnel, and which ones are available from on-site third-party subcontractors? (If your needs include specific managed services, ask about them.)

Telecom

• Which lit local loop fiber providers serve the data center?
• Are any dark fiber options installed to the meet me room or located in adjacent streets?
• Are any public cloud direct-connect circuits installed for customer use?
• Are any software-defined telecom platforms, like Megaport, or international peering exchanges available for customer use?

Operating History

• What events of downtime have occurred at the proposed facility during the prior three years, and can you discuss the remedial actions taken following those events?
• What are the key service level agreement (SLA) metrics and the proposed compensation for performance breaches?

Colo Provider

• Provide a brief history of the provider and a summary of its financial condition.
• Provide a brief professional bio for the provider’s on-site operational managers (general manager, electrical, mechanical, telecom, etc.)
• Who are the colo provider’s C-level executives?
• What are the provider’s unique competitive advantages, especially those most valuable to the customer given its explanation of project needs?

Security

• What physical design elements and operational security policies protect the data center?

Hazards/Risks

• Are any hazards/risks located within the specified minimum distances established during project scoping, such as freight railroads within .2 miles of the data center?
• What is the lateral and roof uplift wind rating for the base building?
• If located in a seismically active area, to what seismic resistance was the building designed?

Utilities

• Which electrical utility provides last-mile service to the data center?
• In states allowing deregulated choice of suppliers, which electricity generators can serve the data center, and what rate plans and energy mixes are available?

Financial Terms

• What are proposed monthly recurring charges (MRC) for all line-item services (critical power, space, telecom interconnects, distribution circuits, etc.), including any future rate increases?
• How will MRC rates change if the customer optionally increases or decreases its quantities of space and power in future contract years? (Proposed pricing for future growth and shrinkage can yield significant insight into the provider’s variable costs, helpful to a skilled contract negotiator.)
• What reimbursements are proposed for upfront, non-recurring charges (NRC), and are any waivers available as a “signing incentive”?
• Are any sales tax or personal property ad valorem tax incentives approved at the data center, and do those flow through to colo customers of the size requested in the RFP?

Addenda to the RFP

• The RFP should request that many of the provider’s standard documents are provided as addenda for review, including the proposed colocation contract, sales order form, service level agreement, and description of standard operating procedures.
• Diagrams of the campus site plan and building floor plan indicating the proposed premises, including expansion areas, example cabinet layout within the customer’s suite, electrical one-line drawing for the data center, mechanical flow diagram for the cooling system, and copies of major certifications (SSAE18, PCI-DSS, etc.), should also be requested.
• Several existing customer references should also be requested.

Clarifying Proposal Terms

Following receipt of the proposals, users should promptly seek clarification of open questions or ambiguous answers in the proposal. If replies prompt additional questions that should be asked to multiple candidates, those follow-up requests should be made quickly while relevant data is fresh on all participants’ minds.

Advisor Role

Conducting the RFP process can be very time-consuming. However, it is a critical phase of the colo procurement process because the project requirements are translated into colo provider solutions at this point. Many enterprises engage advisors experienced in data center selection to streamline the procurement process, strategically capture key information to optimize colo selection, and create negotiating leverage to significantly reduce contract costs – potentially by millions.

Kirk Killian

Kirk Killian is President of Partners National Mission Critical Facilities, and has advised enterprises in procuring data center facilities worldwide since 1999. Kirk assists clients in project scoping, site selection, contract negotiation, and facility procurement for self-operated and colocation data centers. He can be reached with any questions or to request an RFP checklist at kkillian@pnmcf.com.