How to Select a Colocation Provider: Comparing Wholesale, Carrier-Owned and Managed Service Options

Have you ever wondered what the difference is between a data center and colocation?

While a data center is a physical building with the power infrastructure, cooling resources, security measures, colocation is a service based on the standards, policies, procedures, people and data center infrastructure. The quality of each of these components drives the overall end-user experience, as does the type of provider you choose.

Colocation is defined by three components: space, power and cooling. Space, measured by square foot or meter, is delivered in either cages or racks. Power is critical, because without it, there is no colocation offering. It is a robust combination of utility, generators, uninterruptible power supply and distribution at the circuit level to customer equipment. Cooling helps drive efficiencies and deliver greater data center densities, which translates into potential savings to the end-users. Combined, these three elements are a very sellable commodity.

In colocation, core competencies such as security, facility management and carrier access should be table stakes. These required items can make or break the experience. Clients benefit from these offerings and can focus their efforts and resources on managing and growing their business.

The client’s core business is at the pinnacle of its priority list and all aspects of the colocation experience must adequately support that. A colocation provider should deliver the stable foundation on which the client can execute on its IT strategy or e-commerce platform.

But how do you select a colocation provider? Which one should you choose? Let’s look at the three primary types of colocation providers:

Real estate investment trust (REIT) or wholesale colocation providers These providers want only to build data centers to their or your design, then lease you the whole site, floor or large powered suite. They deliver a building with the cooling and power distribution to the floor, but the client must distribute and manage delivery to the racks, as well as manage the entire space. This type of colocation is sold at commodity prices because you, the client, do everything! The client in this case bears a good amount of the time and costs to operate the data center.

Carrier-owned providers – Here, colocation can be viewed as the loss leader that the carrier uses to also sell its core service (network access). These providers offer a greater array of services that are directly enjoyed by the client, but limited carrier diversity can hamper choice and network growth.

Retailers/managed service providers – These providers, such as Savvis, have refined the commodity, distribute and manage the power and cooling to the racks, provide the racks and cages, and offer cabling, remote hands and support services. Levels of competency, ability and delivery of the end-user experience are the differentiators. As a refined product, this type of colocation carries higher prices than the wholesale proposition, so it’s important to carefully examine how the providers differentiate themselves and show value-add over and above the other players.

With a commodity, price is almost everything. With colocation, a greater importance is placed on value adds like capacity, connectivity, location and the human factor, all well before pricing. In fact, as Tim Anker from Colocation Exchange notes, pricing is fifth on the list of key decision factors.

In the end, your level of expectation and need for levels of service should dictate your decision on which type of provider you choose – not the price. 

A wholesale colocation provider likely will not offer power and capacity planning to accommodate for future needs. Security – not just a video of the halls and access ways, but complete security to the cage or rack level, etc. – also will be lacking. You will want to ask about network connectivity and proximity, onsite 24/7 support and flexible contract terms (typically one to three years with a managed service provider compared to about five to 15 years with a REIT).

Using a wholesaler may come with hidden costs as well. These may include:

  • Client costs for data center design, capacity, power, security and space management
  • Third party resources or internal staff who are required to travel to provide routine maintenance or upgrades
  • Network connectivity to multiple carriers – local loops as opposed to cross connects from within the suite
  • Staffing and training
  • Managed hosting and cloud services

I hope you now have a clearer understanding of the differences between full-service and other colocation providers, and know what to look for when selecting a colocation provider.

Colocation is a service. That service is based on the standards, policies, procedures, people and the data center infrastructure. The quality of each of these components drives the overall end-user experience.

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