by Michael Bullock

Evaluating Data Center Colocation Options: Expert Tips

Oct 22, 2009
Data Center

What you don't know can hurt you when you're shopping for a new data center colocation deal.

If you’re in the market for new or additional data center space, I have some advice that can help you make better decisions, save money, and avoid some pitfalls. 

For example, a company found what at first seemed like the one of the most affordable spaces around, but after I asked the colocation provider a few pointed questions (actually, it was more like 70), it turned out to be one of the most expensive. Once the provider was pinned down and the customer’s true requirements were taken into account, it turned out that all the power charges were vastly underestimated and the simple, 1,000 square foot / 120KW facility would have cost the customer about 250 percent more than he originally thought, amounting to an extra $1.6 million over the first five years of tenancy.

That’s a lot of money.

So my advice has two parts:

1. Try to keep more than one target space in the mix until the deal is done.  Even if you are actively negotiating with your first choice, it pays to have a backup option.  At minimum, this will allow you to negotiate without feeling trapped and provides a solid plan ‘B’ plan should the preferred space become unavailable — or too costly upon full discovery. 

2. Go into negotiations armed with a trusty sword of skepticism.  As Ronald Reagan said many years ago, “Trust, but verify.”  And since you and your company will be living with this decision for at least 5 to10 years, it’s very important to understand the details and long term impact of your agreement with your data center provider. It’s always a mistake to view them as IT consultants who are there to help you.  Their goal is to get you to commit to their space and lock you in while they retain the flexibility to increase their rates over the long term. This is not because they’re bad guys. This is simply their business. You’d do the same.

Here are some of the colocation gambits that will end up costing you:

The Shell Game: As you know, total facility fees include rent, power (utility) and a power surcharge that covers cooling, humidification, UPS (to avoid spikes and dips), etc. An inefficient facility will look very expensive and risky based on this surcharge, which could amount to one-to-two times as much as the cost of the actual metered power usage.  So as not to scare off prospective customers, some operators may try to hide a percentage of this cost (that comes from their own inefficiency) by burying it in your lease charge.

This would not be an issue were this a fixed cost, but more often than not the lease is subject to annual escalations. So you need to make sure you understand your provider’s true operating expenses, pass through charges and cost escalation terms in order to have some degree of cost predictability going forward.

Convenient Laziness: I’ve seen this happen this way: You put out an RFP with very specific questions, such as, “Does your proposal include redundant power feeds?” The bidder provides a one page summary of its expected charges and then replies to your question about backup power by writing, “See quote.”  When you look at the quote, you see a line item for redundant power. So does that answer your question? Maybe yes, maybe no. The quote may refer only to the UPS battery backup on the primary line and not to the second power feed into the building that’s required for Tier 3 facilities.

So, at best, it takes a lot of digging and hard work on your side to interpret the provider’s response when he writes “See quote,” and there’s always the risk that you won’t get it right. On the other hand, this convenient laziness in the response to your RFP allows the provider to crank out many quotes for many RFPs using an Excel spreadsheet with fixed assumptions that have nothing to do with your unique business and its unique requirements, not to mention the specifications contained in your RFP — the only one you care about. So when issuing an RFP for data center space, you should make it clear that specific, detailed responses are required or the bid will be rejected as noncompliant.

The Old Bait and Switch: In this case, the bidder may provide detailed responses to your questions but he may not have the capacity or architecture to live up to his promises or your requirements.  Recently, I saw a colo provider assure a customer of Tier 3 redundancy even though its facility’s backup power feed was unconditioned street power. This meant that it was unprotected by UPS power and therefore represented a single point of failure and vulnerability to power spikes whenever the primary went down for maintenance. The tenant was paying market rate (which seemed like a good deal) for a true Tier 3 facility but the truth was that it wasn’t getting one.

In other cases, I’ve seen mismatches in what a given facility is capable of providing and what is actually quoted and provisioned to the customer. In these cases, the provider hopes first to get the new tenant in the space and plans to address the requirements later, after the relocation has been completed. I wouldn’t feel comfortable with that set-up. Would you?

Rounding Down: In this scenario, the customer asks for a specific power capacity he requires to operate his IT equipment.  The colocation bidder immediately discounts this by 20 percent, claiming, “You shouldn’t run the system above 80 percent of design load.”   So the facility provides you with 120 KW of breakered service where only 80 percent (or 96KW) is available for IT use.  Of course, it could have provided 150 KW of breakered service (120 IT usable), but then its price would look too high. All the power and cooling estimates you get after that are based on this assumed 20 percent reduction to your requirements.  If you don’t look at the details, you may end up with a space you thought was 20 percent more efficient than others but really has 20 percent less capacity than the alternatives.

The message is that when evaluating new data center space, make sure you’re diligent, and be on your guard. Take advantage of the people in your organization (or outside experts) who have the experience to know how large data centers are operated and where to look for the traps and gaps that will cause your requirements to go underserved. And beware of real estate brokers who may not understand what data centers really require and simply try to sell you on sites that pay them a higher commission.  I’m not saying all real estate brokers are like that. I’m just saying watch out. 

As always, I welcome feedback, questions and comments.  You may reach me at  

Michael Bullock is the founder and CEO of Transitional Data Services (TDS), a Boston, MA-based consulting firm focusing on green data centers, data center consolidation / relocation, enterprise applications and technical operations.  Prior to founding TDS, Bullock held executive leadership positions at Student Advantage, CMGI and Renaissance Worldwide.