Colocation Pricing Demystified

Kelvion New Plate Heat Exchanger

OPINION – Alex Rabbetts, Managing Director of UK-based colocation provider MigSolv, was so frustrated by the way in which colocation providers mask their pricing making it impossible to compare one provider with another, that he decided to write this article and demystify the colocation pricing models being used.

Colocation pricing is often difficult to understand. Recently one of our customers asked us if there is a guide to colocation pricing and why it is so difficult to get pricing that compares ‘apples with apples’ when looking at Colocation pricing? The answer is, unfortunately, simple – marketing!

In a very competitive market, everyone is looking for that ‘edge’ that something that will give them the lead over their competitors. And that’s fair enough. But not all is as it seems. If Company A is offering a 10amp rack in a colocation data centre for £500 per month and Company B is charging £900, it would appear, on the face of it, that Company A is significantly cheaper than Company B. But are they?

What’s included in Colocation pricing?

Examining this colocation pricing we can uncover some quite interesting things. Starting with the 10amp rack. What does this mean? Is Company A offering their customers 10amps of power within the £500 monthly charge? Well, although they don’t say it, the probable answer is no. It is actually costing something in the order of £175 per month to deliver that 10amps of power and at least another £75 to cool the heat.

So, is Company A offering a rack for £250 per month? They couldn’t – it simply isn’t commercially possible. And, is Company B including the 10amps of power too? No, almost certainly not. Don’t expect power to be included in the pricing – it can be, but rarely is.

Pay only for the power that you use!

So, what of the 10amps? In most cases the colocation company will charge for the 10amps regardless of whether the customer uses it. In other words, the rack plus the 10amps of power is more likely to be nearer, (note the nearer, we’ll come to that), to the actual price per month. This can actually be quite a big cost. If the 10amps is costing the customer 18p per kilowatt hour, (a not unusual or high charge), then it will be costing around £315 per month, (don’t forget this is in addition to the rack rental).

But what happens if the customer is actually only using 8amps? They will still pay for 10amps in most colocation pricing. That’s 2amps that the customer is paying for that they aren’t actually using. To put that another way, the customer is paying around £63 per month for power that they don’t use. The moral here is only pay for the power that you use.

Returning to the rack pricing in a guide to colocation pricing, this must surely be the same. Unfortunately not. Taking Company A’s rack pricing, what does this include? Is the power backed by a UPS and a generator? Is the rack dual fed from completely separate A and B power supplies? Is the rack monitored for temperature and humidity? Is the rack secure?

In order to publish such a low price for the rack, Company A has to strip the offering back to the bare bones. The colocation pricing will include the rack of course. But what else? Some colocation providers even charge extra for the power strip. Others will charge extra if you want two power strips on separate A and B supplies. Many will charge extra if you want your cabinet monitored. Generally, the rack will have a standard lock on it that is unlocked by an industry standard key. All of these are ways in which to build up the price of a rack.

What’s in the price?

Taking Company A’s rack, and using a real life example although we’ve eliminated the name, let’s see how this price actually builds up. The price is £500 per month for the rack. Of course the rack comes with a power strip, but that only has 6 outlets, which allows the customer to install 6 devices in a 42U cabinet! For a power strip with 20 outlets there is a £100 per month charge. A second power strip on a separate supply is another £100. This makes the actual charge £700. The customer wants the rack to be monitored, that’s another £50 per month. The customer would like an electronic lock to ensure that the rack is secure, that’s another £50 per month.

The actual price of Company A’s rack is £800 per month. Company B includes 2 x 20 outlet power strips, monitoring, electronic locks within its £900 per month charge which makes them actually only £100 more expensive. Beware of cheap pricing, it rarely is.

Quality may come at a cost

What about the quality of the facility? Is Company A’s data centre well maintained with modern efficient plant? If the plant is inefficient, then the facility will run inefficiently using much more power meaning that the colocation pricing for power will have to increase to compensate for it.

Company A may charge 20p per kilowatt hour and Company B 18p per kilowatt hour. The same 10amp rack will cost £350 per month with Company A and only £315 with Company B – this means a saving using Company B of £420 per year.

Are standards important to you? Do you transact or store credit card data? If so, PCI DSS will be essential. Does the colocation operator have PCI DSS accreditation? What about ISO 9001, 14001 or 27001? Are these important to you and are you going to have to pay for them?

Remote Hands and Eyes

Another consideration in my guide to colocation pricing is that of ‘remote hands and eyes’. This is where the colocation operator provides people who will carry out small tasks such as re-booting a server, changing a tape or similar. Is the support available 24 x 7? Many colocation providers do not offer 24 hour support.

Company A may charge £150 per hour for remote hands and eyes whilst Company B only charges £50. Assuming that the customer requires 1 hours of remote hands per month, (and most colocation operators will charge as a minimum for 1 hour or part thereof), then Company A will cost an additional £300 per month whilst Company B charges an additional £100. Company A is now £135 more expensive with its £500 per month rack than Company B with its £900 per month rack.

Transparent Pricing

My guide to colocation pricing is not turning out to be so simple. The problem is that there are so many factors which can influence a price and it is rarely simple to compare two different offerings. It is easy to misunderstand colocation pricing that, on the face of it, looks cheap. My advice is to talk to a provider that is transparent about their colocation pricing and shares with you the benefits of any efficiencies that they have.

About MigSolv, Alex Rabbetts

colocation-providers-alex-rabbettsMigSolv (Migration Solutions Ltd) is a colocation provider that has its data centres located in Norwich, UK, in the county of Norfolk. Its MD and founder, Alex Rabbetts, has over 20 years of experience in the data centre business and is a regular speaker at conference events. Mr. Rabbetts is also on Twitter: @DCAlex.