Colocation Pricing

Colocation Pricing

Introduction

I’d like to talk about colocation pricing. In this brief time, I’d like to cover:

  • how data center colocation pricing works
  • why data centers vary in price
  • and real world pricing examples

We can only imagine the curiosity a IT director faces as they begin to outgrow their in house data center or realize that their new building lease has no suitable space for a good server room.

Today our goal is to put some clarity around the costs associated with colocation. From a smaller regional providers to notable name brands. If you’d like a high level overview of what colocation is, check our our article about colocation here.

chart - colocation pricing and data center components in vertical chart

Let’s Start With – the Components of Colocation Pricing

There are several components, In no particular order they are space, power, cooling, bandwidth, and cross connects. We’ll begin

Space

There are several ways space is sold in a building based data center. I am not going to cover containers or other portable data center footprints. Here are some of the options

  1. By the U (a unit of measurement that is about 1.75 inches or 44.45 mm
  2. 1/4, 1/3, 1/2, or Full Cabinet / Rack
  3. Preconfigured Caged Spaces with Racks inside OR
  4. Preconfigured secure rooms that are almost completely isolated from the rest of the facility
colocation pricing power options in chart form

Moving on to Power and Colocation Services Pricing

This comes several different ways and it can be one of the more confusing aspects of colocation pricing. When you are speaking about Racks you have:

  • 20A/120V power ~ 2.0 KW
  • 30A/120V power ~ 2.8 KW
  • 20A/208V power ~ 3.3 KW
  • 30A/208V power ~ 5 KW
  • 50A/208V power ~ 8.3 KW
  • 60A/208V power ~ 10 KW

This can go way higher, up to 60 or even 80KW per cabinet depending on the datacenter. There’s also a 3 phase option for most data centers.

Here’s how you calculate kilowatts:

Take your amperage and multiply by volts. But, I only use 80% in my calculation as you aren’t supposed to use the entire circuit as you can trip a breaker. So for example:

  • 30A x 208 = 6240 BUT

80% of 30 amps is only 24AMPS. So let’s redo the formula:

  • 24A x 208v = 4992, round up to 5000 and you have 5000 watts. To represent 5KW, you just move the decimal 3 places to the left. 5 KW.

Also, These circuits can be delivered as single circuits or as primary and redundant circuits. Redundant circuits double the capacity with the understanding that you’ll only use 1/2 since it’s meant as a failover only.

large sign that says ways to buy 1 Megawatt of colocation space

Let’s talk hyper scale for a moment…

For hyper scale sized data center use, it’s not unusual to purchase space using Kilowatts or Megawatts of power. So ordering 1 MW of data center space would make the main metric the energy needed, and the facility would literally have a spec which included the circuits, cabinets, cooling and space to accommodate that power draw. This is also referred to as wholesale colocation

Let’s Talk Cooling

Cooling is usually included as a component of power pricing unless your requirements for your power are really high. Most facilities can offer 10 KW cabinets at a standard price. Increasing this to 20 or even 60KW can incur higher cabinet pricing which is mainly to cover the cooling aspects of the service.

Bandwidth & Cross Connects

Bandwidth and cross connects show up in every data center quote. There are 2 ways I typically see this happening.

A client will establish bandwidth like this:

  • purchases 1 or 2 cross connects from the data center THEN
  • purchases bandwidth from 1 or 2 different providers for failover.

OR

Some data centers can price out their own blended bandwidth that consists of 2 or more internet service providers. This allows the bandwidth provider to quickly deliver bandwidth services to a colocation client without the wait and without the complexity of setting up failover via BGP and it’s also easier than signing 2 contracts. One for colocation and one for bandwidth

Moving on.

Pricing and Data Center Margins

Data Center space is derived like any other product and is costed using typical accounting models for overhead and margin with some variances. Buying data center space as a provider isn’t a known quantity and there are many ways to start a data center operation such as:

  • purchasing (financially) distressed or foreclosed data centers
  • pouring concrete and building a facility from scratch
  • purchasing and retrofitting existing buildings to be data centers

The point here is the initial investment can vary widely unlike other businesses and franchises with more predicable startup costs. This investment made by the data center provider has to be reflected in their pricing to end users.

Let me talk about the

the colocation pricing dilemma - sign with 3 paths

The Power vs Space Dilemma

In addition to the startup costs of building a data center, there are other pricing issues that product management have to avoid when pricing things out such AS

  • Selling all their space BUT having plenty of power capacity left over (which means selling lots of low density space was the issue) OR
  • Selling all their power BUT having plenty of space left that cannot be sold (selling lots of high density space is what causes this) OR
  • Filling up the data center BUT they have slim profits after having filled the entire site (which means space was sold at too low of a cost)

I’ve been able to witness this miscalculation first hand. It always seems to go down the same way. A major online company needed lots of space and didn’t want to build their own data center. Not being able to resist the massive influx of revenue, the data center in question sells a deal that was high in power, low in space and was sold with slimmer margins. Once the space was sold, it reduced the power capacity to the rest of the data center to a point where there was plenty of square footage but no power left to sell in that square footage. From this point forward, each new client had to have their power requirements closely calculated and each additional power circuit that was sold could only be done so after an audit of available power and cooling. Some data centers are able to add cooling and power capacity but in many cases, local utility can be limited unless there are major capital expenses thrown at the issue

Real World Pricing Examples

Cabinet or Rack Pricing

Cabinets are usually sold in 1.75 inch increments which are referred to as a “U”. Many cabinets are 42U but there are smaller and taller ones based on the facility. For some high density and space efficient designs, it’s not unusual to have much taller cabinets. We’ve seen this cabinets run from $300 to $2000 per month based on region and cooling requirements.

power pricing graphic of $500-$2000 per month for 30A/208v power which is 5 Kilowatts

Power Pricing

Power or Energy is really the driving factor for almost all things here.

1 x 30A/208V Power – Primary + Redundant Power tends to cost between $500-$600 per month. Most retail colocation assumes that you will consume the entire amount of power allocated to you which on a 30A circuit would be about 24 amps. Wholesale pricing for power is different.

Cross Connects

There is quite a variety of pricing from a single charge of $50 one time up to $350 monthly. While this is sometimes the cause of some pain, i.e. why are you charging me so much for a piece of fiber that runs 50 feet, data centers will often justify this by saying that the cross connect is treated as a mission critical circuit, is included in the service level agreements, is fully monitored with the responsibility for keeping it connected and secure. For some data centers, it’s a major stream of revenue justified by the multitude of network access one is given in that particular site. Access to almost all bandwidth providers can allow an infrastructure company grow quickly as all their important partners are just a cross connect away.

Internet colocation pricing for bandwidth sign

Bandwidth

What I call “in house blended bandwidth” I find varies greatly. Generally a Gbps to the internet will run between $500 and $1000 per month depending on the carrier.

Remote Hands

I’ve seen this fall into the range of $100 to $200 per hour. Data centers like to bill in 15 or 30 minute increments meaning that if you ask for a task to be done (say rebooting a server) and it only takes 5 minutes, they will round to the nearest 15 or 30 minute mark. Some data centers will offer better pricing if you commit to remote hands service monthly. That way, the data center can gauge their supply of on hand personnel and staff up to ensure timely support if you pay for it consistently on contract.

Finally…

Things Not Covered

My goal was to really outline data center pricing. There are some colocation facilities that offer the most basic space, power, cross connects and remote hands and nothing else. Other facilities can get pretty wild and deliver so many services on top of colocation, it starts to look like managed cloud. If you currently need to set up data center strategy we are able to reach out to multiple colocation vendors in a single shot, pull back pricing and present it to you in a very easy to read manner. This is a free service. Just look for a link below to start the process.

As always, thanks for joining us this month and I look forward to seeing you on our next video.

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