For many businesses, colocation makes smart business sense. Instead of investing capital in their own infrastructure to ensure there is enough space for servers and other equipment, they can usually rent space in a data center for a fraction of the cost. Savings are also realized when you take into account the fact that the business doesn’t have to spend as much money on electricity for operation and cooling of machines, security, and maintenance. For many businesses, colocation simply makes financial sense.
That is, if they choose the right colocation provider. When a business chooses the wrong provider, or doesn’t perform enough due diligence on the terms of the contract, what initially appears to be a smart business decision can quickly turn into a costly mistake. Add-on fees, unexpected charges, and other unanticipated costs can quickly eat away at the cost savings, leaving CIO’s with a tough decision: Continue with the colocation arrangement and make cuts elsewhere, or face additional charges for breaking a contract, not to mention the disruption of changing data centers?
Fortunately, most of the biggest cost surprises can be avoided if you understand which services and fees are included in your contract and what will result in excess fees. When evaluating your options, pay close attention to these services and factors that commonly cause billing surprises — or incur other costs.
Location
While conventional wisdom holds that data centers located near major metropolitan areas are more expensive, in the end, paying more for a centrally located center may be in your best interest. Not only does a colocation facility in San Diego, for example, provide a level of protection against most natural disasters, its urban location ensures greater bandwidth availability than may be available at some rural centers. A more accessible location also ensures that you can get to the facility easily and efficiently if necessary; a remote center that requires a flight with several connections and a four-hour drive is going to be inconvenient and costly if you need to visit the center for any reason.
Excess Bandwidth Charges
When it comes to billing for bandwidth, colocation providers use different methods of determining the charges, and depending on your business and usage patterns, the wrong choice could be costly. The most common formula is 95th percentile billing, in which the provider establishes a Committed Data Rate or the typical usage amount for the month. As long as all of the bandwidth falls within 95 percent of that typical usage, you won’t see any overage charges. If you use more bandwidth, though, you will be billed extra — charges that can add up quickly if you see a spike in traffic.
You can avoid these extra charges by choosing a provider that bills based on your actual usage, which calculates the fee as an average of your usage as measured in five-minute increments. With this model, you avoid overage charges, and a short burst in traffic won’t send your bill skyrocketing.
Ancillary Services
When analyzing your contract, pay close attention to which services are actually included as part of your “rent” in the space. Some providers charge extra for janitorial services, for example, or will add on extra charges for security personnel. While these fees may not be “deal breakers” per se, it’s important to expect them and consider them as part of the overall charge to avoid unpleasant surprised.
Power and Environmental Services
Again, it’s easy to assume that certain services are included in your overall colocation fee — you will obviously need power in order to operate your equipment — but read closely to determine whether there are any limits on your usage, and whether or not there will be overage charges. The same goes for environmental services. Will you be charged for certain types of waste, and how much?
Space Considerations
One area that tends to cost companies a great deal of money is overestimating the amount of space needed to manage their operations. Many companies opt for colocation in order to allow for future expansion, but paying for extra space up front isn’t necessarily cost effective. It’s important to carefully consider how much space you actually need now, with some contingency for growth within 2-3 years. That will eliminate the likelihood of overbuying space. At the same time, consider how much space is available in the building, for if you need to expand significantly in the future, you want to be sure that there will be adequate space for you, so you do not incur more moving costs.
Colocation is a financially savvy decision for many businesses, but only if you carefully plan and consider all of the potential costs. Take care to read your contracts, ask questions, and you’ll avoid any unpleasant bills.