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Colocation Pricing – 7 Important Factors To Consider

Colocation providers can be an integral part of a company’€™s long-term IT strategy, but the decision to move the network hardware off site isn’t always an easy one. The biggest concern that many business owners and IT managers report is the price associated with the move. Colocation is an effective physical facilities option for many companies, but only if the switch will provide completely reliable results and a sufficient ROI.


There are some immediate cost savings that stem from using a colocation service. The first is by reducing the physical footprint in its own facilities. The second is by sharing physical security, HVAC systems, and power infrastructure. Businesses can reduce many of the ongoing maintenance costs, and save a lot of money by reducing the risk of outages and downtime.

Hosting servers in a separate data center is a simple way to make sure the company’s equipment is always on and cared for every day, but it isn’t something to just jump into or out of. The contracts and pricing structure are going to be a major part of the initial phases, and there are some factors that you should consider before signing anything.

Understanding Pricing

The prices you pay for colocation hosting are, of course, important -€“ but that doesn’€™t mean you should be shopping strictly for the lowest price available. Instead, you need to find the pricing structure that meets your individual requirements while still guaranteeing the highest possible up-time.

But how do you compare what you are in the market for? There hasn’€™t been a lot of price standardization across the industry, which can make it difficult to determine exactly what you’re paying for (and if you’€™re paying too much). Can you say for sure how much power you are getting for the price, or if your power density can be supported? Do you know how much service and support you can expect for the fees? There are many questions to ask.

For the most part, the industry has moved away from a rack pricing model to something relying more on variable levels of consumption. Still, there is a lot of jargon flying around out there, making it harder to understand the pricing structures than is actually necessary. There are a lot of variables that can affect pricing, and these factors could impact what you can expect to pay, what you will be required to pay, and where there’s room for negotiation. For more specifications about data center features, go here.

1. Support

Does your contract involve paying for a lot of bells and whistles -€“ the things that sounded good because you ‘€œnever know when you might need it?’ System management tools and power infrastructures don’€™t really mean much if the people who are maintaining it don’€™t have the necessary skills, experience, and dedication to keep things running.

Expertise is an important part of the pricing structure. 24/7 support should be figured into the contract, whether their preferred contact method is through a priority ticket system, web portals, phone calls, etc. You need to make sure this is about more than having someone monitoring the phones, though. The provider needs to be able to respond to your needs with the right people.

2. Location

Just because you have chosen to host your servers off site, it doesn’t mean you won’€™t need to access it from time to time. Depending on your business, this could imply regular visits to update and upgrade the hardware and other systems. How far you have to travel will impact your costs, and therefore needs to be part of your considerations.

If the provider has multiple data centers, you may want to choose the one that is closest to your business and provides the easiest and quickest access. On the other hand, if you are located in an area that is considered high risk -€“ someplace that is prone to natural disasters -€“ you may want to choose a location a little further away.

Location may also factor into the pricing when the surrounding infrastructure is a concern. Do they have a reliable power supply or do they have frequent troubles? Do they need to take extra measures to ensure you have the consistent access that you really need?

Also keep in mind that geographical location within the United States does not appear to have much of an impact on the price, so you don’€™t need to look across the country hoping for a better deal. While it does seem the prices in Europe may be much lower on average, that may only be when comparing things like costs for cabinets and different power densities. Other countries may make their money by charging more on space and power so don’€™t assume from first impressions that other countries automatically have better prices.

3. Data Center Infrastructure

The physical infrastructure of the data center could have a large impact on the price. Was the building designed specifically to house all those servers? Does it have the capacity to manage the power, cooling, and access necessary to provide reliable service for the money? This will all reflect in the provider’€™s guaranteed up-time, so you need to look at that number and get as many details as you can.

The infrastructure can also affect the price because of the type of network design, their capacity and how many network paths lead into the data center. Whatever the final price, make sure that it is in line with the level of infrastructure reliability.

4. Flexibility

Your business has evolving needs, which means that the colo center will have adapt to them. It’€™s hard to predict the future, and you may need more space/power/access as you go, and your provider needs to respond to those needs quickly. Along those same lines, your pricing should vary according to your needs instead of locking you into an irrelevant contract.

A provider needs to be flexible with their pricing structures. Maybe they can give the same SLA but with a shorter contract length or maybe they can create custom options for a fast-growing company. There should also be more than a single option for you, so you aren’€™t trying to force your needs to match their structure.

If your company suddenly grows or makes a new acquisition, your provider should have the flexibility to expand your plan based on your new usage estimates. The same should apply if you develop a new product and need more space to accommodate your growth, since you will not want to move your servers just because your company has become more successful. Most companies are fluid entities, so their needs are constantly changing based on the current landscape. As a result, your provider should be adaptable to these changes, no matter how large they might be.

Your provider should also focus on carrier-neutral services. This is an important feature because if an internet provider’€™s costs increase you won’t be stuck with them. You can simply switch to the provider that offers the better deal. If your colocation provider has many high-speed access partners, they can offer some important diversity.

5. Bandwidth

In a colocation center, with many companies being served from a single location, you need to know that they have enough bandwidth for everyone. They need to connect those different internet carriers to the data center and ensure that you will consistently have the access you need.

The bandwidth can easily have an impact on the price of your service. If you are getting poor access or things get dropped too often, you may be paying too much. This means that the uptime guarantee is an important measure here, too. You can get more details on this factor by finding out how many routers they use to make sure you have redundant bandwidth to keep the network up and running.

6. Security

Security has always been one of the largest impediments to large-scale colocation adoption. Most providers put a heavy focus on digital and physical security to protect your IT assets. Still, not every provider is the same, so it is important to know that your investment is also paying for the best security.

Physical security measures could include everything from biometric scanners and video surveillance, as well as strict procedures that only allow authorized personnel to access the servers. Digital security is technically still the responsibility of the server’€™s owner, but the colocation host can help with built-in firewalls and other intrusion detection services.

7. Size of Your Business

One of the most important factors related to the pricing structure will likely be the size of your business. The options you choose should relate to the size of your business and the unique need presented by the industry you serve.

An SMB, for example, may finally reach that point where you can’€™t just fit the servers in the spare closet anymore, but still not where you need a lot of bandwidth or physical space. You may, however, expect to keep adding capacity as you grow, so you need to look for a provider with enough flexibility to handle that.

If you are a medium to large business, you may have a better idea of your requirements, which means you can be a little surer of your contract negotiations. You may be using applications more heavily and need more energy and space, which will come at a higher price, but you will also have a better idea of your needs.

Finding the Best Option for Your Business

When you are comparing data centered and their proposed pricing structure, the most important thing to remember is that you are looking for the structure that fits your business. Not just the one that is cheaper than the rest. While one might not exclude the other, the important thing is getting the services and support you need. Because saving money won’t mean a thing if the services you are paying for aren’€™t enough for your needs.

Look closely at the SLA, the guaranteed up-time, and the level of support your provider offers. Then determine whether their offering will make your switch to colocation worth the effort.

Written By

Digital Communications at InfoRelay Online Systems, Inc. Jonathan covers small and medium business IT trends and technologies. He is based in Arlington, Virginia, where he is an active member in local tech MeetUps, such as DCtech, MoDev DC and Techbreakfast at AOL. Jonathan has been writing technical content since 2012, when he graduated from San Diego State's graduate school of business.rnFor more, please email [email protected] rn rn rn rn rn rn rn rn rn



  1. Prakash

    April 10, 2014 at 10:26 am

    Security is the main thing for every field. And in this pricing stuff it is the main point to discuss about. Thanks for sharing this.

  2. Sudipto

    April 24, 2014 at 8:44 am

    Hey Jonathan,
    Nice post and Thanks for sharing this with us. Flexibility, Security and Bandwidth is very important factor to consider. Security is very essential and most important factor.

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