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Colocation Data Center Facilities: One Size Does Not Fit All - Part 2

Finding a colo provider that accommodates change as it occurs in the IT arena and provides flexibility within a lease agreement is imperative to managing cost.

Industry Perspectives

August 3, 2018

3 Min Read
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Sean P. Brady is Managing Director of Cushman & Wakefield.

As discussed in Part 1 of this series, when it comes to site selection for a colocation data center facility, the old saying “do your homework” rings true for companies large and small in all types of industries. The second part of this series will address the wide-ranging benefits, from lowering costs to improving efficiencies, of rent portability and new services, such as BMS/DCIM.

As a whole, designs of colo facilities have become more flexible and efficient, although not all are the same. Finding one that accommodates change as change occurs in the IT arena and provides flexibility within a lease agreement is imperative to managing cost. It is quite possible that within the first 18 months - or even 24 months - of signing a lease agreement, a tenant may look to shrink its physical footprint as it migrates more data to the cloud and servers continue to provide greater capabilities. In this regard, finding a colo facility that offers rent portability is key.

Rent portability enables tenants to keep Monthly Recurring Costs (MRCs) flat or close to flat when reducing physical space in exchange for increased use of the provider’s cloud services or in some cases AWS, Azure, etc. Some providers will also offer rent portability if the tenants want to move some of their cabinets to another data center within the operator’s portfolio. The user will incur the cost for migrating the equipment, building out the new space and connectivity, which are the Non-Recurring Costs (NRCs). This change and accommodation to users is the wave of the future.  It is being done today by some in varying degrees and, over time, almost all providers will likely offer this flexibility.

In addition to the new services above, providers are offering BMS/DCIM services that help tenants run their caged environment more efficiently to lower their costs for metered or gross licenses. For example, a company may have hundreds of “A&B” circuits, cross connects, and services; and these programs will tell the user which ones they are paying for but not using.  Normally, operators do not inform you of these inefficiencies.

They also have services that help tenants operate their cloud services more cost effectively. That's because today more companies have found going to the cloud can be more expensive than running their own applications and software in their own or outsourced caged environment. That said, the cloud does offer better flexibility and those other two options cannot compete on this front. Both of these services are evolving and getting better by the month. In both cases, though, they are helping users lower their data center’s operating and cloud costs.

Colo Hub in Metro New York Area

The Metro New York area is home to 171 colo facilities, making it one of the largest markets in the U.S., with over 1,854 wholesale/colocation facilities in 49 states.

New Jersey alone has 80+ locations by 37+ different companies. Other submarkets include:

New York City                   43
Long Island                        32
Rockland                           4
Westchester                      5
Fairfield                             7

With the myriad of options, the user needs the right team. At the very least this includes: an IT network, engineering consultant, real estate adviser and a data center attorney.All should have the experience to help navigate through these choices to find the “best-in-class data center/provider.” The  real estate adviser quarterbacks the assignment, assembles the team, knows the best operators for the client’s needs and coordinates all the vendor information within the process to create the most flexible and cost-effective agreement.

Local and national supply and demand in most cases heavily influences the rental rates, concessions and contract flexibility. Real estate brokers track these statistics and have the best knowledge and expertise to negotiate them during wholesale and colocation transactions. This process helps ensure the ideal outcome for the site selection process and maximizes the contract flexibility.

Opinions expressed in the article above do not necessarily reflect the opinions of Data Center Knowledge and Informa.

Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating.


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