Colocation Managed Services: Pros and Cons for Providers

Colocation managed services is emerging as a new business model among data center providers. Find out why, as well as the reasons some colos are steering clear of it.

Christopher Tozzi, Technology Analyst

September 7, 2021

5 Min Read
Colocation Managed Services: Pros and Cons for Providers
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Colocation providers all sell one core product: data center space.

But a variety of colos now sell much more than just real estate. They also offer varying types of managed services designed to help customers set up, manage, monitor and secure workloads running inside colocation facilities – and, in some cases, in other locations as well.

Why are some colos getting into the managed services business? And just as important, why are some steering sharply clear of offering colocation managed services? This article unpacks those questions to provide an overview of how colocation and managed services converge.

The Multiple Meanings of ‘Managed Service’

To understand the role of managed services in the colocation market, you must first understand what a managed service means in general.

Unfortunately, there’s no simple explanation here. The traditional definition of managed service within the IT industry centers on the type of solution delivered by managed service providers, or MSPs, which are essentially IT outsourcing firms. MSPs typically take a hands-on approach that provides complete setup and management for various types of IT needs. Customers typically pay a monthly fee. The MSP benefits from ongoing revenue, while the customer benefits from predictable cost.

But in other contexts, managed services aren’t necessarily this extensive. For example, the label “managed” is frequently applied to cloud-based services for platforms like Kubernetes. But “managed Kubernetes” doesn’t mean that an MSP comes in and manages every aspect of Kubernetes for you. Most managed Kubernetes services basically automate infrastructure provisioning and management alone and leave everything else to customers.

In still other cases, you can find examples of managed services that amount mostly to helping customers plan IT deployments, as opposed to actually implementing them for the customer. In other words, these solutions look more like consulting services than managed services, even though they are sometimes marketed as the latter.

Colocation Managed Services Models

The ambiguity surrounding what defines managed services holds true across most corners of the IT industry, and colocation is no exception.

There are some colos – typically, smaller ones – that are full-service MSP shops in addition to being data center providers. For example, DataVerge, a colocation provider in the New York region, offers a suite of managed services that customers can purchase not only to help support workloads running in DataVerge’s own data centers, but in external locations as well. Likewise, DataBank, a larger colocation provider, has added hands-on managed services to its hybrid cloud strategy.

Other colos deliver managed services that fall mostly into the “infrastructure automation” category. Probably the best example is Equinix, which bought Packet in order to deliver a bare-metal-as-a-service offering that helps customers automate infrastructure setup within colocation facilities. (Equinix also offers other types of management services in certain regions, but these are not directly connected to its bare-metal-as-a-service solution.)

As for the consulting-centric category of managed service, you can find that from colos like Evoque, which recently acquired a consulting firm to help customers plan architectures that include colocated resources. CyrusOne is another example of a colo that provides some consulting services.

Although it seems that a majority of colocation providers offer some form of managed service, not all see value in such solutions. For instance, Sean Baillie, executive vice president for connectivity at QTS, told Data Center Knowledge in an interview earlier this year, “We don't do managed services, and we're not going to.”

Summary: The Why (and Why Not) of Colocation Managed Services

What do colos stand to gain (or lose) by offering managed services, and why are some choosing different strategies than others when devising managed service offerings? While it’s difficult to draw hard-and-fast conclusions about these questions, a few trends seem clear.

One is that hybrid cloud is part of the reason why more and more colos are interested in delivering some form of managed service. In an age when more and more colocation customers are embracing hybrid architectures that blend colocated workloads with public cloud services, colocation providers seem eager to gain an edge – and deliver something that public cloud providers mostly don’t – by offering managed consulting or support solutions. It’s a way, perhaps, of encouraging customers to keep more of their workloads inside colocation facilities and out of public clouds that increasingly compete with colos.

A second trend is that small colos seem more interested in offering full-service management solutions, presumably to help themselves stand out from large colos. If you run a regional colo that can’t boast a global network of data centers, you can at least deliver a set of hands-on managed services that most large colos, which focus primarily on real estate, can’t.

What about those that have disavowed colocation managed services, or at least not developed any managed service solutions extensively? They perhaps believe that sticking to the core, tried-and-true colocation business model will yield the best results in the long term. Managed services are expensive to build and add much more complexity to a colo’s business operations. It’s understandable why some colos prefer to stick to what they know best: selling data center real estate and leaving it up to customers to do what they will with it.

About the Author(s)

Christopher Tozzi

Technology Analyst, Fixate.IO

Christopher Tozzi is a technology analyst with subject matter expertise in cloud computing, application development, open source software, virtualization, containers and more. He also lectures at a major university in the Albany, New York, area. His book, “For Fun and Profit: A History of the Free and Open Source Software Revolution,” was published by MIT Press.

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