Gartner Research

Colocation Pricing Models Are Changing — Don't Overpay and Don't Overbuy

Published: 10 October 2014

ID: G00271147

Analyst(s): Bob Gill

Summary

While North American colocation pricing is stable, deal composition continues to shift to power-based pricing. We urge IT leaders to focus on what is negotiable and to establish a standard model for cost analysis to make comparison possible and avoid overbuying and overpaying.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Pricing should not be the first or the major deciding factor when selecting a colocation provider or location
  • While pricing continues to be generally stable for the past several years, providers do discount to fill space and close deals
  • Even where pricing is non-negotiable, adjusting quantity of space and power closer to actual demand can yield significant savings on proposals and renewals
  • Deconstruct proposals to a least common denominator to allow for a direct comparison — better yet, dictate pricing format in writing the RFP
  • Set expectations by starting from rough national averages, and adjust for geography, data center quality, and additional services
  • Use Gartner's Power Cost Transparency Modeling to avoid overpaying for power
    • Small Deployment (approximately one to 10 racks, less than 40 kW)
    • Midsize Deployment (under 25 racks or 100 kW)
    • Large Deployment (higher than 25 racks or 100 kW)
  • Consider nonrecurring charges to be somewhat negotiable, not absolute

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