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#DATACENTERWORLD | DATACENTERWORLD.COM Colocation Bootcamp March 19, 2019 Co-Presenters: Kirk Killian, Partners National Mission Critical Facilities Hector Diaz, iDiaz Advisors David McCall, QTS Data Centers

Transcript of Colocation Bootcampfiles.informatandm.com/uploads/2019/3/126ABC_-_T_-_8.00...• The corporate data...

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Colocation BootcampMarch 19, 2019

Co-Presenters:Kirk Killian, Partners National Mission Critical Facilities

Hector Diaz, iDiaz AdvisorsDavid McCall, QTS Data Centers

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Data Center World – Certified Vendor Neutral

Each presenter is required to certify that their presentation will be vendor-neutral.

As an attendee you have a right to enforce this policy of having no sales pitch within a session by alerting the speaker if you feel the session is not

being presented in a vendor neutral fashion. If the issue continues to be a problem, please alert Data Center World staff after the session is complete.

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• Who, What, When, Where & Why of Colocation• How does Colocation offer opportunities to the corporate data

center manager• Steps DC managers can undertake for Scoping, Planning, Selection,

Procurement & Deployment• How is Colo different than corporate On-Prem and Public Cloud

I. Session Intro

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• Reliability is and will always be important.• Costs are more important than ever.• The corporate data center facilities environment is evolving rapidly.• Evolution of the third-party cloud marketplace adds pressure to data

center managers to defend their role.• Colo evolution has improved reliability & control, and decreased costs.• Prudent DC managers should understand how their companies should

adopt Colo to add value.• Good DC managers add value by understanding all delivery paths.

Why this MattersTo Data Center Managers

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• Understand the modern Colo model• Understand when Colo is - and isn’t - a good match for enterprise

computing• Understand how to select and procure Colo intelligently• Understand how to get more out of Colo to meet overall

corporate/enterprise objectives• Understand how a prudent data center manager adds value to the

overall process

Session Objectives

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II. WHO? – The Users

Who should consider colocation?

Customer specific needs

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Who should consider colocation?

Any enterprise needing to run applications on their own hardware.

In particular if the enterprise does not have the economies of scale to build/operate a data center > 2MW capacity.

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Why 2MW? – Economies of scale

$ / K

W

Capacity (in KW)

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Economies of scale matter!

New Tier III data center buildout cost:

• < 2MW “stick build” corporate data center: $15-17M / MW

• >2MW “stick build” colo data center: $10-12M / MM

• >2MW semi prefabricated colo data center: $7-10M /MW

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Customer specific needs – pick your own

• Location• Security• Connectivity• Latency• Redundancy• Business

alignment

• Proximity to skilled workforce

• Geo-fencing• Taxation• Energy cost• OpEx vs CapEx

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III. WHY? – from the User’s Perspective

Cost containmentElastic provisioningHigher reliability

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Cost containment

A brief data center financial modeling primer.

(You probably don’t know how much your data center is costing you!)

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Data center CapEx

CapEx includes:• Land acquisition• Site Prep• Building• “MEP” fit-out

At end of day ~ $15-17k/kW of it load for typical enterprise data center

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Data Center OpEx

The best financial modeling strategy for data center OpEx is to boil down all operational costs into a monthly recurring cost (MRC) expressed in $/kW for every data center or colocation facility you operate in.

This is your “cost of compute”.

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Data Center OpEx

• Depreciation• Maintenance of infrastructure components• Utilities (power, water, …)• Fuel (e.g. diesel for generator tests)• Salaries (for data center infrastructure personnel,

dedicated security personnel)

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Know your “cost of compute”

Question you are answering:“How much is it costing me to deploy a rack full of IT gear at

a given location?”

Boil everything down to MRC in $/kW @ a given redundancy level (for valid comparisons)

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Cost of Compute

Know this number for every data center you own and for every colocation vendor you use.

Easier to compute for dedicated data centers.

More difficult but possible to compute for shared use buildings.

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OpEx financial accounting issues

MRC in $/kW is not constant over time.

For a given location, MRC in $/kW will decrease as IT HW occupancy increases.

• There are seasonal variations for cooling loads.

• Design targeted PUEs are attained at full loads

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Typical cost of compute

For small / medium Enterprise (no economies of scale) in a non-concurrently maintainable DC

• $300 - $400 /kW MRC; much higher for a concurrently maintainable DC (which a small enterprise is unlikely to have)

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IV. SCOPING – Defining the Need

You probably don’t know how much you are actually using; much less how much colo do you need!

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Typical space & power utilization

25 - 30 ft2 of floor space/rack

Average data center equipment rack consumes 3-5 kW

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Data center space & power strategies

Measure and publish utilization over time.• Know your metrics: (avg. kW/rack, avg. ft2/rack) – do

not use faceplate numbers!

Set-up a space & power governance program• pre-authorize HW intake to data center• follow-through with decommissioning equipment!

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Establish a Capacity Planning Strategy

Detailed quarterly forecast (new and decommissioned HW) tied to budgets

Project 2-3 years

Publish a dashboard

Add feedback loop (actual vs. forecast)

Enforce HW decommissioning!

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Capacity Planning Example

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Other Colo Services

Remote hands support• Rack & stack• Structured cabling

Connectivity• “Blended bandwidth”

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• Market Segmentation of Colo Providers: Wholesale, Retail/Managed Services, Interconnect, Hyperscale

• Lines are blurring between market segments• National/International, regional & local providers• Large providers offer advantages/disadvantages relative to smaller

providers• Ages/ Locations, Densities • Colo as midpoint between On-Prem & Cloud

V. WHAT – Colocation Options

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• Large freestanding buildings of 60,000 – 300,000 SF (some larger)• Several 25,000 – 60,000 data halls per building, with 1,500 – 9,000

kW critical power per hall• Typically 5-10 year customer contracts• Uptime Institute Tier 3 “design principles”, but rarely certified• Focused on large cage & private suites for 250 kW – multi-mW• Less expensive than retail/managed services providers/facilities• Only basic managed services offered directly by provider

Wholesale Colo Providers

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• Freestanding buildings and suites in multi-tenant buildings• 10,000 – 30,000 SF data halls w/ many customers in cages• Reliabilities, scalability, power densities vary widely• Typically 3-5 year contracts• Uptime Institute Tier 1-3 designs, but rarely certified• Cage & single cabinet deliveries of 10 - 250 kW• More expensive than wholesale providers/facilities• Extensive managed services offered by providers, including private

cloud and “smart hands”.

Retail/Managed ServicesColo Providers

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• Typically suites in multi-tenant buildings, often near downtowns and redundant fiber networks, with low latencies to long hauls

• Sizes and uptime reliabilities vary widely• Key differentiator is maximum fiber network interconnection

through “meet-me rooms”• Pricing is typically above retail/managed services Colo providers,

but network savings can offset higher rents• Usually TUI Tier 1-3 designs, but rarely certified• Some providers bundle network savings with Colo rents

Interconnect Colo Providers

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• Evolution within Wholesale Colo segment: huge buildings (200,000 – 1,000,000 SF) with data halls of 30,000 – 60,000 SF and 5-20 mW per hall for lease to technology and cloud companies.

• Objective is cost reduction and aggregation of network traffic onto massive campuses, where other Wholesale and Retail customers will pay more to be near hyper-scale users.

• Challenge for ~ 100 kW enterprise customers is getting good attention when provider is focused on 10 mW deals.

• Minimal managed services offered by provider

Hyper-Scale Colo Providers(a new subset of “Wholesale” Colo)

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• Most early Colo facilities were built between 1998 – 2005, some converted to colo after “dot bomb” tech bankruptcies.

• After 2010 most colo facilities are purpose built in new warehouse buildings or “purpose-designed” data center shell buildings.

• New/recent construction is modern norm for most enterprise customers.

• Newest facilities include hot/cold aisle containment, high-densities.

Age of Colo Facilities

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• We’ll discuss locations of modern Colo facilities later, but most of largest 30 cities in US have reasonably modern Colo options

Locations of Colo Facilities

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• Early colos offered 40-80 watts/SF average across the data hall.• 2010-2015 densities increased to 100-150 watts/SF average• Following 2015 many engineering-forward Colo providers designed

new data centers with modular electrical/cooling scalability, where they could offer customers ever-increasing power densities without standing upfront CapEx (and therefore higher interim rents).

• New colos can accommodate 50 watts/cabinet, and 15-25 kW/cabinet over the entire data hall

Power Densities

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• In many ways, Colo sits between On-Prem and Public Cloud.• In term, Colo typically requires 3-5 year contract (longer than

cloud), but shorter than capital commitment to on-prem.• In CapEx requirement, Colo saves the cost of the facility build-out

but requires the capital investment for IT hardware.• In total cost of occupancy, Colo is typically higher than “long term”

owned on-premises but lower than public cloud.• Colo requires IT staff for hardware/software management, but

leverages the provider’s facility managers across many customers.

Key Colo Differentiators

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VI. HOW – Technical Delivery

• Cooling• Power• Physical Presence• Connectivity• Stranger Things?

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Cooling

• Free Cooling • Less Complexity• Designs

• Classic (Water / Refrigerant)• Heat Wheel

• Mechanical Galleries that are divided by hall and in a discreet unit• Containment (which to use) (uptime says 80% of DC use

containment)• Cold Aisle adv / dis• Hot Aisle adv / dis

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• Static and Kinetic• 2N, N+1, N, M, U• 150 – 200 (5kW – 7.5 kW rack), 300 kW (retail) • Impact of Hyperscale on over subscription• Building for the future - The rise of Green requirements

• Direct renewable (site hosts and uses green)• Sub is fed by green• Credits to offset• Contracting to service Green

Power

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Physical Premises

• Data Center Era’s• The new secret weapon – Logistics• Physical Security

• Physical Hardening including points of entry • Lock/Key. Bio Metrics, Infrared, Keywatcher• CCTV (Ingress, Egress, Common areas)

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Connectivity• Cross Connects

• Simple and Easy• Automated• Connectivity Options

• Meshed IP• Ethernet (Site to Site)• Fiber (Lit / Dark)• Carrier Rich / Waves

• MMR Multiple entry points Diverse paths to carrier hotels Diverse paths within the building

Transcontinental Loop

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• The future anatomy of the Data Center• Beyond DCIM AI, Machine Learning, and Blockchain in the DC

Technical Delivery

• DC of Tomorrow

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• Typical timeline for selection & procurement of colo suites/ cages is 6-8 months, but some completed in 2 weeks!

• Rapid selection & procurement is dependent upon proper project scoping, and selecting a location with colo facility options with immediately deliverable space/power/cooling.

• Big projects (private data hall w/ 1,500 kW critical power) typically take longer than smaller cages (10-50 cabinets).

• International projects add delays for legal, communications, multiple office approvals, etc.

VII. WHEN – Selection &Procurement

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• Each of these can take much longer, especially if project team isn’t focused or internal approvals encounter delays!

Typical Colo Selection & Procurement Timeline: 7-9 Months

Task Typical DurationProject Scoping (location, size, specs, services, specs, etc.) 1-2 monthsIdentify Colo Candidate Facilities/Providers 1 monthTour Prospective Facilities 1 monthIssue RFP; Review Proposals 1 monthSelect Preferred Colo; Negotiate Commercial Terms 1 monthInternal Approvals and Negotiate Colo Contract; Sign Contract 1 monthBuild-Out Cage/Suite Including Circuits 1-2 monthsTotal 7-9 months

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Keys to stay on schedule (or accelerate) the timeline:• Have project leaders prepare drafts of scoping documents before

the rest of the team gets started.• Do scoping right the first time! (locations, telecom, growth, audit &

certifications, budget, etc. – avoid Ready/Fire/Aim)• Consolidate tours, proposal solicitation/review, & negotiations• Pre-schedule your internal approvals meetings• Pre-schedule legal review of contract (and stack w/ approvals)• Question & cushion any data center construction schedules• Demand very rapid cage build, & triage circuit installs• Review install schedule with colo provider well in advance

Keeping the Project on Schedule

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• The overall colo procurement team is likely to include DC managers, DC capacity planners, real estate, IT audit/compliance, telecom, risk management, CFO’s office, and legal.

• Deciding who is involved in scoping is a significant decision: more people reduces risk of changes but takes longer.

• If you lack internal resources, hire consultants (engineering, telecom, advisors/brokers, hazard/risk, lawyers, etc.) – far cheaper than doing it twice.

The Scoping & Selection Team

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Observations from (20) Years in data center procurement

• Have project leaders prepare drafts of scoping documents before the rest of the team gets started.

• It’s normally the customer’s (end user’s) internal processes & approvals that cause most delays.

• If a colo provider promises an aggressive construction schedule, consult Murphy’s Law for realism

• Sales puffery from colo providers is sometimes BS (get details).• Third-party consultants (IT, site selection/broker, electrical/cooling,

incentives) can reduce overall costs and provide valuable info

Keeping the Project on Schedule

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• Locations with abundant colo provider/facility choices vary by market segmentation.

• Most large US “NFL cities” have a variety of Interconnect and Retail colo providers; often with good reliability.

• The 100 largest US cities usually have at least 1-2 colo options.• In cities smaller than “NFL cities” colos are typically located in mid-

rise downtown buildings near the ILEC central office, or located in single-story small flex/tech warehouse buildings.

VIII. WHERE – Interconnectand Retail Colo Locations

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• The “Big 8” US data center markets have many Wholesale colos(Northern VA, Dallas, Chicago, San Jose, NY/NJ, Phoenix, Atlanta, WA/OR), with recent construction and high reliability.

• Hyperscale colos concentrated in these “Big 8” markets, although Big Techs also pick remote rural sites (cheap!).

• You can negotiate better pricing where multiple providers compete; add metros as needed to create competitive bidding landscape.

Wholesale (& Hyperscale)Colo Locations

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• Most large international cities have Retail & Interconnect coloproviders; quality, sophistication and pricing varies widely; small markets may only be served by the local telecom.

• The largest “money center” international cities have wholesale colooptions, but the wholesale delivery model is less mature (and usually more expensive) internationally than in the US.

International Colo Locations

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• Lowest electricity rates in South/Southwest, Midwest, WA/OR state and Buffalo (hydro cheap hydro power). Highest electricity rates in CA and Northeastern US.

• Lower land prices and construction costs in South/Southwest (passed through as lower rent to customers).

• Earthquake risks in CA, OR, WA• Hurricane risks in southeastern coastal regions• Tornado risks across midwest/south central

Advantages/Disadvantages ofSpecific Locations

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• Economic incentives (can be worth millions!) vary by state/municipality; most common available to colo customers are:

1. Waiver of Sales Taxes on IT equipment purchases2. Exemption from Business Personal Property Taxes

• Difficult for small customers to negotiate incentives; typically more a “research on availability” process.

• Some states do not charge BPP taxes.• Some incentives are by right; others require application/approval.

Economic Incentives by Location

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• Some metro areas already host major public cloud clusters for AWS, Azure, Google, Oracle, Salesforce, IBM, etc.

• Northern VA, Chicago, Omaha, Columbus, San Antonio, Atlanta, Des Moines, WA/OR, Bay Area, & Los Angeles host public clouds –more cities on the way (Dallas, Atlanta, Phoenix).

• Close proximity to public cloud can offer low-latency direct connects and ease subsequent migrations into cloud

Public Cloud Proximity

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IX. Certifications, Audit & Compliance - Objectives

1. Get You to “Love Compliance”

2. Integration = Simplification

3. There’s no “I” in “Team”, But There’s “Me”

4. If You Can’t Remember 1 – 3 “Just Do This”

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Certifications, Audit & Compliance - Objectives

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Certifications, Audit & Compliance –Everyone Has a Role to Play

• “Say what I do, do what I say, prove what I do” more

1. Document Management Framework

2. Departmental Procedures & Controls

3. Document Retention

4. Training & Development

5. Reporting

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• Safe Drinking Water

Certifications, Audit & ComplianceWhy we should “Love” Compliance

• Financial Stability

• Smart Phone

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Certifications, Audit & Compliance

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Certifications, Audit & Compliance - Integration

The Facilities Department secures data center cabinets, cages, and suites to restrict access to authorized personnel through the use of combination locks, traditional lock and key mechanisms, electronic readers and/or infrared beams.

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Certifications, Audit & Compliance

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Certifications, Audit & Compliance – Integrated Controls Framework

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X. Managed Services

• Managed services is the practice of outsourcing on a proactive basis certain processes and functions intended to improve operations and cut expenses. It is an alternative to the break/fix or on-demand outsourcing model where the service provider performs on-demand services and bills the customer only for the work done.

• Under this subscription model, the client or customer is the entity that owns or has direct oversight of the organization or system being managed. wikipedia

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Expectations

• What do clients expect?

• setup, installation and configuration (following best practices)

• Ongoing patching and monitoring as applicable

• Hardening• Functionality resolution• Repair/replace

hardware

• What do providers expect?

• Initial setup is already completed – baseline established

• Runbook / order of operations generated

• Hardware replacement per warranty & support contracts

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Sample of Services

• Colocation• Remote Hands• Secure Storage• Asset Management• Power Analytics

• Security and Compliance

• Managed Firewall• Intrusion

Detection• W.A.F.• Managed VPN• Compliance

Assistance

• Data Protection• Managed

Backup• Offsite

Protection (tape or disk)

• DRAAS• Cloud

• Hosted Private Cloud

• Managed Public Cloud

• Managed Private Cloud

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Keys to Success

• Step 1 – Understand and build a partnership. • Step 2 – Contracting. Agreements must be explicit and

validate both parties mindsets• Step 3 – Communication.

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• Pricing Models: Wholesale & Retail• Power Pass-Through• Managed Services• Multiple Locations• Getting Expansion/Contraction Options• Term of Contract• SLA

XI. HOW MUCH – Analyzing the Costs

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• Typically Customer Size >= 250 kW (can request for >= 100 kW)• Base charges are called Monthly Recurring Charges (“MRC”)• Base metric for MRC is Critical Power Allocation, and IT Equipment

Area (raised floor space) is included• Typical contract terms are ~ 5 years for 250 – 500 kW, and 5-10

years for >= 500 kW; Multi-mW contracts often 10 years• Customer chooses electrical distribution circuits, but pays for total

of critical power available, not MRC “per circuit”• Customer pays for metered electricity, plus PUE “uplift”• Customer pays one time upfront for caging & circuit installations

Wholesale Pricing Model

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• Customer needs 500 kW for five years (300, 400, 500 years 3-5)• Base charge is $125/kW/mo. in 1st year with 3% annual increases

Year 1: 300 kW x $125.00/kW = $37,500 in months 1-12.Year 2: 400 kW x $128.75/kW = $51,500 in months 13-24.Year 3: 500 kW x $132.61/kW = $66,305 in months 25-36.

• Customer pays one time upfront of $150,000 for caging & circuit installations (negotiable).

Wholesale Pricing –Example Occupancy Charges

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• Customer reimburses colo provider for actual critical power use (metered at output from PDUs for all customer circuits), in this example 250 kW average use x 730 hours/mo = 182,500 kWh

• Colo has 1.4 average PUE (prior year actual, or stated in contract)• Utility rate (including fees/taxes) is $.065/kWh

182,500 kWh x 1.4 PUE x $.065/kWh = $16,607 reimbursement

Wholesale Pricing –Metered Power Charges

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Ask for concessions during contract negotiations:• Seek flexibility (expansion options, ROFR, termination options, etc.)

to maximize utilization and minimize “over-contracting”• Seek extended move-in period (free rent), waiver/bundling of

upfront charges, “smart hands” included, spend shift to other DCs• Seek fixed PUE as method for determining “likely PUE”• Get fixed PUE in early years if facility is new/mostly vacant.

Wholesale Negotiation Tips

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• Like almost anything, as quantity of power increases to “mega size” (>= 5 mW), prices drop significantly.

• Customization that often runs with hyperscale contracts also allows customer and colo provider to work collaboratively to control/defer provider’s capital spending, passing savings to customer.

Large Wholesale/Hyperscale Pricing

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• Typically for Customer Size < 250 kW (and very common for 5-10 cabinet cages)

• Two main MRC costs are Space Rental and Electrical Circuits• Typical contract terms are 3-5 years for <250 kW• Space rent might be ~ $20/SF/month• Customer chooses electrical distribution circuits, but and pays flat

monthly fee for “A” & “B” circuits (from different PDU/UPS)• No separate charges for electricity usage• Customer pays one time upfront for caging & circuit installations

Retail Pricing Model

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• Customer seeks non-shared cage for (10) cabinets for 3 years.• Each cabinet needs A+B single-phase 208v/30amp (L6-30) circuits,

which support 4.99 kW/cabinet = about 50 kW capacity.

Space fee is 300 SF x $20/SF/month = $6,000/month(10) L6-30 circuits are $900/each = $9,000/monthTotal Month = $15,000 (= $300/kW)

• Customer pays $20,000 upfront for one-time caging & circuit installations (example cost – this is negotiable).

Retail Pricing –Example Occupancy Charges

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Ask for concessions during contract negotiations:1. Seek flexibility (expansion options, ROFR, termination

options, etc.) to maximize utilization and minimize “over-contracting”

2. Seek extended move-in period (free rent), waiver/bundling of upfront charges, “smart hands” included, spend shift to other DCs

3. Seek bundled package of managed services at reduced price (e.g. 20 hours “smart hands” for price of 10), plus ability to cancel.

4. Get renewal options at pre-determined rates.

Retail Negotiation Tips

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• CFO (corporate accounting perspective) often includes not only cash costs but also “depreciation” on hardware and data center critical systems equipment. In a colo contract, data center critical assets are owned by the colo provider, and no depreciation of them is required by the customer.

• If you are publicly-traded, you must average colo rents across the entire contract term (irrespective of the rents by month), but you are not obligated to start rent expense until the contract begins.

Cash vs “Financial” Costsfrom CFO’s Perspective

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• The colo contract will include service level agreements (“SLA”) on uptime for critical power, cooling, and telecom (if colo network).

• Many large colo providers now offer a 100% uptime SLA, but be aware that credits received from an SLA breach are often very skimpy (example 50% of one day’s MRC) for an event of downtime, far less valuable than your operations downtime/reputational risk.

• SLAs are negotiable if your colo contract is large; tougher if small.• Seek not only credits for SLA breaches, but also contract

termination rights for recurring or lengthy outages.

Service Level Agreements

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• One aspect of colo selection often overlooked is the attitude and company “fit” of the colo provider team with your organization.

• Colo providers vary in strengths, weaknesses, pricing and especially staffing and corporate DNA – some are meticulously organized and structured, others have keggers on Fridays at the company HQ.

• Making a good match between your company’s team and the coloprovider team (and processes) will facilitate much better collaboration throughout your contract term.

Colo Provider “Fit”

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The most common colo selection/procurement mistakes are:

• Poor Scoping. It’s tough to hit a target you can’t identify.• Selection. Do your homework in due diligence.• Delays. Delays in procurement rush poor decisions.• Overcommitment. Don’t contract for more power than you need.• Inflexibility. Get multiple expansion and modification options.• Overpayment. Negotiate hard for better terms; colos want you.• Overpromising. Inform management early of goals and progress.

Procurement Mistakes to Avoid

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XII. IMPLEMENTATION – Moving to Colo

New deployment vs. “forklift” moveDeciding what (if anything) gets movedPlanningGeneral guidelines

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New Deployment vs Forklift

New deployments are preferable over forklift moves• New capability or application deployment• Piggyback on technology refresh

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What to move?

Is application dependent on legacy HW or supporting infrastructure which are not moving?

If so, do you have the the required network bandwidth and latency between your place of business and your colo?

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Planning

Does your staff have the right skills to support a move to colocation?

Can your staff handle process changes related to changes in service delivery models?

Demand for network connectivity troubleshooting skills are likely to increase.

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General Guidelines

Avoid Forklift moves if possible

Match rate of migration to available skills - do not overwhelm your staff with unrealistic expectations.

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• Engineering advances in recent years have improved colo reliability, decreased cost, and (important to corporate DC managers) improved flexibility of delivery, which serves enterprises very well.

• Knowing when and where colo fits corporate objectives well (and where it doesn’t) enables prudent data center managers to be part of the recommendation, procurement and implementation plan, adding value to their organizations.

• Colo is part of a “3-pronged attack” (with On-Prem & Cloud) to deliver high reliability, flexibility and low cost to enterprise users.

XIII. CONCLUSION – Key Issues and Takeaways (Killian)

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• Colocation will in most cases result in a lower “cost of compute” over insourced data centers.

• Operating out of a colo with concurrently maintainable infrastructure will result in higher uptime.

XIII. CONCLUSION – Key Issues and Takeaways (Diaz)

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• Please call with any questions or comments:

Kirk Killian, PresidentPartners National Mission Critical Facilities; www.pnmcf.com214.365-2050; [email protected]

Hector Diaz, Managing DirectoriDiaz Advisors; iDiazAdvisors.com720.346-4446; [email protected]

David McCall, Director Sales Engineering (VP of Innovation?)QTS Data Centers; www.qualitytech.com678.835-5219 (o); [email protected]

Thank you for attending this Workshop!