How to negotiate data center colocation space and power contracts?
The demand for data center colocation space and power is absolutely skyrocketing! In internet and data center hub locations like Amsterdam and Frankfurt, it is not uncommon for space and power to run out! Especially in the premium well-connected data center campuses. The competition is super intense in these cities. And both customer and data center supplier need strong negotiation skills! But what can you do as a customer, to (re)negotiate the best deal, given the intense competition?
In this article, I am going to discuss 3 important, underestimated negotiation strategies. I will share 3 personal tips, that will help customers to negotiate a better deal. And as a result, data centers can choose to invest in the customer platform. And use it to monetize their data center community further.
Setting the scene and common misperceptions in data center negotiations:
For many years, I have been helping carriers, cloud providers and enterprise customers to get the best deals and value for premium colocation services. First at Verizon and Interxion throughout Europe, but especially in Amsterdam and Frankfurt am Main. And also in Asia while working at NTT. And recently I am supporting my wholesale customers at VEON, selecting the right data center to build a network PoP in Russia, Kyrgyzstan and Kazakhstan (under Beeline and Vimpelcom brands).
I have noticed, that most customers try to negotiate the best data center colocation deal, based on the volume aspect. Volume, as in the required amount of racks and power, for the colocation of their platform in the data center. But did you know, that space and power are only just a very small fraction, of what really determines the final price these days?
3 data center colocation negotiation tips for customers
Here are my 3 customer negotiation tips for better data center colocation deals, that I recommend you to start using today:
Tip 1: Understand the value of your data center colocation cross connect
A data center’s core value proposition, is to provide an ideal secure environment for your colocation platform. A place, where you have a guarantee that your platform will always be available and online. But what really determines the value of the data center, are the parties that you can connect to. For example, the right mix of global carriers and fast reliable IP-Transit providers.
Customers should develop a clear understanding, how many cross-connects they want to order from the start. And to which parties they want to connect. And how the amount of cross connects will grow over time.
Not only do cross connects bring in a substantial amount of additional monthly revenue for the data center. Is also allows other parties in the data center to do more business. Hence their platform will also continue to grow within the same data center. Understand, forecast and commit to a certain number of cross connects. Read my other article with tips how to negotiate cross connects. And find out how important the other receiving cross connected party is to the data center.
Now you can use this as part of your overall negotiation strategy. And actually, you will also help the data center provider. You will help them to better understand the value of your platform. The transactional value of your platform and the cross connects.
Tip 2: Sell the power of your magnet to the data center colocation provider
Adding to my first negotiation tip, we need to understand how a customer’s colocation platform will add even more value to the data center. Customers should ask, how their platform can help to attract additional new customers to the data center?
In other words: what is the magnetic potential of your platform?
Let’s take as an example a default enterprise private cloud platform. A core enterprise platform, which is used by many employees from all over the world, to access certain latency sensitive applications. Such platforms tend to consume a lot of data! And they require multiple connections to multiple IP-upstream providers, to ensure availability and uptime. And often such platforms serve as the main hub location too, for incoming international MPLS networks.
You see, this platform alone can help bring in new carriers or IPSs to the data center. Because these connectivity providers can connect to the Enterprise platform. And also start selling additional services to other customer in the same data center. And you don’t even need to be a large heavy data consuming cloud platform, to be considered a potential magnet these days.
Understand whether you can help the data center win potential new customers. And also understand, whether the party you wish to cross connect to is highly strategic to the data center. Even if this means, if this party is actually already located in the data center.
Understand the magnetic potential of your platform. And how you can help the data center win more customers, that will increase the value of the data center’s customer community.
Tip 3: Enable community monetization by helping the data center marketing team
My third tip to help customers negotiate the best colocation deal, is all about marketing communication! We need to understand, that for data centers in particular, it is often very challenging to build great customer case- and reference studies.
Why? It is because most customers, do not want the public to know that they are present in a particular data center. And it makes sense, because these customers host their core data and assets in a particular facility. But if you can agree to write a case study together with the data center. And explain to the public, why you selected a particular data center? And explain how your platform can add value to other customers? Then very often, you can and will negotiate more favorable terms and pricing.
Such case studies can be worth a lot of money to the data centers! Because it allows them to showcase fundamental parts of their valuable community to the public. And explain to the public, how their communities can help add value, and help solve other customer’s problems.
Value…. besides just offering great data center uptime and infrastructure.
Most powerful and desired are 3-way case studies. Such case studies may include the customer, an ISP or carrier and the data center. It truly showcases the whole value chain of the data center. And why a customer has selected that particular data center, because of its communities. These case studies can really help the data center, to attract and sign up many other new customers. And are therefore worth a lot of money.
Data center colocation site and connectivity provider selection
Do you need help renegotiating your data center and global connectivity contracts? Or do you need support in choosing the right strategic providers? Please contact me or visit my LinkedIn profile. Let’s discuss how I can help you too in securing the best connectivity providers data center colocation site and contract.
Thanks for reading and I hope you found these 3 tips useful! Please like and share the article with the community and your professional network.