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Colocation Pricing Explained

The best way for a company to generate a profit is by reducing costs. One of the major expenses incurred by companies these days is that of Information Technology (IT). The use of IT has made operations more efficient than ever before. However, it has also forced companies to bear significant increases in costs. However, companies now have cost effective options for their It solutions. Colocation services have completely changed the game.

Colocation facilities provide companies with equipment and data storage for a contracted monthly expense. The equipment primarily consists of servers, which are connected to a high speed Internet connection. Data is then transmitted via this connection.

Therefore, the two main areas of that determine colocation pricing are server space and bandwidth.

Defining Colocation Pricing Factors

Expense is one of the major driving factors behind the popularity of colocation facilities. The expense of creating and maintaining an in-house IT infrastructure certainly drives many companies to colocation. Basically, colocation lowers infrastructural costs and improves reliability of the IT infrastructure of a company. Nevertheless, there are two costs to consider when analyzing colocation pricing.

Rental Costs

These expenses are related to the actual hosting of servers at a facility. Servers are stored in racks at colocation facilities. Colocation charge a fee for the amount of rack space a company's IT equipment uses.

Rack space is measured in 'U' units. Each U unit is equal to 1.75 inches. A U unit is used to measure the amount of vertical space taken up by a server. The normal requirements of any company amount to about 40U or 42U. Every colocation facility has a different rate for each U unit. The formula used is simple. The total number of U units is multiplied by the rate being charged by the colocation facility. That rate can be affected by many factors, including cooling and fire suppression systems that protect the racks. It would be wise for a company to ask about these systems, as well as others used to control the server environment. Quality colocation centers will offer the top of the line in all of these areas. This may raise costs, but reducing the risk of server damage is priceless.

High Speed Internet Connection Costs

This is the cost of Internet connectivity and bandwidth. Companies utilize an Internet connection to remain in touch with their equipment 24/7/365. This also ensures the client's customers will have constant connect to its websites, etc. When connection is maintained in-house, bandwidth can be quite expensive.

Colocation pricing related to bandwidth rates is a much cheaper alternative. Bandwidth is the total amount of network usage. Colocation facilities charge each client according to the total usage per month, or how much data is transmitted. For instance, bandwidth can be equal to 2 Mbps. However, colocation facilities also tend to use an average value rather than the exact value of the bandwidth provided.

There are some providers who will just calculate the total bandwidth usage, and then divide it by the total number of seconds per client.

There are also some providers that use a different system, which is known as the 95th percentile method. According to this system, bandwidth usage is recorded every five minutes rather than every second. At the end of the month when total usage is being calculated, the top 5% of the readings are removed. The bandwidth reading that is the highest is then used to calculate the bill of the user. This allows the user to occasionally "burst" beyond the usual usage without paying for it but still is beneficial for the colocation provider.

When considering colocation pricing associated with a particular provider, it is a good idea to consider the above factors. Providers will often offer several pricing options, so it is best to do research before signing a contract. However, providers can offer good rates because it uses multiple carriers and spread costs across all its customers.

George Baylor believes there are many factors to consider when evaluating colocation pricing. His articles educate readers about the features that set different data centers apart. Learning how those features dramatically impact cost allows readers to determine whether the provider is worth the price.

This post was written by: Sabrez Alam

This is Sabrez Alam, a passionate blogger and creator of this blog and many more. You can follow me on Facebook