Data Center Power Cost Control Strategies

One of the most significant factors in pricing data centers is the power requirements. And it is one of the most overlooked and easiest areas to address in order to reduce overall data center costs.

The margin between data center power usage and capacity is important to consider when working with a US or Asia Pacific data center provider. Vendors in these geographies typically buy data center power based on usage and then resell it based on capacity. While it is not a simple matter to identify the actual cost a vendor pays for data center power, understanding and making use of the underlying cost and risk model can deliver significant savings for buyers.

Impact of Lower Data Center Power Costs

The vendor’s hidden margin – and therefore savings potential – can range from five percent to twenty-five percent of the total data center cost. This drives home the importance of investing time and effort to understand your vendor’s data center power costs, and working with them to arrive at a pricing model adapted to your usage. A strong negotiation strategy will include not only demands from the vendor, but an understanding of their constraints and risks.

Given that data center power costs are one of the largest cost drivers for data center operators and their tenants, both parties logically give significant weighting to data center power costs when selecting locations.  In addition to the location and price model, variables that go into the final calculation of rates include utility bulk purchase deals negotiated by the data center vendor, power usage efficiency (PUE), and, of course the amount of power your infrastructure will require.

Negotiation Considerations

Being armed with power cost metrics is not the end of the journey. You still must work with the vendor to arrive at an agreement. The following are suggestions to consider as you approach your vendor:

• Recognize that power pricing can vary widely across geographies and reasonable expectations in one location may be overly aggressive in another
• Shoot for metered power pricing as your best-case pricing scenario
• If per-amp or per-circuit pricing is what’s feasible – pay special attention to the assumptions and see what commitments you can make to reduce the vendor’s risk in exchange for a rate reduction
• Review your contract to ensure you have recourse against future cost increases or service degradation

Need help negotiating your data center power costs and other aspects of your data center contract? Please contact us at  1-310-802-3702 or email info@ramprate.com.

Reading on Data Center Power Costs

For more information on data center power costs, consider reading Alex Veytsel’s ”Data Center Vendor Playbook: Capacity-Based Power“.  Here’s an excerpt:

“…throughout the US, co-location facilities are taking sizable margins on power by buying on a usage basis and selling on a capacity basis. In fact, based on SPY Index™ data, we place that margin at more than 150% of typical cost – as much as $245K in a typical $1M co-location contract.”