Data Center Price Evaluation Methodology

Many different elements need to be taken into account when planning data center outsourcing; including geography, data center tier, historical reliability, reference reviews, SLA guarantees, protection against natural disasters, etc. A best practice approach boils all of these considerations down into a simple scorecard for direct apples-to-apples comparisons across all aspects of potential solutions, including both outsourced and in-house.

Addressing the Data Center Pricing Challenge

While a full data center evaluation is a complex process, grappling with pricing is perhaps one of the most challenging facets. From the buyer’s perspective, best practices in data center pricing requires identifying a common size metric and cost accounting model to enable comparisons between different vendors and facilities. However, this is often very difficult to achieve due to confusing vendor pricing models, opaque data center cost drivers, and conflicting reporting parameters.

Level the Data Center Cost Playing Field

RampRate has found that the analysis of data center/colocation costs on a space per peak kilowatt basis is the preferred method of cost accounting, benchmarking and evaluation of data center fixed costs (including rent, maintenance, and depreciation of non-IT equipment such as UPS and generators).

This conclusion is reached by evaluating all the price models available in the market against seven key principles that we have ascertained through our experience in advising data center buyers on hundreds of transactions:

1. Comparability. Cost analysis metrics should allow apples-to-apples comparisons, so that an offer from one provider, location, or project can be contrasted with offers from other providers in other locations and projects.
2. Flexibility. The metric should allow for inferences about the impact of design changes on costs without going back to the vendor.
3. Correlation. Vendors should not be able to increase chargeable amounts to the customer unless they are incurring additional underlying costs.
4. Neutrality. Proprietary terminology from one vendor precludes cross-vendor comparisons, so the metric should be neutral to all vendors or options.
5. Translatability. The metric should be clearly definable and translatable into other charge models.
6. Minimize Misunderstandings. The metric should be easily and directly explainable to all participants on the customer side and on the vendor side.
7. Adhere to Best Practices. The metric should allow for clear and repeatable processes, success metrics, and standards for purchasing that can be directly compared with other organizations, and with industry benchmarks.

The underlying elements in data center space costs are always the same – land, facility, equipment, maintenance, power generation/consumption, and overhead. However, depending on the vendor’s background, you may see one or more of six price models for this same bundle. Some of these do a good job of fulfilling the above criteria, while others may leave you with offers that are less flexible, more difficult to compare to alternatives, and even exceed your budget without warning.

Recommended Reading on Data Center Pricing

For a more in-depth discussion of moving towards lower-risk data center cost evaluation methods, read the whitepaper The 7 Principles of Data Center Cost Metrics. For immediate support in defining your cost analysis methodology or selecting and negotiating with data center vendors, please contact us at  1-310-802-3702 or email sales@ramprate.com.