How to Calculate Colocation Costs

Colocation services allow businesses to rent space in a third-party data center while maintaining ownership of their servers. Although colocation offers a cost-effective alternative to building and managing a private data center, calculating the total cost can be complex due to several factors. Here's a comprehensive guide on how to calculate colocation costs to ensure that your business is making a sound investment.

1. Rack Space Costs

One of the primary factors in colocation pricing is the amount of rack space you need for your servers and equipment. Rack space is typically measured in rack units (U), with a standard rack measuring 42U.

Per U Pricing: Many colocation providers charge on a per-U basis. For example, if you need 10U of space and the provider charges $100 per U, your monthly cost for rack space will be $1,000.

Full Rack or Cabinet: If you need more space, you can rent an entire rack or cabinet, which is usually 42U. Full racks are often offered at a discounted rate compared to per-U pricing.

2. Power Costs

Power consumption is another major factor when calculating colocation costs. Providers charge for the electricity your equipment uses, and prices can vary depending on your usage and the facility's pricing structure.

Power Allocation: Power is typically measured in kilowatts (kW), and you will need to estimate how much power your servers and networking equipment will draw. Providers often allocate a certain amount of power (e.g., 2kW per rack), and additional power usage may incur extra charges.

Power Pricing Models:

Flat Rate: Some providers charge a flat rate for power, regardless of usage.

Metered Power: Others use a metered model, where you are billed based on actual consumption. This can be more cost-effective if your equipment has low power requirements but could increase costs for high-consumption equipment.

Example: If a facility charges $200 per kW and you use 2kW, your power costs will be $400 per month.

3. Cooling Costs

The heat generated by servers and other equipment requires advanced cooling systems to ensure optimal performance. Cooling costs are typically included in the colocation fees, but some providers may charge separately for additional cooling if your setup requires more than the standard amount.

Standard Cooling: The colocation provider usually includes cooling in the base price for rack space and power. However, it’s important to check if there are any extra charges for high-density racks or if your equipment generates more heat than typical setups.

4. Network Bandwidth and Connectivity Costs

Network connectivity is another significant factor in colocation costs, as your business will need sufficient bandwidth to handle its traffic. Providers typically offer various options based on your bandwidth needs.

Carrier Neutral vs. Single Carrier: A carrier-neutral colocation facility allows you to choose from multiple Internet Service Providers (ISPs), potentially offering better pricing and redundancy. Single-carrier facilities restrict you to one provider.

Bandwidth Pricing: Bandwidth is usually charged based on the amount of data transferred or the size of the connection. Common pricing models include:

95th Percentile Billing: This model involves tracking your bandwidth usage and discarding the top 5% of the highest data points, billing you based on the 95th percentile of usage. This prevents outliers from inflating costs.

Flat Rate: Some providers offer a flat rate for unlimited data usage within a specified bandwidth limit.

Example: If you need a 100Mbps connection and the facility charges $10 per Mbps, your monthly bandwidth cost will be $1,000.

5. Remote Hands and Support Services

Colocation facilities often provide remote hands services, where on-site technicians handle tasks like rebooting servers, replacing hardware, or installing new equipment. These services are especially important if your team cannot regularly access the facility.

Hourly Fees: Remote hands services are typically billed on an hourly basis. Rates can vary widely, with prices ranging from $50 to $300 per hour, depending on the complexity of the task.

Emergency Support: Emergency or out-of-hours support may incur higher fees.

6. Cross-Connect Fees

A cross-connect is a physical cable that connects your server to another service within the data center, such as an ISP or a cloud hosting provider. These connections are critical for ensuring fast and reliable network performance.

Monthly Cross-Connect Fee: Many colocation providers charge a recurring fee for cross-connects, typically ranging from $50 to $300 per month, depending on the connection type and distance.

7. Setup and Installation Fees

When you first move into a colocation facility, there may be setup fees involved. These one-time fees cover the installation of your equipment, setting up power connections, configuring network access, and other initial tasks.

Rack Setup Fees: The setup fee may include installing your servers into the racks and connecting power and network cables. This can range from $500 to several thousand dollars, depending on the complexity of your setup.

Initial Configuration: Some facilities offer optional services like initial configuration of networking equipment or firewalls, which may come at an additional cost.

8. Other Potential Costs

Backup and Disaster Recovery: If you require backup services or a disaster recovery solution, expect to pay extra. Colocation facilities may offer these services at an additional monthly cost, which can vary based on the amount of data being backed up.

Compliance Costs: If your business needs to adhere to specific compliance standards (e.g., HIPAA, PCI DSS), some colocation providers charge extra for compliance-related features like audit support or additional security measures.

9. Total Monthly Colocation Costs Example

To calculate your total monthly colocation cost, consider the following example:

Rack Space: $1,000 for 10U.

Power: $400 for 2kW.

Bandwidth: $1,000 for a 100Mbps connection.

Cross-Connects: $100.

Remote Hands (estimated 2 hours): $200.

Total Monthly Cost: $2,700.

Conclusion

Calculating colocation costs involves understanding various factors such as rack space, power, cooling, bandwidth, and support services. By carefully assessing your needs and the provider's pricing structure, you can create an accurate estimate of your total colocation costs. It’s essential to consider both the recurring monthly fees and one-time setup costs to ensure that colocation is a cost-effective solution for your business.