This document provides guidance on developing a co-location strategy for an organization's data center. It discusses factors for success in co-location including conducting requirements gathering, cost comparisons, server profiling, establishing criteria, and using a formal RFP process. Organizational size and level of service do not determine success. Successful co-location requires at least 3 months of planning and due diligence.

1. 1 Info-Tech Research Group Develop a Co-location Strategy

3. Organizations that are looking to outsource all or part of their server inventory.

5. Examples of co-location service level criteria to include in the RFP.

6. A co-location RFP template complete with proposal scoring tool.

7. Site evaluation checklist for final due diligence in the selection process.The co-location strategy solution set will take IT decision makers through the following process to select a co-location vendor that fits the organization’s needs: Info-Tech Research Group

9. While many organizations avoid co-location due to perceived misconceptions about size and service, Info-Tech research found that all organizations can be successful in a co-location engagement:

10. Organizational size is NOT a factor to success.

11. Size of engagement is NOT a factor of success.

12. Factors of success in a co-location engagement require effort on behalf of the organization:

13. Successful co-location requires a minimum of 3 months planning and due diligence.

14. Organizations that gathered current and future facility requirements, were able to estimate a high level budget and conduct cost comparisons and were more successful in their co-location agreement.

15. Profiling servers before entering a co-location agreement were a significant factor to the engagement’s success.

16. 55% of organizations that established a shopping list of services aligned with their business needs, were more likely to experience co-location success.

17. Organizations that solicited vendors through an RFP process were more likely to experience success in their vendor selection and co-location engagement.

18. 62% of organizations conducted site visits to vendor locations before entering into an agreement which resulted in a more successful co-location arrangement.

19. Many vendors in the co-location market space have cut out their basic level of service and are only offering managed services as their entry level service, however basic co-location services suit the small to mid-sized organization’s needs. Customers must be prepared to have educated conversations with vendors to ensure they are engaging with the right vendor and the right level of service for the business needs now and in the future.

20. Co-location SLAs range from the very simple to the very complex. They must be enforceable under contract and managed on at least an annual basis. Vendors should be held accountable for non-performance.Info-Tech Research Group 3

21. Co-location Strategy Roadmap Info-Tech Research Group 4

25. While many of these factors are reasonable fears regarding the co-location decision, organization’s that co-located all or part of the facility experienced the factors in the graph on the right.23% 23% 25% 26% 30% 41% 30% 39% 25% 41% 44% 25% 9% 23% 9% 9% 18% 12% 2% 2% Dedicated resource to manage engagement Both parties view as a partnership Knowledge and helpful staff Defined escalation process Service and availability match contract Security exceeds expectations

26. 64% of organizations engage in some form of data center co-location services N 14% 18% Disaster Recovery Services Fully Managed Services Managed Services Basic Co-location No Co-location Data Center Co-location Services by Organizational Size 5001+ 30% 20% 50% 2501-5000 1001-2500 19% 25% 501-1000 8% 8% 8% 251-500 12% 6% 24% 43% 29% 101-250 51-100 33% 1-50 Info-Tech Research Group 7

27. Co-location success comes in many shapes and sizes Success does not increase according to company size Info-Tech Research Group 8 Are you avoiding co-location because of organizational size? Organizations that haven’t considered a co-location strategy based on their size, should not avoid this option. Info-Tech found that organizational size does not have an effect of the level of success achieved. A successful co-location engagement can be realized by both small and large organizations. 0 100 500 2500 5000 Success does not increase according to level of co-location services Are you avoiding co-location because of perceived service requirements? Organizations that haven’t considered a co-location strategy because the perceived notion that they have to engage in a higher level of service to be successful should not avoid the co-location option. You don’t have to dive into a higher service level to be successful, even the most basic levels of co-location engagements are successful. Basic Managed Services Hosted Services Recovery

30. Over 77% of organizations do not outsource the entire data center and instead outsource a subset of physical servers that require extra recovery and availability while leaving the rest in-house.Percentage of organizations 27% 25% 25% 23% 62%-100% 25%-62% 6%-25% 0%-6% Percentage of servers outsourced Info-Tech sees that the median percentage of servers outsourced is 35% of total physical servers. The minimum percent of physical servers outsourced was 4%.

31. Successful co-location requires a minimum of 3 months planning and due diligence 4 Info-Tech Research Group 11 Co-location can be a risky decision when presented to IT with a limited timeframe to make a decision on a vendor. Because it is a long-term commitment, the decision should be carefully considered. Take the time to plan and conduct due diligence to ensure the engagement goes right the first time – co-location switching costs are high. 55% of organizations that demonstrated success put a minimum of3 months planning into their co-location strategy Did not conduct a minimum of 3 months planning 45% 55% Conducted a minimum of 3 months planning

32. Successful co-location planning involves many tasks 8 Organizations that experienced success in their co-location engagements put more effort in gathering facility requirements, cost comparisons, profiling servers, setting business expectations, the RFP process, and conducted site visits to potential co-location vendors in the planning process. Info-Tech Research Group 12 6 = Strongly Agree 5 4 3 2 1 = Strongly Disagree Profiled for redundancy 24% 40% 17% Profiled for high availability 19% 33% 23% Cost comparison 19% 21% 21% Minimum of 3 months planning 16% 16% 23% 14% 19% Formal RFP process 15% Site visits 2% 16% 29% 35% Gathered facility requirements 2% 21% 23% 28% 20% 30% Set of business criteria 25% 100%

33. Determine if a Co-location Strategy is a fit with the Business Info-Tech Research Group 13

34. Assess organizational fit and appropriateness before engaging in data center co-location Info-Tech Research Group 14 ü ü ü ü ü ü

35. The build versus buy decision requires a 360 view of the current facility Info-Tech Research Group 15 Organizations exploring the option of data center co-location should assess all options surrounding the build vs. buy decision and must follow the same process to aid in making the final decision. A thorough assessment of the current facility requirements should be conducted from assessing the business need by involving key stakeholders throughout the business to facility requirements gathering to develop a high level budget and cost comparison For a more detailed explanation of each step in the decision making process, see Info-Tech’s “Data Center Facility Requirements Estimations At-a-Glance.” VS.

36. To build or not to build? It’s a question of cost Many organizations that gather requirements and forecast data center costs into the future will find that over time, co-location will be a less expensive alternative than having all servers in-house. Ongoing operating expenses represent 65% of the total costs associated with building a data center. Both capital and operating expenses for the build vs. buy decision should be carefully examined. Info-Tech Research Group 16 Use Info-Tech’s “Data Center Facility Build vs. Buy Tool” to determine a high level budget and estimate cumulative costs for data center build and co-location over the long term. Organizations that estimated a budget and conducted cost comparisons were more successful in their co-location agreement

38. Table 2 demonstrates the costs associated with the co-location strategy examined by the company over a period of eight years.Table 1. Company ABC Estimated Build Costs

39. Case Study: Comparing costs for the build vs. buy decision Info-Tech Research Group 18 Table 2. Company ABC Estimated Co-location Costs After careful estimation, the company found that to build its data center in-house, it could cost approximately $888,000 over eight years. The co-location option would cost the company $472,816 over a period of eight years – almost half of the build cost even with Cat5e and Fibre interconnects factored in. It was evident in this case that the best option was co-location.

41. 51% gathered facility requirements before making the final decision to co-locate all or part of the data center facility.“ Understanding the facilities requirements can help the organization have better conversations with co-location vendors about the business needs and fit with vendor offerings. I had to do a lot of homework ahead of time, and I think that’s important [to understand what our actual requirements were] so that when we went to the vendor, we were able to say we needed half a rack, we needed this much power, we needed this much bandwidth. And then you’ve also got some idea of what your growth is going to be [to understand how much it will cost]. - Source: IT Director, Semiconductor Manufacturing ” For help in estimating facility requirements for power, cooling, and standby power, refer to Info-Tech’s “Data Center Power and Cooling Requirements Calculator.”

43. 56% of organizations profiled servers to determine requirements for high availability.

44. Profiling servers before entering a co-location agreement was a significant factor to the engagements success.Info-Tech Research Group 20 Is it best to co-locate servers that require high availability and redundancy? “ “Cost of provisioning and operating redundant power, diesel generators and fiber circuits at each company site would greatly exceed Co-location fees.” “Co-location provides a level of recoverability that cannot be achieved by in-house service.” “To in-source such services and redundancy a corporation required a huge investment into an infrastructure which is hard to justify. In a co-location the company shares the costs with other customers, reducing the cash flow burden of such an investment into these services.” “It does if there are limited resources within the company as we provide those services for us it is not a major hurdle. Servers that require high availability and communication links makes more sense. Has been a deciding factor in our strategy was redundancy of communications and bandwidth availability.” “As a mid-sized organization co-location allows us to take advantage of the stability and functionality that a larger installation base can afford to support.” ”

45. Warning: Co-location will NOT remove all in-house operating costs Although co-location may be a less expensive option over time for many organizations based on estimates and monthly fees, co-location will NOT remove all costs. Beware of additional costs for switching, moving, and implementation, and ensure they are accounted for in the high level budget and cost comparisons. Even when an organization outsources its entire data center, it will still require a wiring closet to tether the enterprise to the co-located services with the requisite costs for power, cooling, and standby power that will incur operating expenses. Info-Tech Research Group 21 “ Many organizations fail to factor in switching to implementation costs when co-locating the data center. You want to be aware of all the factors that you’re looking for on a day to day basis. How do you measure your efficiency and make sure you apply all those same rules to an outsource model? People think “Oh, I’m just outsourcing it; it’s all turnkey; it’s all included. Not the case.” Source – General Manager, PMP, Air Transport Security ” What initial and/or ongoing costs did you incur during the transition to a co-located facility? “ “Network circuit changes, temporary extra gear to bring networks up, moving, packing, insurance costs” “Dual hardware and software maintenance costs” “Transport and consolidating cost ( the move trigger consolidation as now economic driver of space drove consolidation ( not part of original scope).” “Carrier services expenses, additional time of existing staff” “The initial team working on the co-location under estimated the build out costs. Initial costs were under €100K.” ”

46. Case Study: Excessive additional costs result in a no-go co-location decision Info-Tech Research Group 22

47. Case Study: Security concerns discourageexternal co-location, but result in aninternal shared services model Info-Tech Research Group 23

48. Case Study – Build vs. Buy evaluationresults in a GO decision Info-Tech Research Group 24

49. Understand the Market and Vendor Offerings Info-Tech Research Group 25

50. Basic Co-location offerings are fading away… 26 “ One lesson learned that was interesting is particularly some of the value added services that a lot of the organizations are putting out these days. I’m seeing and hearing that there’s a real drive to cut collocation and there’s much more of a preference for managed services because that way the vendor gets to sell you on things like disaster recovery; dynamic infrastructure. Today you might only need two ports on a switch or something to that effect. So instead of selling you an entire switch, they’ll sell you just those two ports and you can buy them by the port. You expand as you grow so it’s dynamic in that regard which is great for them because it’s a total money maker. They isolate each port to a V-line and you have a nice day. I think things like where people are growing applications and they need a server farm or something to that effect, there is a lot of benefits there but you pay for it as well. Source - General Manager, PMP, Air Transport Security Many vendors in the co-location market have cut out their basic level of service and are only offering managed services as their entry level service. This has deterred many organizations from considering co-location as an option; however, based on a recent Info-Tech survey, organizations that enter into basic level co-location services are no more successful than those that engage in higher levels of service. “ Co-location Services Managed Services Recovery Services Fully Managed Services … but unfortunately this is what the mid-sized market needs! Info-Tech Research Group

53. The Tier 2 vendor market is highly commoditized which makes it difficult to differentiate vendor services.

55. Enterprises looking to co-locate the data center should stay away from these vendors and facilities as the service level are subpar when compared to Tier 2 facilities.Info-Tech Research Group

56. Co-location success is directly related to business need Info-Tech Research Group 28 55% of organizations that established a shopping list of services aligned with their business needs, were more likely to experience co-location success. Enterprises find it difficult to sort through the commoditized services offered by vendors. Whether or not a higher level of service is required at the time of selection, all levels of criteria are important for IT to include in the evaluation process. Many organizations find themselves tied to a vendor that cannot support their growth and future service needs, which results in the need to change vendors and incur switching costs. Cost and service level “ Infrastructure is a commodity these days. It is pretty difficult to differentiate sometimes. And those tier 2 guys, they were pretty much the same. One was just a couple hundred dollars a month more than the other. But there was really no difference in the facilities, no difference in the services that were available. No difference really in their ability to meet our needs if we decided to expand using their facilities. Made it difficult to decide Source – Director of IT, Semiconductor Manufacturing “

58. Availability.

59. Carrier routes.

60. Additional power capacity in primary and operational mirror sites.

61. Standby power in primary and operational mirror sites.

62. Support and maintenance.

63. Power metering.

64. Monitoring and technical support.

65. Pricing.Requirements that are specific to the business needs, such as geographical location, level of availability, and power capacity, can help to narrow the search for a co-location vendor.

67. 6U of standard rack space, $291 per month

68. 12 U of standard rack space, $621 per month

69. 42 U (or Full) of standard rack space, $690 per month

70. 110V 20A Circuit (‘A’ side/’B’ side included), $240 per month

71. 110V 30A Circuit (‘A’ side/’B’ side included), $360 per month

72. 208V 20A Circuit (‘A’ side/’B’ side included), $480 per month

74. Full descriptions

75. Examples to use in the RFPInfo-Tech Research Group 31

76. Manage your Managed Services Info-Tech Research Group 32 Managed services offerings build upon basic co-location with added services provided by the vendor. The vendor typically provides Server-OS configuration and management , Server monitoring & reporting, Server back-up management which includes: scheduling, media handling, re-start, change control, incident handling, and limited ad-hoc restoration requests. Some examples of managed services selection criteria include: Although managed services are becoming the entry level for many vendors, only 8% of organizations engage in managed services agreements.

78. Unix-based servers in a range of $240 - $950 per month.

80. Server monitoring & reporting (real-time, basic utilization metrics from the server OS, SLA reporting, monthly distribution of reports)

81. Server back-up (assume customer supplied Back-up/Restore solution not “full managed”, scheduling, media handling, re-start, change control, incident handling, and Ad-Hoc restoration service).

83. Full descriptions.

84. Examples to use in the RFP.Info-Tech Research Group 34

86. Office space & resources

89. Services in scope

90. Reporting

91. Demarcation of roles and responsibilities between vendor and customerEvaluate costs for all server types and one-time provisioning and de-provisioning charges

93. Full descriptions

95. Fully managed services is a level of service that should be worked up to over a long period of time. In most cases, small to mid-sized organizations will never engage in this level of service.Organizational Size Organizational Fit

96. Account management & service are key vendor differentiators Info-Tech Research Group 39 “ Engagement practices help to set expectations up front. Establish a criteria and evaluate vendors on practices, such as soliciting client references, aligning project management processes, and establishing channels of communication for the term of the contract to ensure a successful relationship. I think obviously the relationship with the vendor is going to be important particularly when you’re talking about your data; if your business is running entirely on that data. You want to make sure you have a solid relationship there particularly if it ever came down to any type of disaster recovery situation. Source – General Manager, PMP, Air Transport Security Stability “ 66% of organizations that co-locate all or part of their data center facility view the co-location relationship as a partnership and have experienced a successful engagement as a result Communication Account Management Trust Because basic services offered by data center co-location vendors are largely commoditized, in the end, the decision may come down to which vendor offers better account management skills and service.

98. Full descriptions

99. Examples to use in the RFPInfo-Tech Research Group

100. D Organizations that properly plan, gather requirements & understand the business need, experience moresuccessful co-location engagements Info-Tech Research Group 41 Organizations that take the time to go through an evaluation process, experience high levels of success factors in their co-location arrangements. While Security is a major deterrent for many organizations, 66% of respondents said that the security in the co-location facility exceeded the current security capabilities of the organization. 6=Strongly Agree 5 4 3 2 1=Strongly Disagree 2% 18% 25% 41% Security standards exceeds own capabilities 2% 12% 44% 26% Maintains level of service and availability 23% 30% 23% Defined escalation process 23% 30% 23% Staff knowledgeable, friendly & helpful 9% 41% 25% Both parties view the agreement as a partnership 9% 25% 30% Dedicated resource to manage enterprise services

101. Case Study: Poor business requirements definitionleads to a poor co-location partnership Info-Tech Research Group 42

102. Evaluate Vendor Offerings Info-Tech Research Group 43

104. Smaller engagements may only require an RFI; however, even if the size of the project does not warrant an RFP, it is still beneficial for the organization to go through the process internally to help further define their engagement requirements.Current Facility Requirements Established Service Criteria Future Facility Requirements Co-location Vendor RFP Document Info-Tech Research Group 44 “ The duration of the RFP process was about 2 ½ months. It took us a bit longer because of the co-ordination with the purchasing department. We had to negotiate and get them up to speed on what co-location was. It was those kinds of complications that took us longer. Source – IT Director, Semiconductor Manufacturing “

106. Co-location selection criteria.

107. Managed Services selection criteria.

108. Recovery Services selection criteria.

110. Score each vendor based on proposal responses.

113. Is the city or country the site is located in politically stable?

114. Is it in an area susceptible to natural threats? (i.e. severe winter storms, floods, hurricanes, tornadoes, and earth quakes)

115. Is there a permanent FEMA presence in the geographical location?

116. Is there unobstructed access to the location?

117. Can the organization’s personnel and vendors get to the facility easily?

118. Are there train stations, airports, and hotels nearby?

119. Are fuel supplies able to get to the facility? Evaluate the following before the site visit:

120. Be prepared & understand what to look forduring a co-location site visit After a shortlist of co-location vendors has been determined, IT must still take the next steps to ensure that all due diligence has be covered. Ensure that vendor claims are valid, and that facilities and surrounding areas are adequate for the organization’s data center co-location needs by conducting an evaluation of the site before, during, and after the site visits. Use Info-Tech’s “Data Center Co-location Site Visit and Evaluation Checklist” to track and record impressions during the site visit. The co-location site visit and evaluation checklist covers areas such as: Physical security of the co-location site. Facility upkeep and maintenance. Facility Requirements Info-Tech Research Group 49 For additional explanation of what to look for during a site visit, refer to the Info-Tech research note, “Data Center Co-location Vendor Validation & Site Evaluation.”

121. Manage the Outsourcing Agreement Info-Tech Research Group 50

123. Co-location SLAs range from very simple to the very complex Typical SLAs include the following components: Service category (availability, response time, throughput). Acceptable range of service quality. Definition of what is being measured. Formula for calculating the measurement. Credits and penalties for achieving targets. Frequency and interval of measurement. Info-Tech Research Group 52 The simplest form of SLA is the one that defines a service simply by availability or non-availability. More complex SLAs that require greater management overhead are also likely to be more expensive. A manageable SLA will determine objectives, refine requirements, set measurements, and establish accountability.

124. The customer & vendor must be clear about theirexpectations within a co-location engagement Info-Tech Research Group 53 A Service Level Agreement (SLA) provides a definition of performance for a negotiated service. SLAs ensure accountability on the part of the service provider and also determine the price of the service. In essence, the SLA defines the “product” that is being purchased, permitting the provider to rationalize resources to best meet the needs of varied clients, and permitting the buyer to ensure that business requirements are being met. The terms of a well-negotiated SLA will be balanced between defining the service expectations of the customer and limiting the liability of the provider. Use Info-Tech’s “Co-location SLA & Service Definition Template” to understand and develop expectations on co-location vendor SLAs. This Template provides: Aggregated real world examples of a co-location SLA and service definitions documents. A basis to compare and negotiate vendor SLAs

126. Delivery, or timeliness and conformity to specifications.

127. Billing dispute resolution time.

128. Account management responsibilities.

129. Call answering, including wait time, percentage of calls resolved on first contact, user satisfaction, and specific business relationship goals.

130. Vendor resources, including turnover and improvements in service performance.

131. Risk management, including control of volatility in buyer’s cost.

132. Availability of the service.

133. Access and response times.

134. Installation lead times.

135. Maintenance and support response and resolution times.

136. Availability of dedicated support staff.

137. Capacity, or volume handled before performance degradation.

138. Reliability, or number of outages over time, and how long it takes to recover.

139. Efficiency, or increase in output or performance using the same resources.

141. Establish a reporting structure

143. Understanding the two typical SLA management models Info-Tech Research Group 57 Management by Vendor Management by Client SLA management by the vendor is most common, because it is applied to IT and network outsourcing, where service levels can be set according to well understood and standardized metrics. The service provider may have a variety of different service levels at different costs, which serve as the basis for an SLA; individual or custom provisions are then added through negotiation, according to specific needs, or the base level SLA may be acceptable without change. As SLAs and services become more complex, the tendency is shifting toward client management. Even if the vendor has a management system in place, the client should perform some internal monitoring and establish management procedures. This can be further facilitated by the vendor providing the client access to the vendor’s monitoring software or portal. Management involves monitoring performance levels and the vendor’s situation on an ongoing basis, periodically reviewing performance against objectives, and measuring performance against specific metrics agreed upon in the contract. There must be a structure in place for regular reporting, and procedures for problem resolution need to be in place, including notification procedures and tools and procedures for analysis. Finally, the SLA itself should be reviewed on an ongoing basis to ensure that provisions adequately respond to business process needs, account for changing technology, and meet financial goals.

146. With most SLAs, the customer has the responsibility to make claims for financial rebates when performance targets are missed. The typical remedy for failure to meet service targets is a refund of charges.

148. Appendix – Co-location Strategy Tools & Resources Info-Tech Research Group 61

149. Appendix - Demographics Info-Tech Research Group 62

150. Info-Tech Research Group 63

151. Info-Tech Research Group 64

152. Info-Tech Research Group 65

153. Info-Tech Research Group 66