Understanding Data Center Pricing Models: A Comprehensive Guide

Data centers are a key investment for many modern businesses. Understandably, those businesses want to maximize the return on that investment. To achieve this, it helps to understand data center pricing. With that in mind, here is a comprehensive guide to what you need to know about data center pricing models.

The basics of data center pricing models

The three main data center pricing models are colocation, metered power, and managed services. Here is a brief overview of each of these options.

Colocation

This involves renting space in a shared data center facility to house servers and other hardware. Pricing is typically based on the amount of space occupied, with additional charges for power usage, connectivity, and other services as needed.

Metered power

With metered-power pricing, clients are charged according to their actual energy consumption. This pricing model allows for greater flexibility and scalability, as clients can adjust their power usage according to their needs and budget. It also incentivizes energy-efficient practices and aligns incentives between data center providers and clients.

Managed services

Managed services involve outsourcing IT infrastructure management to specialized providers, covering tasks such as monitoring, maintenance, security, and support. Pricing for managed services is typically based on a subscription or usage-based model. This means that clients pay a recurring fee for the services rendered.

Factors influencing costs

Here is an overview of the five main factors influencing data center costs.

Location: This affects costs due to differences in real estate prices, energy costs, tax regulations, and accessibility. Facilities in urban areas or regions with high energy prices may have higher operating expenses.

Infrastructure requirements: The type and scale of infrastructure needed can significantly impact costs. High-performance hardware and redundant systems enhance reliability but also increase expenses.

Energy efficiency measures: Implementing energy-efficient technologies can help reduce operational costs and minimize environmental impact. One of the advantages of leasing data center space is that the cost of the upfront investment is placed on the vendor. Moreover, it is recouped by charging multiple customers rather than just one.

Scalability: Scalability is convenient for the client but challenging for the vendor. This means that the more scalable a solution is, the more of a premium it is likely to charge its customers. With that said, this premium may be more than justified for the benefits it delivers.

Security and compliance measures: All data centers need to provide robust security and most, if not all, need to support the mainstream compliance programs. Data centers that go beyond this are likely to charge extra for the extra protection they provide.

Billing structures in data centers

Here is an overview of the three main billing structures used in data centers. Each of these structures can be implemented on a pay-as-you-go or contractual basis. In the latter case, they can have diverse contract lengths and terms.

Area-based pricing

In this structure, clients are charged based on the amount of floor space they occupy within the data center facility. This model is straightforward and, hence, easy to understand. It may not, however, accurately reflect the actual resource usage or operational costs associated with individual clients.

Power usage effectiveness (PUE) models

With PUE-based billing, clients are charged based on their power usage efficiency. This is calculated by dividing the total energy consumed by the IT equipment (excluding cooling and other overhead) by the total facility energy consumption. This incentivizes clients to optimize energy usage and improve efficiency, leading to cost savings and environmental benefits.

Tiered pricing structures

Tiered pricing models offer different service levels or tiers with varying features and pricing. Tiers may be based on factors such as performance, reliability, support level, or additional services offered. This structure provides flexibility and customization options but can be complex to manage and compare across different providers.

Cost optimization strategies

Here are three strategies businesses can use to help minimize their data center costs.

Right-sizing infrastructure

Analyze workload requirements and scale infrastructure resources accordingly to avoid over-provisioning. Utilize capacity planning tools to optimize resource allocation, ensuring that hardware, storage, and network capacity match actual demand.

Implementing energy efficiency measures

This includes server virtualization, consolidation, hardware optimization, and airflow management techniques. By optimizing energy usage, businesses can lower electricity bills, improve PUE metrics, and mitigate environmental impact. Regular audits and performance monitoring help identify inefficiencies and opportunities for optimization.

Leveraging managed services

Outsource non-core IT functions to managed service providers (MSPs) to reduce operational overhead and optimize resource utilization. MSPs offer expertise, scalability, and efficiency gains that can result in cost savings compared to in-house management.

By offloading tasks such as monitoring, maintenance, and support, businesses can streamline operations, improve service quality, and free up internal resources for strategic initiatives. Evaluate managed service offerings to identify areas where outsourcing can deliver the greatest cost efficiencies and business benefits.