235 Montgomery, Suite 1017

San Francisco, CA 94104

(415) 373-0673
www.ramprate.com

The 7 Principles of Data Center Cost Metrics

The Cost Evaluation Methodology Vendors Wish You Didn’t Know

By Alex Veytsel
Principle Analyst
RampRate

August 2010
When planning a data This paper addresses the methodology
and reasons for looking at cost of data
center outsourcing strategy, center / co-location space per peak
many elements need to be kilowatt as the preferred method of cost
accounting, benchmarking and
taken into account, including
evaluation of data center fixed costs
geography, data center tier, historical (including rent, maintenance, and
reliability, reference reviews, SLA depreciation of non-IT equipment such
guarantees, protection against natural as UPS and generators).
disasters, etc. A best practice approach
boils all of these considerations down This paper concludes with a Q&A that
into a simple scorecard for direct we compiled from the common
apples-to-apples comparisons across all questions we received from customers
aspects of potential solutions, including seeking to adopt data center
both outsourced and in-house. outsourcing costs evaluation best
practices.
While a full evaluation is a complex
process requiring years of market data, Fundamental Goals of Optimal Cost
vendors’ historical performance, and Metric in Procurement
highly technical sourcing experience,
one basic facet of the selection process In order to say which analysis model is
can still cause trouble even for some of better, we must first ask "better at
the largest and most experienced co- what?" We’ve learned that a cost
location buyers: identifying a common analysis metric should follow 7 key
size metric and cost accounting model. principles:

This is essential to enabling 1. Comparability of quotes — The metric

comparisons between different vendors should allow apples-to-apples
and facilities purely on a financial basis, comparisons, so that an offer from one
but is often very difficult to achieve due provider, location, or project can be
to confusing pricing models, opaque contrasted with offers from other
cost drivers, and conflicting reporting providers in other locations and projects.
parameters.

2
2. Flexibility to spec changes — The Potential Cost Models for Data Center
metric should allow for inferences about Space
the impact of design changes on costs
without going back to vendor. The underlying elements in data center
space costs are always the same –
3. Correlation with underlying cost land, facility, equipment, maintenance,
drivers/constraints — vendors should power generation/consumption, and
not be able to increase chargeable overhead. However, depending on the
amounts to the customer unless they vendor's background, you may see one
are incurring additional underlying costs. or more of the following six price models
for this same bundle:
4. Vendor neutrality — Proprietary
terminology from one vendor precludes 1. Per deployment -- a total bottom line
cross-vendor comparisons, so the quote for a customer’s specific data
metric should be neutral to all vendors center spec (e.g. the total for X racks
or options. with Y power is $Z per month)

5. Translatability — The metric should 2. Per rack (or cabinet, or rack unit)
be clearly definable and translatable into a. 7’ tall
other charge models. b. 10’ foot tall

6. Minimization of misunderstandings — 3. Per square foot

The metric should be easily and directly a. Raw square foot
explainable to all participants on the b. Rentable square foot
customer side and on the vendor side, to c. Raised floor square foot
remove potential for miscommunication. d. Useable square foot

7. Adherence to market best practices 4. Proprietary metrics:

— The metric should allow for clear and a. Per ―virtual data center‖ –
repeatable processes, success metrics, used to denote a bundle of
and standards for purchasing that can space, power, and bandwidth.
be directly compared with b. Per cage / half cage – used to
other organizations, and with industry denote a VDC of 4 or 2 standard
benchmarks. racks respectively

3
5. Per kilowatt – defined as ―sufficient
space to house 1 kilowatt of power draw
at peak utilization‖
Checklist vs. Cost Analysis Goals
can be established for previous deals or
for other options on the market because
no correlation is established between
quantities and prices.
2. Allows spec change projections: no.
Each change in spec must go back to
vendor(s) for pricing.

3. Reflects vendor cost structure: yes.

4. Is vendor neutral: yes

5. Can translate into other models: no.

Strengths / Weaknesses of Each
No correlation is established between
Approach Per Deployment
quantities and prices

Per-deployment is a price model favored

6. Minimizes misunderstandings: yes
by larger vendors for whom data center
(assuming spec is thoroughly defined)
is a small piece in an overall managed
services or full IT outsourced solution.
7. Follows best practices: no.
Its biggest strengths are its brevity for
Knowledge from one exercise cannot be
an executive presentation and its ability
reused in others
to compare offers for the same are the
possibility that the vendor did not
Per Rack
properly size the environment as well as
Per rack (or cabinet) is the most
the need to re-run the RFP / RFQ for
common model for carriers and carrier-
each small design change.
neutral hubs, dating back from the time
when all rack deployments used the
Here's how it matches up against each
same power draw. In fact, vendors in
criterion:
many non-US markets still enforce a
standard rack size at a density that's
1. Apples-to-apples comparable: partial.
incompatible with modern layouts. Its
Although offers between vendors in a
primary strength
deal can be compared, no benchmarks

4
is its universal appeal – you will never
have to explain to a vendor what you
mean by "I need 10 racks." It weakness
is that "10 racks" now has many more
underlying meanings than before,
creating an infinite array of ways not
only to have genuine misunderstandings
but to be intentionally misled by the
other party. In practical terms, it tends to
break down completely at densities of
more than 3kw-4kw, creating artificial
charge metrics such as "50 racks (20
useable)."
1. Apples-to-apples comparable: partial.
Although offers between vendors in a
deal can be compared, no benchmarks
can be established for previous deals
because racks can contain different
amounts of power, which will affect price
drastically.
2. Allows spec change projections:
partial. Changes in quantities can only
be projected provided
the same power load per rack remains.
3. Reflects vendor cost structure: no.
Most data center operational costs are
driven by power /
cooling, not space.
4. Is vendor neutral: yes
5
5. Can translate into other models:
partial. Per kilowatt pricing can be
established if the power spec is
provided; however per-square foot
pricing cannot be inferred easily.
6. Minimizes misunderstandings: no.
Vendors are selectively blind to power
requirements and price in a ―standard
rack,‖ hoping to get through initial down
select. Only after moving to final
negotiations do they announce, ―Well,
we didn’t realize you would need to use
a non-standard rack with a non-standard
price.‖ Furthermore, some vendors offer
taller racks, creating an issue where
both quantities and prices change as
equipment can be consolidated into
fewer, more high-priced racks.
7. Follows best practices: no. Major
organizations have a variety of rack
configurations ranging from mid-range
computers to high-density blades and
cannot meaningfully compare
cost/pricing with external vendors or
market benchmarks.
Per Square Foot
Per square foot is the legacy real estate
metric, so you will most often see it from
vendors whose core competency is real
estate rather than co-location or data
center services. It is practically endemic
in in-house data center accounting
(especially in the financial services
vertical). Its primary strength is in the
ability to work from layout diagrams if
your design requires a specific physical
configuration. Its biggest weakness is its
inability to handle the true cost drivers of
the data center environment today,
which is power consumption rather than
space usage in the vast majority of
cases. Not all data center space is
created the same, and therefore your
predetermined layout may either be
suboptimal or impossible with some of
your providers.
1. Apples-to-apples comparable: no.
Not only can benchmarks from past
deals not be used due to differing power
densities, even offers in the same deal
cannot be evaluated meaningfully
because both the quantities and unit
rates of the services included change
from sq ft offer to sq ft offer.
2. Allows spec change projections:
partial. Changes in quantities can only
be projected provided the same power
load relative to space used remains.
3. Reflects vendor cost structure: no.
Most data center operational costs are
driven by power /cooling, not space.
6
4. Is vendor neutral: yes
5. Can translate into other models:
partial. Per kilowatt pricing can be
established if watts per square foot are
provided. However, per-rack pricing
cannot be inferred easily – standard
rules of thumb for converting square feet
into racks become useless at densities
above 3kw / rack.
6. Minimizes misunderstandings: no.
The need to change both quantity and
unit price simultaneously has historically
proven highly confusing to vendors and
does not allow for an easy definition of
what is being requested (a 500 square
foot cage if you’re a high density vendor;
a 750 square foot cage if you’re a
medium density one; and a 1,000
square foot cage for low density is
obviously suboptimal). Furthermore, the
very definition of a square foot can vary
(especially in large purchases):
a. Raw square footage – entire
building space including walls,
elevators, etc.
b. Rentable square footage –
removes building infrastructure
such as elevator shafts
c. Raised floor square footage –
removes office space
d. Useable square footage –
removes support columns, major
 walkways, space for UPS /PDU,
etc.
7. Follows best practices: no. Major
organizations use a variety of data
centers with drastically different peak
densities per square foot and cannot
create a meaningful comparison metric
across locations and against industry
benchmarks.
Proprietary Metrics
Proprietary metrics have the same
disadvantages as per-rack / per-square
foot pricing, plus lack of vendor
neutrality, making them a non-starter for
most of our clients.
Per Virtual Data Center (VDC)
This metric originated with Exodus (now
Savvis), and was adopted by other
vendors for a period of time. However, it
represents a product definition as a
service description and, for Savvis, as a
market differentiator. We generally only
see it in legacy situations, where a
contract has not been closely reviewed
in several years.
Per Cage
Cage is a metric that can denote either
a fixed or variable amount of data center
space:
7
Savvis used "cage" and "half cage" to
denote a specific type of VDC
configuration with sufficient space for 4
and 2 racks respectively.
Some vendors also use "cage" as the
unit in a per-deployment pricing model,
where each distinct footprint appears on
the client's bill as a cage.
This ambiguity in the usage of the term
gives buyers yet another reason to seek
quotes denominated in a different set of
units.
Per Kilowatt
This approach was pioneered in large-
scale buyers of entire wholesale data
centers, and by companies who build
their own facilities. Today it is
propagating in the market largely
through the efforts of wholesale
providers such as Digital Realty Trust
and CoreSite as well as RampRate's
own work with our clients.
This approach has many advantages as
a simple metric that can measure the
footprint at almost any type
of facility with just one number. Its
primary disadvantage is that, although
each data center operator
worth its salt knows its cost per kilowatt,
many neglect to train their salespeople
on properly interpreting these requests
and they do not adapt their price sheets
or billing systems from
configurations. We expect per-kilowatt
pricing to become dominant (or at least
universally understood in the same way
that rack pricing is) in the US in the next
three years, with other world locations
trailing a little behind.
1. Apples-to-apples comparable: yes.
Each offer in a given transaction can be
compared to other offers in the same
transaction, as well as to other offers
and other transactions (except ultra-low
density deployments such as space for
tape libraries or aged mainframes).
2. Allows spec change projections: yes.
Per-kilowatt pricing most
matches vendors’ internal engineering
calculations governing cost and allows
most accurate projections of
increases /decreases based on changed
specifications regardless of change
type.
3. Reflects vendor cost structure: yes.
Directly ties to key cost drivers of power
and cooling
4. Is vendor neutral: yes
5. Can translate into other models: partial.
Price per rack is typically identified
through definition of site specs, but price
legacy per square foot is not considered
essential to the quote process, and is
occasionally omitted because it needs
vendor-specific density information to
calculate.
6. Minimizes misunderstandings: yes.
Since the specific terminology of per-
kilowatt pricing is not used by the
majority of vendors in other contexts /
models, if the client defines the metric
thoroughly, no opportunity for confusion
arises.
7. Follows best practices: yes.
RampRate has worked with major
media and financial services companies
closely who have already adopted per-kilowatt
as a metric for tracking data center
space costs, or are planning to do so.
cost This group includes Intel and Digital
Realty Trust.
Key Questions on Data Center Cost
Metrics
Q: If neither we nor our vendors use
per-kilowatt pricing, why would we use a
model that most vendors don’t use in
their sales process / billing
A: For the purposes of requesting a
quote, the lack of familiarity can be very
8
beneficial. If forces you and the vendor then high density data centers would
to speak the same language, and always be price leaders in terms of total
removes the risk of confusion from cost. This is not the case. In well-
―what we’ve always done‖ that has negotiated deals in our experience,
built up over years of conflicting when faced with a competitor reducing
definitions and adherence to outdated costs through increasing density, low-
schematics (e.g. that all racks use a density vendors can and do adjust their
standard 110V / 20A circuit, or 1.5kw of pricing to match the bottom line quotes
power). If the vendor wants your on the table. While there are some
business – and be assured that they do unrelated business drivers (strategic
– they’ll figure out a way to meet your providers and MSPs like IBM and AT&T
requirement in the sales and billing happen to run some very low density
process. And we can almost guarantee data centers and have high prices), we
that all vendors are using per-kilowatt have found that high density does carry
pricing for some portion of their a premium and low density a discount.
customers, even if they haven’t started
doing so with you. Furthermore, for the purposes of
projecting a budget for a specific set of
Q: Our experience has been that services, using a methodology where
price per square foot does not vary with total pricing is contingent on vendor-
the vendor’s data center density driven variables such as data center
(maximum watts / square foot) – density does not appear appropriate or
meaning that the lower the vendor’s meaningful. Building a budget or
density, the higher the total cost. benchmark that said, ―Your costs for
However, per-kilowatt pricing implies a this configuration will be $X, unless you
direct relationship — total cost stays choose a lower or higher density data
constant, but as density decreases, the center than our default assumption‖
cost per square foot should also would not serve the purpose of truly
decrease. reflecting the breadth of pricing available
A: Vendors participating in competitive in the market.
markets recognize that buyers make
decisions based on the bottom line. If Q: Does per-kilowatt price modeling
pricing per square foot were, in fact, work for all deployments?
constant regardless of power density,

9
A: Per-kilowatt price modeling works used. The space pricing methodology
best for medium to high densities. Low above uses peak rather than average
densities often do still have space as a (typically 80% of breaker and 133% of
core cost driver, which skewing your average) power capacity.
price. Ultra-high densities may require
vendors to undertake new CapEx in Nevertheless, multiple organizations,
cooling equipment (e.g. water or CO2 both on the vendor side and on the
cooling) that can increase per-kilowatt client side, have not only tracked power
pricing. based on peak kilowatt, but rolled space
and power pricing into one total figure
Q: How would we request a quote per kilowatt (or, more typically per
for 1 kilowatt of space? megawatt) when buying at scale.
A: There are two potential approaches.
One is to directly say, ―We need Q: Can we discuss this with
sufficient space RampRate in more detail?
to house X kilowatts of power‖. The A: To schedule an in-depth
other is to ask for pricing for X racks conversation, please contact us at the
drawing Y kw of power each. following:

Q: Should we use per-kilowatt cost 235 Montgomery, Suite 1017

San Francisco, CA 94104
metrics for power as well?
(415) 373-0673
A: Although it is not RampRate’s www.ramprate.com
preferred approach, per kilowatt cost
or send an email to info@ramprate.com.
modeling (to remove confusion,
potentially referred to as kilowatt-month
as opposed to kilowatt-hour) is also
possible for power. One nuance to keep
in mind is that, when forecasting for
usage-based power, you should use
average kilowatts drawn (typically 60%
of breaker capacity and 75% of peak
capacity), which can then be multiplied
by the number of hours in a month to
understand kilowatt hours of power

10