Aron Smetana: 10 due diligence questions to ask before co-locating your data center

Monday, May 6, 2013

10 due diligence questions to ask before co-locating your data center

10 Things 10 due diligence questions to ask before co-locating your data center

Takeaway: Many organizations are discovering the benefits of data center co-location. But if you don't thoroughly vet prospective co-lo vendors, you could get burned.

One of the hottest trends in 2013 is co-location. The idea of farming out all or portions of your data center is catching on as companies look for greater agility — and for ways to avoid data center expansion costs. Co-lo can be fantastic. But before you take the leap, here 10 ten things you should include in your co-lo due diligence.

1: Will you be able to meet all your IT obligations?

Saving money and facility costs is one thing, but meeting regulatory, governance, and security requirements is another. One hiccup in a regulatory or security area can cost careers, a company reputation, and customers. All are expenses that go far beyond what you'll ever save in cold, hard cash. This makes it essential that you thoroughly vet all co-lo prospects for their ability to comply with the governance, regulatory, and security standards you expect of yourself. If they can't comply, don't do business with them.

2: Is the co-lo you're considering the best fit for your business?

If you're only looking for a place to park a few servers and disk, a bare-bones co-lo that offers secure space and the ability for your staff to perform periodic maintenance might be enough. However, if you're expecting the co-lo vendor to also offer on-staff expertise for the applications you want to farm out or to be thoroughly familiar with all the demands and requirements of your particular industry, you should look for a full-service co-lo.

3: Does the co-lo have SLAs (service level agreements)?

You'd be surprised at how many co-los don't! Never ink a contract with a co-lo unless you have SLAs. If the co-lo doesn't offer them, write them into the contract.

4: How easy will it be to walk away from the co-lo if you have to?

Industry tends to go through alternate phases of outsourcing and insourcing. There is no reason to think that this trend won't continue. Be sure to include in your contact a guaranteed service level from your co-lo vendor in the event that you need to terminate service. No one likes to negotiate these "terminating" SLAs in a new service contract. But if you ever need to make a break, you'll be glad you did.

5: Does the co-lo own its own data center?

A number of SaaS (software-as-a-service) providers still contract with third-party data centers to provide their data center operations. Try to avoid a situation like this. If you ever have a data center disaster or outage at a third-party data center, you are at least one vendor away from that third-party vendor. It will likely mean that you have little influence or leverage — and the health of your business could be hanging in the balance.

6: How much money are you really going to save?

Starting with a co-lo can be as much as 80 percent cheaper than building out your own data center But once startup is over and you're on an ongoing co-lo subscription, co-lo (versus internal data center) costs tend to even out. If it is strategically important for you to maintain your own data center, take a hard look at your situation before going with a co-lo.

7: How does your technology roadmap match up with your co-lo's?

If you are moving mission-critical applications to a co-lo, you need to understand what the co-lo's own technology investments and upgrade strategies are going to be. This upgrade path should closely coincide with your own. If it doesn't, you risk falling out of sync technologically with your co-lo.

8: How strong is the co-lo's disaster recovery plan?

Every co-lo well tell you that it has a disaster recovery (DR) plan — but will the plan work with your own DR plan? Upfront, you should negotiate with your co-lo to jointly test DR with you on an annual basis.

9: How stable is your co-lo?

Many companies check out SAS70, Dun and Bradstreet, and financial statements on co-los to ensure that they're financially viable. But another angle to think about is the potential for mergers and acquisitions. The co-lo sector is no different from other technology sectors. Mergers and acquisitions are ongoing. Sometimes when these events occur, clients find that they don't work well with the new business partner. Be sure to negotiate an opt-out clause in your co-lo contract that allows you to terminate if there is a change in management control.

10: How strong is your co-lo's service record?

When you check out co-lo customer references, ask about service quality and response times. Business is tough enough these days. In an escalated situation, you don't want to find yourself with a co-lo partner that is slow to respond.

Aron Smetana