Costs have been coming down for enterprise and major corporate data center colocation deals for years. Savvy purchasers frequently renegotiate during their term for even lower costs. But many multi-tenant data center providers claim they are getting to a point where they can’t go much lower for colocation pricing, especially on larger deals.
The desire of end users to lessen their spend on major data center colocation contracts has another component that is winnowing down prices, and will likely be leading to providers (and the shrinking number of end users that still do their own thing) building fewer concurrently maintainable data centers as a result.
As redundancy increases at the application layer, many users are considering whether their current level of investment in resiliency at the infrastructure layer is necessary. One enterprise that formerly demanded data center resiliency at a Tier 3 level (concurrently maintainable data center infrastructure) now is confident they can match that level of reliability with Tier 2 infrastructure (redundant components supporting data center infrastructure, but not concurrently maintainable) due to greater resiliency at the application layer.
When there is confidence in the investments made in near-instant failover at the application layer, the resulting cost savings in data center infrastructure can be considerable. A Tier 3 data center can cost about 30-40% more to build than a Tier 2 data center.
Data center providers approached about this issue have different views ranging from “a real trend” to “we haven’t seen it personally” and some are considering it as a factor in their building and expansion plans, not wishing to invest as heavily in backing up their primary systems if less redundant infrastructure is desired by tenants.
While data center providers are understandably resistant to adjust their construction and expansion investments based on “flavor of the month” tech trends, this one appears to have legs, and may result in a lowering in the investment levels of planned data center construction.