It wasn’t that many years ago that when you spoke of colocation pricing trends the numbers that were mentioned were $400.00 plus per Kw, especially for the enterprise class market leaders such as Equinix, Savvis and others. While smaller niche players were able to win business by being more agile and price competitive, they too commanded prices of $300.00 plus per Kw, especially for deals below 100Kw.
Recent work we have done in a number of major and secondary markets have shown that the colocation market is significantly more competitive today than we have seen in past years. We have seen colocation pricing trends on colocation only deals decrease and it’s not unusual to see upper end pricing by top tier firms in the $300.00 per Kw range for deals in the 50Kw range. For deals in the 100kw and above, the deals are well below $200 kw all-in in many markets. Tier 2 providers could be significantly below those numbers.
In most cases, we are not seeing a decrease in demand. Demand is still trending upwards, with demand outstripping supply in most markets. What appears to be driving the price reduction is twofold: 1) the entry of new players in the field and 2) the ultra-competitive nature of many of the markets. There are a lot of good service providers out there and colocation only service is a very hard service to differentiate.
As a buyer, these colocation pricing trends mean that you can expect to see substantial savings on your configuration, especially if you have the flexibility to shop your solution against a number of providers. If you are approaching the end of a contract term, this is the time to open the lines of negotiation with your service providers.
As a service provider, we believe the best way to offset price reductions in colocation is by offering a full stack of professional, managed, and cloud services to your clients. These types of services are still not viewed as a commodity and are still enjoying better margins. They also make you stickier with your customers.
The Infrastructure as a Service segment is still a very healthy segment, however the market dynamics continue to evolve and mature. Whether you are a buyer or seller of these services, you need to be aware that the market is rapidly evolving and that what was true just months ago, may have changed.
If you have any questions about how ANTARA Group can help your colocation company navigate the decreasing colocation pricing trends, click here to fill out our contact form.