Colocation contract
A colocation contract spells out the room, power and network you're renting in a data center, along with what you pay, how long you're locked in and what recourse you have if the provider fails you.
The expensive surprises tend to hide in a handful of clauses, so it's worth knowing which ones deserve a slow read before you sign.
What the agreement should cover
A complete agreement covers your space, power and cooling, network connections, security, uptime guarantees, the SLA, pricing and how the contract ends, according to DataBank. If your draft skips any of these, ask the reason. Every one of them touches either your invoice or how dependably your gear stays up.
The colocation SLA and service credits
SLA stands for service level agreement, and it's the part of the deal where the provider's promises turn into figures. It should cover uptime guarantees, how quickly staff answer, when maintenance happens and what compensation you receive when something breaks, DataBank says.
That compensation is normally a service credit, meaning a discount applied to a future invoice. In Corserva's example SLA, the lower the month's availability, the bigger the credit, and here are two of its credit levels.
| How available it was that month | Discount off that month's invoice |
|---|---|
| Between 99.0% and 99.99% | 5% |
| Between 95.0% and 97.99% | 15% |
In that example, the discount can't go beyond half of what you paid that month for colocation. A credit is typically your sole remedy, and it usually isn't paid out as cash, so a rough month trims a later invoice instead of returning money to you.
Providers calculate credits differently. Verizon's data center terms, for example, credit one day of your monthly charges for each hour that both of your power feeds (called A and B) are down at the same time.
Contract length and yearly price rises
Retail deals on the smaller side tend to run 1 to 3 years, and big wholesale deals stretch to as long as seven, datacenterHawk notes. At Equinix, the three-year commitment shows up most often, Vendr reports.
| Kind of arrangement | Typical commitment |
|---|---|
| Retail, a few racks at most | 1 to 3 years |
| Wholesale, a large footprint | 3 to 7 years |
 Equinix's most frequent choice | 3 years |
Most leases carry an escalator too, a clause that lifts your rate every year. It usually falls somewhere between 2.5% and 5% annually, datacenterHawk says. If your contract includes an annual increase, the quoted rate will rise during the term, so it's worth checking when each increase applies.
How the contract charges for power
Plenty of quotes list a base price with "+E" after it. That means the electricity gets billed separately, in addition to the base charge, datacenterHawk explains. Your actual monthly cost can run past the advertised figure.
The contract also decides how much power you're allowed to draw. Go past that allowance at Equinix and you'll pay 20% to 50% more than the standard charge, Vendr reports. If your plan bills power at a flat rate, it may also charge overage fees once you exceed what you contracted for, CoreSite says. And some contracts allow the provider to bump the power fee if your consumption rises above what's typical for you, as in i-evolve's sample agreement.
What room do you have to negotiate?
You can push back on the pricing model, how long you commit, how flexible your power allowance is, what bandwidth costs and the SLA figures, DataBank says. Treat the first draft as an opening offer. These items are far easier to shift before signing than after.
Renewal and moving out
Some services renew themselves. Equinix Fabric terms roll over automatically unless you cancel 90 days before the end date. Mark that date down as soon as you sign, and you'll spare yourself an extra term you never intended.
Once the contract wraps up, you'll want time to remove your equipment. i-evolve's sample agreement allows the customer 30 days following the end date.
Questions people often ask
What is a 99.99% SLA promising?
It's a commitment that the service will be available 99.99% of the time. In Corserva's example, that commitment covers your power and your network connection alike.
What will colocation set me back?
List prices that get published include a fixed amount of power. Anything beyond that costs extra.
| Package | Monthly list price | Power bundled in |
|---|---|---|
| 1 to 4 servers | $69 to $199 | 0.24 kW or so |
| Quarter rack | $330 to $399 | around 0.6 kW |
| Half rack | $530 to $699 | around 1.2 kW |
| Full rack | $930 to $999 | around 2.4 kW |
Our price tool estimates the cost of extra power using the asking rent per kilowatt in your chosen market; this is an estimate, not a provider's quoted charge. CBRE asking rents span $155 to $275 per kW a month across the 16 markets they track, peaking in Silicon Valley and bottoming out in Central Washington, Seattle and Denver. Expect somewhere around $1,350 to $2,410 a month for a full rack pulling 5 to 10 kW in Dallas-Ft. Worth. Our price tool shows a monthly range after you pick your space, power and market.
At Equinix, every cross connect, a straight cable into another network inside the same building, runs $100 to $300 monthly plus $500 to $1,500 for installation, per Vendr.
Where can I find a sample colocation contract?
You can read i-evolve's sample colocation agreement online, or look at Corserva's example service level agreement for its uptime promises and service credits. Put either next to your own draft and odd clauses stand out much more clearly.
Which colocation providers have the most buildings?
Across the 48 metros we track, PeeringDB puts Digital Realty in front with 68 buildings, with Equinix and DataBank next at 60 apiece. After them come Cologix (38), Centersquare (37), Flexential (36), Lumen (33), CoreSite (28), Cogent (25) and EdgeConneX (23). Every city page shows all the buildings there along with their operators and addresses.
Is it possible to get quotes for comparing contracts?
It is. One form is all it takes, and we forward it to as many as three providers or brokers with space where you are, who then email you their pricing directly. It costs you nothing to ask, though providers may pay us for making the introduction.