Q: DrPeering -

The data center market is commoditized and I hear it characterized as trench warfare... Data centers are aggressively competing for racks in the $400-$500/rack range.

Gern Digawit Blanston

A: 

The data center market is commoditized unless you are a colocation provider and your population is beyond critical mass, or has some other attraction. The market price for commodity data center space is about $500/rack instead of $1500/rack for premium space at a well populated colocation center. This has led to a tactic I call the network umbilical pitch.

Let's assume a target colocation customer interconnects with network service providers and hosts servers at the premium colocation center as shown in the top part of figure 13-9.

Figure 13-9 Network Umbilical Pitch

In this tactic, an upstart colocation provider builds critical mass by starting as a data center, but positions itself as a network umbilical (colocation extension) site. This data center company pitches its data center as a cheaper place to host the larger server deployments and edge routers. The customer keeps its core routers at the premium network dense colocation site, but deploys the rest to the discount network umbilical site as shown in the bottom half of the diagram. The fiber between the two data centers is paid for by the cost savings of hosting the large number of servers at the cheap site.

Once the network umbilical site has enough participants, it has a roster of impressive peers that can help it make the pitch as a peering point. While some companies may not be able to peer at the extension site, some will. The roster of participants is impressive in any case and helps build credibility when establishing a new IX.

These were excerpts from The Internet Peering Playbook.

DrPeering@DrPeering.net