4 Things Your Board Wants to Know About Colocation

Board directors blog

If your decision to go with a colocation provider comes down to a board review, it’s important to understand their concerns before narrowing your list down to a couple of finalists. Convincing the board of directors revolves around four important factors: maximum risk aversion, continuous compliance, economic advantages and corporate responsibility.

Risk Aversion

Minimizing Downtime

If your equipment is currently in a facility that does not provide the same uptime a colocation data center would, the board should know what the improvement in uptime or availability means in terms of dollars. Calculate the difference between your current availability compared to what your top colocation providers offer, and the cost of each hour of downtime. Our blog post on calculating downtime contains a formula for calculating productivity cost and revenue loss.

The total cost of downtime should not only include productivity and revenue loss. There are other, less obvious costs to consider. Would some of your staff need to work overtime in the event of an outage? Figures presented to the board should include overtime and an estimate of the cost to the company’s reputation. How many customers and prospects might you lose due to an outage, and how much would this equal in sales revenue? Would you need to pay a PR firm to help heal your reputation? Would your supply chain be interrupted, resulting in expensive delays? These costs should also be incorporated.

It may also be helpful to highlight how a particular colocation facility provides maximum availability. Compare the number of power, water and network feeds to what you currently have. Also compare the equipment and how the colocation facilities you are evaluating are more reliable. This can be done without getting too far into the weeds. Illustrating reliability with images can supplement uptime facts and figures.

Uptime SLAs

Colocation providers offer service level agreements, referred to as SLAs, to ensure they provide the availability they say they do. If availability falls below the number of minutes or hours per year specified in the agreement, the colocation provider must compensate the company accordingly.

Security Breaches

Most colocation data centers are extremely secure, with multiple layers of security, biometric access controls and video archives. They also have security staff on site 24×7. If a company’s equipment is not in a secure colocation facility, they must pay for their own security equipment and security staff. If there is a security breach, the blame and the cost fall on the company. Most colocation data centers are more secure than enterprise data centers, and they are responsible if there is a physical security breach. The company would be compensated for the damages.

Continuous Compliance

Different verticals are required to meet different types of compliance, continuously. If your company provides medical or healthcare services, it may have to continuously comply with HIPAA requirements. If your business processes credit cards, it likely has to meet PCI-DSS requirements. Some companies require general information security compliance standards are met, such as ISO 27001 or SSAE 18. The cost of these compliance audits and staff necessary to maintain standards in the data center adds up. If your equipment is in a colocation facility, this responsibility shifts to the provider.

If a data center doesn’t have a particular compliance certification, this doesn’t necessarily mean they don’t meet the requirements. They just haven’t paid for a third-party certification. Compliance can still be proven; it just requires more work. Ask the data center providers you are considering to supply the necessary documentation that shows they meet your standards, and present these to the board.

Economic Advantages

Is your company’s core competency building and operating data centers? Not likely. Outsourcing a data center can save a company millions in capital expenses. There are economic advantages to taking data center operations out of the equation, and having your staff focus on revenue-producing initiatives. If you outsource your data center, where else might you be able to focus the budget you will gain for operations? Could you apply it toward gaining a competitive advantage or product development? Getting a finance stakeholder involved, such as the CFO, to present the advantages of shifting money from CapEX to OpEx could be a great help.

Corporate Responsibility

Over the last few years, many companies have turned their attention to corporate responsibility policies. Some have even hired corporate responsibility officers. Corporate responsibility efforts not only involve preventing and mitigating harm to society, they also concern environmental impact. This may be of concern to your board. If your company currently operates its own data center, it is using much more energy and other resources than it would use in a colocation facility. Multi-tenant data centers are economies of scale because tenants share building infrastructure, power equipment and cooling equipment. For example, if 50 companies share a data center, they may be sharing five chillers and 2 UPS systems instead of needing one per company, at a minimum. The construction of robust and resilient data centers also has an environmental impact and requires a lot of resources (iron, dirt, cement, fuel from trucking, etc). Because the company will share these resources with other companies, their environmental impact is smaller.

Know Your Board

This blog post on World Economic Forum written by a board member gives insight into dos and don’ts when presenting to your board. Board members are often pressed for time, so it is usually best to get them the documents they need to make a decision in advance, and to understand your time limits for presenting. Ask board members how they prefer to receive the information. It also helps to know who is on the board, and their backgrounds and areas of expertise. This will help you to build a more effective presentation. Above all, make sure your presentation to the board is clear and concise, and not loaded with IT and engineering jargon without explanations.