You want SAS 70 Type II with that? (Do buyers really want wholesale data center space?)

The subject de jour is: Wholesale data centers.  Now I, for one, have been very pleased to see the marketplace stratify into a “wholesale-retail” type of environment.  As a “retailer” of data center-centric services, it is valuable to me to have the industry define the differences so that the buyer understands the value of each model.  For the longest time (almost two years….which is a lifetime in this business) we have seen two types of requirements:

1. Wholesale buyer. Typically buys by the kilowatt or megawatt of power. They typically buy 1 megawatt or more of power. He/she has their own staff. They “don’t need your help”. The preferred contracting instrument is a long-term lease.

2. Retail buyer. Smaller footprints. Typically pay by the foot and whipped power. The have some staff but need some help.  The preferred contracting instrument is the Master Services Agreement.

This model made the world fairly simple to navigate. Everyone knew what they were and what they wanted.

But over the last few months I have noticed that the end-user buyer is starting to blur the lines. And not just a little bit. I just finished reading an RFP that CLEARLY says it is wholesale, but the client is CLEARLY describing co-location (and in some cases managed) services. 

So this leads one to ask, “why do people want wholesale data center space?”. 

I have read three large RFPs in the last month (all of which were household names) in which the following was required:

-Wholesale pricing

-Price per whip install and whip types

-Cross-connects and costs

-Helping hands

-SAS 70 Type II

-Three to five-year “lease” term

-SLAs

Ok read those again.  That ain’t wholesale.  That’s colo all the way.  Now most readers here know exactly what RFPs I am talking about. So the big question is: why do they insist on wholesale?  Since wholesalers don’t give you a SAS 70 Type II; since wholesalers don’t typically manage your telecom; because wholesalers dont typically like to do leases less than 7 years; since the protections (for the client) of the wholesale lease are not as good as a retail MSA, I can only come to one conclusion:

The reason these buyers are seeking wholesale is: price.  The implication in the market place is that you can get cheaper rent from the wholesaler.

Another reason could be the desire for metered power, but now most retailers will do that too. As a matter of fact we have created three “consumption-based” models that are better than the wholesalers traditional metered power models.

I have floated this theory to many folks across the country and there is much agreement.  So how come the broker or consultant isn’t telling his client he really wants colo at wholesale prices.  And really, that is what they want. Colo services at wholesale prices. A hybrid.

So here at Horizon we are taking our hybrid to the street. Our DC Flexspace offering actually offers pricing models for space, power, bandwidth and services that actually mirror the growth patterns and business drivers of our clients. Hybrid. Every time. 

My conclusion, the customer WANTS IT ALL. He wants brand-new data centers, he wants on-demand services, he wants to pay for consumption not extra, he wants an audit and he wants it all for a wholesale price.  He wants, “wholo”.  And guess what…

The retailer is more able to offer the client “Wholo” than the wholesaler is able to…..game on.

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