New Report: Simplifying Data Center Contract Negotiation

Jan. 23, 2019
When purchasing or selling data center services,the legal contract signed by the client and the provider is critically important. A new report on data center contracts explores how to streamline and improve the data center contract negotiation process. 

When looking into buying or selling data center services, it’s easy to get caught up in important considerations like location, type, size, energy sources and more. But above all, one of the key elements to keep in mind is the actual legal contract signed by the client and the colocation provider. Data center contract negotiation can be a complex endeavor. That’s why a new report — The Data Center 101: Negotiating Data Center Contracts  — aims to simplify the process.

Download the full report.

The report, part of Data Center Frontier’s Data Center 101 Special Report series, takes a look at both the buyer and sellers perspective. It answers key questions like how to identify an infrastructure buyer’s and sellers’ key concerns and negotiation leverage points.

Interestingly, although this is likely one of the most important pieces of the equation when purchasing or selling data center services,  the legal contract signed by the client and the provider are often overlooked by the client or reviewed by attorneys who are unfamiliar with the industry.

But today’s colocation providers and their clients can no longer afford to discount this key step in the process. In fact, clients and service providers have both been taken advantage of as a result in the past, potentially costing hundreds of millions of dollars in legal fees and damages.

The report explores in detail different issues data center and colocation buyers care about most, to help ease data center contract negotiation. Elements discussed in detail in the report include automatic renewal clauses, termination clauses for chronic outages, maintenance windows, insurance requirements, indemnification, pre-negotiated price increases, pre-negotiated costs for additional services, and coterminous contract terms for services.

Also covered in the new white paper are the “leverage points for buyers” — or in other words, what’s going to catch a potential buyers’ eye. These include size of initial deployment, contracted growth, term length, brand recognition, newness of the facility and space available, competition and multiple services.

The size, contracted growth, and term of a deal will most assuredly dictate how willing a provider is to negotiate the terms of the agreement and how flexible they want to be with said terms.

Switching speeds, the report then goes on to take a look at data center contract negotiation from the perspective of the service providers. Top of mind for service providers is likely the targets tied to the dollar per kW or dollar per square foot achieved within the facility. Nearly every commercial data center around the world has them, according to the report. Also key to these deals are client insurance, access to cabinets, cages and/or suites, and termination of services terms and agreements, to name a few.

As far of what to use as leverage points for colocation service providers, the first note outlined in the report may note come as a surprise: size, time and growth of the project. “The size, contracted growth, and term of a deal will most assuredly dictate how willing a provider is to negotiate the terms of the agreement and how flexible they want to be with said terms,” the report states. Further leverage points for colocation providers include availability within the facility, competition, cost of power, energy efficiency, security, and more.

Download the full report, The Data Center 101: Negotiating Data Center Contracts, brought to you in partnership with CoreSite and  Open Spectrum, to learn more about how to streamline and improve the data center contract negotiation process. 

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