Colo Represents New Revenue, Challenges

Mission-critical applications, along with rising volumes of data they generate, have made third-party data centers and colocation a growing business.

“Unlike all the telco circuits that are constantly going down in price, colocation is actually going up in price. If you do it right, it’s a more stable revenue stream than connectivity,” said Aaron Loehr, president and CEO of Bandwidth Advisors Inc.

Loehr, along with two other members of the newly formed colocation consortium — Chris Palermo, president of agency Global Communication Networks Inc., and Michael Murphy, president of NEF Inc. — will be on hand Monday at the Channel Partners Conference & Expo in Boston to discuss the opportunities and challenges for agents selling colocation.

All three agencies have been seeing a marked increase in the amount of colocation they have been selling in the past few years and each has found wide variances in the terms and conditions from the providers. They have come together to share information about providers and work toward improving their agency agreements. Among the members, there are more than 200 colo agreements.

Palermo noted colo agency agreements today are anything but consistent, ranging from one-time referral commissions to monthly residuals, and some have evergreen clauses while others do not.

And, while agents typically have some leverage to move customers to which they have sold circuits should a carrier cancel their commissions, Loehr said with colocation this isn’t the case. “With colocation, it’s so sticky and hard for the client to move,” he said, noting this puts agents at the mercy of the providers that might decide to cut commissions when their properties are full.

Murphy, offering another example, said consolidation among colo providers also puts revenue streams at risk if the acquired supplier has an agent-friendly agreement and the buyer doesn’t. Making sure the contract is written with that in mind is critical to sustaining revenue, he said.

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