Capitalizing on Colo: GCN Grows Agency with Global Colocation, Connectivity

China, Holland, Hong Kong, India, Japan, Sweden, Singapore, Spain, United Kingdom – these are but a few of the exotic locations where Global Communication Networks Inc., Pompano, Beach, Fla., is contracted to set up colocation space for its clients this year. This is a surprising itinerary for a telecom agency that fulfilled its first colo contract little more than 18 months ago.

The company’s dramatic transformation from selling SMB accounts to building out colocation for multinational companies has been not only quick but lucrative. In its first nine years, GCN built up a base of SMB clients billing around $1 million per month. In the last two, it added another $700,000 per month in billables from colo and IP transit customers. In a very short time, colocation has come to represent 30 percent of GCN’s revenue.

What makes the transformation even more astounding is the company has only six employees and not one salesperson, unless you count its president, S. Chris Palermo. Palermo founded the company in 1997 and said it has been built primarily on referrals. Over the years and as the base grew, he has added three account managers and a provisioning manager and, most recently, a project manager for the colo deployments at facilities operated by Equinix, Switch and Data, and others.

The two sides of GCN’s business are very different from one another in respect to customer size, product set and required skill sets. In fact, Palermo is considering splitting the two apart. But, business has been so brisk, he hasn’t had time to make it happen.

A few years ago, GCN began selling in earnest big bandwidth — gigabit Ethernet and waves. This, in turn, put them in touch with increasingly larger clients – many of which contacted GCN on referral to help them source circuits from diverse carriers at competitive rates. As Palermo gained the confidence of these larger customers, he began asking them about how they sourced their colocation. “[We] found that they had a void in sourcing data centers,” he said, noting they were doing it on their own and finding it difficult to find the best ones with their limited knowledge. “So, we tried to educate ourselves as much as possible on that and source and staff our company to be able to really cater to our clients.”

This meant locating data centers and knowing which carriers were collocated. It also meant bringing in a project manager – not just any project manager, but a certified program manager, Vlad “Sal” Salomatoff, with experience managing data centers. Sal, in turn, is teaching the account managers how to manage some of the smaller implementations.

Palermo said the company had early success with domestic deployments and even landed work with a marquee MNC, on referral from data center Terremark Worldwide Inc., which uses GCN to source bandwidth. It wasn’t long before

this MNC started asking about international colocation, specifically in Tokyo. “They are on the other end of the phone, beads of sweat are coming down my head,” Palermo said, not wanting to disappoint his new client. “I honestly told them, ‘Let me get back with you.’… I went straight to Wikipedia and Google. I spent four hours and I learned as much as I could about colocation in Tokyo.”

He went back with the information and the customer gave him the requirements to source the job, which was 800 square feet.

With the primary exception of a time difference, Palermo has found sourcing colo internationally not so different than doing so in the United States. Most providers speak English to cater to multinational companies, and most U.S.-based transit providers are in those locations, Palermo said. “I wasn’t that nervous about it because we had a couple of colos under our belt,” he said. He conceded that it probably didn’t hurt that he has a degree in interpersonal communications and had training in intercultural communications. He admitted to consulting his college texts for insight into doing business overseas. But nothing has fueled GCN more than success in the field. Today, about 60 percent of GCN’s colo business is international with individual sales averaging $60,000 to $110,000 per month. Palermo spoke with pride – and amazement – about a recent 500-square-foot deployment in Frankfurt, Germany, that was completed in just three weeks.

Understanding what goes into a colo project sheds some light on his incredulity. GCN finds several providers in the area; narrows it down based on the client requirements; space and potential peering partners, and comes up with a few providers, with which it will begin negotiations. Once a provider is selected and the contract is signed, “that’s when the fun really starts,” said Palermo. In biweekly calls, GCN’s project management team plans for delivery and setup of racks and servers; installing circuits and sometimes roof antennas for satellite hookups; and meeting

special requirements, such as iron-cladding around cage walls. There are a number of  logistical considerations, too, down to how the servers will arrive and when. Some colos cannot fit palates into their elevators, for example, and disposing of trash (palates and wrapping) must be figured into the cost.

“You really don’t think about everything that goes into project management of these things. It’s not the typical agent/subagent relationship where you say, ‘Hey can you pay me 25 percent and put in some racks in Frankfurt?’” Palermo explained.

This attention to detail has earned GCN additional business from its existing colo clients as well as referrals. Some of these referrals are coming from the colos themselves.

GCN is paid by the colo providers under an agency agreement, which pays a percentage – 7 to 12 percent per month. (These commissions are separate from the amounts earned on transit sourced with the colo deployment.) However, some operators offer only one-time payments based on a percentage of the monthly recurring charge for a year. So 10 percent of a $10,000 MRC for a year would be $12,000. That isn’t enough to justify GCN’s efforts, so Palermo has been waging a campaign to get residuals instead. Because of the large revenue amounts GCN brings to the table, he has been successful in some cases. Palermo has recruited two other agencies that sell colo to help in this effort (see Colo Agents Form Consortium).

GCN’s recent success with the colocation opportunity has not been to the exclusion of its core SMB business. In fact, Palermo has a program to compensate internal account managers as if they were subagents for upselling these customers on additional services. GCN has segmented its base according to the percentage of telecom spend through GCN. “If we don’t have that full share of the wallet, we have that big a percentage chance of losing that customer to someone else who is going after that,” Palermo said.

Colocation likely will be one of the upsells. The week of this interview in February, there were three inquiries about colocation from the installed base. “There’s one customer that might want 10,000 square feet in Dublin,” Palermo said. And, GCN will be there to make it happen.

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