Rapidly changing technology requirements are putting enormous pressure on IT leaders tasked with delivering innovative products and services. A tech stack that’s up to the challenge of serving customers today may find itself outdated and struggling to compete in the market only a year or two later. In order to maximize their flexibility and evolve to meet future demands, organizations must find infrastructure partners that allow them to change their deployments as the need arises. Evoque’s unique SpendAgility service was designed to empower colocation customers to maximize their IT potential throughout the course of their contracts.
How Colocation MSAs Work
Colocation terms and commitments are laid out in a Master Service Agreement (MSA). These contracts stipulate the services colocation providers are agreeing to provide and the amount of money that customers will pay for those services over the duration of the engagement. Typically, an MSA will provide a rundown of non-recurring costs (NRC) that include a number of one-time fees (such as regulatory expenses, materials, movement charges, and hardware buys) as well as terms for monthly recurring charges (MRC), which are the ongoing operation expenses a customer pays to the colocation provider to use data center services.
Like any other contract, MSAs are often subject to negotiation, especially when it comes to the MRC aspects. Colocation customers must balance existing needs against potential future requirements when negotiating their contract to avoid over or under provisioning resources. Flexibility is one of the key advantages of colocation, but that advantage can be quickly neutralized if an organization ends up with an MSA that locks them into a situation they can’t adjust to in the future.
What Happens When Plans Change?
There’s no shortage of cliches about unexpected events derailing plans for the future. For IT leaders, there are few situations more frightening than dealing with an unforeseen development that results in wasteful technology expenses. Capacity planning is one of the enduring challenges facing very inflexible on-premises deployments. Once a capital investment has been made in infrastructure, there is little an organization can do to reduce their costs should demand suddenly shift or decline.
Traditionally, colocation customers have faced a similar problem. Although they may not be forced to swallow wasted capital expenses, they could still find themselves stuck paying for capacity they’re unable to use or forced to keep application workloads on colocated servers because they’re contractually committed to paying for that space on the data floor.
Taking Back Control with SpendAgility
Evoque has developed the innovative SpendAgility contract mechanism to help colocation customers maintain flexibility over the course of their contracts. Where other colocation providers lock customers into rigid MSAs (that prevent them from changing their deployment without renegotiating their contracts), Evoque’s SpendAgility feature allows them to reallocate their colo spend in ways that align with their current business needs.
For some organizations, that might mean shifting spend from kW capacity to AWS, Azure, and/or GCP. It could also see them migrate assets to different data center locations for backup or latency reasons. In any case, the primary benefit of SpendAgility is that it allows customers to make changes to their colocation deployment without having to worry about renegotiating their contract. In many ways, the service realizes the full potential of colocation by providing organizations with maximum flexibility and the ability to adapt rapidly to new circumstances without ruinously impacting their IT budgets.
A Tale of Two Contracts
To best understand how SpendAgility works in practice, it may help to run through a hypothetical scenario involving Acme Corporation. As an up and coming business, Acme is expecting to experience rapid growth over the next five years. Because the company knows it will experience tremendous changes in its technology requirements during that growth, IT leaders decide to turn to a colocation provider to accommodate those needs.
Scenario 1: “Colo-X”
Since the team at Acme has big growth ambitions, they turn to “Colo-X,” one of the largest colocation providers in the market. The provider has all the services, capacity, and connectivity they could ever need, so after prolonged negotiations, they enter into a 48-month agreement with a total contract value (TCV) of $350,000. All of Acme’s assets are migrated into a colocation environment, they get direct on-ramp access to the cloud services they need, and they’re off and running.
Six months later, a competitor unveils a new product that puts Acme on its heels and cuts into its market share. Reeling, the company’s leaders realize that they need to fast-track development of new products if they’re going to recapture lost customers and resume revenue growth. That means restructuring their IT stack to take advantage of cloud development platforms, expand network connectivity, and shore up redundancies.
Unfortunately, they’re staring down the barrel of a rigid colocation MSA for the next 42 months. While they could try to renegotiate, “Colo-X” isn’t willing to be generous with their situation and is threatening to hit them with severe penalties for cutting the contract short. The cost of renegotiating the contract would cut into the budget for developing new products, leaving Acme Corporation caught between the proverbial rock and a hard place. Either they pay the steep costs to renegotiate, knowing full well that their situation might change again in another year, or they remain locked in their current situation and hope they can ride out the rest of the contract without losing more market share.
Scenario 2: Evoque SpendAgility
In this scenario, the Acme team has the foresight to realize that nothing can be taken for granted in their business. They recognize that technology and the market are evolving so rapidly that they need to prioritize flexibility if they’re going to stay competitive and innovative. The company decides to enter into a 48-month colocation agreement with Evoque to spend $350,000 for hosting in the Ashburn, VA colocation facility.
When their biggest competitor releases a new product that takes the market by storm six months later, Acme Corporation doesn’t have to panic thanks to SpendAgility. After evaluating its options and assessing what it will take to put itself back on competitive footing, Acme transitions and diversifies its colocation spending.
- It reduces its Ashburn deployment by a third, cutting spending in the data center to $100,000.
- It invests $50,000 in consulting and engineering support to build a new cloud environment that will meet its development needs.
- It engages with cloud resellers to invest $150,000 in cloud computing resources as part of a dynamic hybrid IT deployment.
- It boosts connectivity to enhance performance and reach new customers, increasing spend to $10,000.
- To ensure continuous uptime and data availability, Acme uses its remaining $40,000 to place disaster recovery assets in Evoque’s Dallas-Allen, TX data center.
Thanks to Evoque’s SpendAgility, Acme Corporation is able to make rapid adjustments to its tech stack to adapt to the changing market without incurring additional colocation costs. The shift ensures that the company’s workloads are always in the ideal location to maximize performance and value.
Maximize Your Agility with Evoque SpendAgility
Evoque provides a unique combination of data center facilities and cloud consulting services and cloud resell that allows customers to take full advantage of the flexibility that SpendAgility offers. We take an applications-first approach when assessing workload placement that helps organizations make the best decisions for their deployments. Whether you’re looking to maximize the security and transparency of a colocation data center or you want to build a dynamic hybrid IT environment using the latest cloud technology, Evoque has the experience and resources to make your digital transformation a reality.
To learn more about how SpendAgility can help your organization maximize its IT flexibility, talk to one of our digital infrastructure specialists today.