Carrier neutrality: Colocation gets a little more stable

What should be a long-term relationship can quickly turn into a nightmare when your colocation host has to leave the market. Why not try a carrier-neutral colocation facility? Here are the potential benefits, plus a look at one customer's experience.

Most IT managers have a list of personal "colocation relocation" horror stories, which invariably start with a letter from a carrier or facility whose venture capital has dried up and is closing its doors for good, usually in two weeks or less. This starts a frantic search for new facilities, a new carrier, the right SLA, good customer service and, of course, a low price. And that's only the beginning. Once the contract is signed, the servers have to be physically moved (with a minimum of downtime) to the new location where everything should be configured in advance for a quick and easy install.

But it doesn't have to be like this. A new breed of carrier-neutral colocation facilities promises all the usual bells and whistles of the best colos with the added benefit of independence from a single carrier. I recently spoke to two executives and a customer of one of San Francisco's larger carrier-neutral colo facilities, eXchange @ 200 Paul. The firm, which began as a carrier hotel in 1998, moved into colocation late in 2000 when a number of ISPs were beginning to feel the crunch of the tech sector crash.

Why carrier neutral?
Many potential customers are attracted to eXchange @ 200 Paul because multiple carriers are available for competitive pricing quotes, meetings, and inquiries at any time, according to Mark Hansen, eXchange @ 200 Paul's director of colocation services operations. In fact, Hansen said most of eXchange @ 200 Paul 's colo tenants have multiple connections to multiple carriers. The facility offers carriers easy access to a market of customers, while it offers colo customers the pricing and service opportunities created by vendor competition.

eXchange @ 200 Paul customer VerticalResponse, an online direct marketing firm with about 40,000 users, uses anywhere between 15 and 60 MB of bandwidth and needs flexibility from its bandwidth provider due to the changing nature of its business. One of the key factors for the company in picking eXchange @ 200 Paul was the carrier-neutral approach to colocation, said Jeff McConathy, CTO and cofounder of VerticalResponse. Though they have stayed with the same provider at eXchange @ 200 Paul so far, McConathy definitely finds comfort in knowing he'll no longer be at the mercy of a carrier that could go out of business at any time.

VerticalResponse moved to the eXchange @ 200 Paul facility in January of this year, and McConathy says "service has been surprisingly good for a colocation facility." The VerticalResponse management team is comprised primarily of former veterans and has had a wide array of experiences with ISPs and colocation facilities. The company has been in business for about two-and-a-half years and, in that time, had been with three colocation facilities before moving to eXchange @ 200 Paul. Without naming names, McConathy said he has helped move the company from an ISP that was just too small, to one that disappeared with a scant 12 days notice, to one that quickly became a customer service nightmare.

Business basics
Unlike many similar companies, eXchange @ 200 Paul has always been privately funded. Perhaps because it didn't need to satisfy quick-buck investors, the company has been able to approach the colocation business a bit differently than most.

eXchange @ 200 Paul owns its two facilities (in San Francisco and Santa Clara, CA) outright. The decision not to lease the facilities certainly carried a greater up-front cost. But CEO John Wilson said that the company's management team, which has roots in real estate development as well as technology, believes ownership gives them both greater financial stability and better customer service flexibility. For instance, eXchange @ 200 Paul can provide some fairly unique satellite, microwave, and line-of-sight services within San Francisco via its rooftop management program, something that's not a run-of-the-mill service for most colo facilities.

Wilson also describes the company as "conservatively financed, cash-flow positive, and self-funding on future capital expenditures," which, he says, are just a few of the reasons eXchange @ 200 Paul has seen growth from 0 to 110 colo customers since November 2000. The company's conservative approach may seem a bit unusual for a tech firm in the Bay Area, but in the face of major ISP bankruptcies and closings it seems to lend credence to the theory that the fundamentals of building a stable business haven't changed.

Hansen agrees that the company's financial stability plays a role in its current success. But he believes the two most important factors to customers are the blending of colocation and carrier hotel services, and the service level that eXchange @ 200 Paul is able to provide. Almost all of eXchange @ 200 Paul's approximately 25 employees have been with the company since its beginning and, according to Hansen, the operation runs smoothly enough that techs are able to provide services that other colo facilities charge for as part of space rental costs about 50 to 60 percent of the time. He added, "Even a large customer with 15 or 30 racks can be up in five days."

Growing options
Certainly eXchange @ 200 Paul isn't the only carrier-neutral colocation facility around. A quick Google search reveals that the competition is picking up, though many facilities are focusing on serving specific geographic areas. However, the underlying proliferation of carrier-neutral facilities should be interpreted as a good sign for potential customers. Those IT Managers who have been through the wringer with colo facilities will certainly agree that a marriage of flexibility, competitive pricing, and good service would be a welcome change.

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