Baseball humorist Yogi Berra once quipped, “If you don’t know where you’re going, you’ll end up someplace else,” underscoring the value of planning and knowledge about distant lands.

Many large multinational corporations require data center capacity in locations worldwide to meet their local and regional operational needs. Major banks, insurance companies, pharmaceuticals, retailers, defense contractors, software firms, and manufacturers procure colocation capacity overseas ranging from small cages that accommodate 10-20 cabinets to entire private suites for 400 cabinets, offering 2-4 MW of critical power.

International data center demand drivers

Multinational corporations cite many reasons for seeking foreign data center space.

• Telecom latency limits for many corporate applications operating within an “active-active” multi-site deployment cannot be exceeded without degrading performance, encouraging “in region” placement.
• Many countries’ data privacy laws, which are often stricter than U.S. laws, require multinational corporations to maintain subsidiaries’ data regarding their local operations within in the same country or region where that business occurs.
• Users adopting a hybrid colocation with cloud architecture may place colocation suites near public cloud providers’ installations to facilitate efficient data migration between colo and cloud.
• Some U.S.-domiciled corporations strategically choose their foreign data center locations to minimize taxes, since countries like Ireland can offer tax advantages.

Same, but different

The process for selecting and procuring data center space internationally is similar to the process in the U.S. Corporate users generally seek robust data centers operated by reputable colocation providers at a fair price. Most modern data centers worldwide have been designed and built to high reliability standards, usually incorporating concurrent maintainability of critical systems components. Most recently constructed international colo data centers can cool 15-30 kW per cabinet across an entire customer suite when hot- or cold-aisle containment is properly deployed.

However, some local differences encourage additional due diligence steps in the planning and selection process overseas.

Electrical voltage and utility reliability vary by country, and local construction code and life safety requirements can affect data center designs and operations.

Variations in prospective countries’ data sovereignty laws and telecom network topologies can affect data center deployment plans.

Colo providers construct high-rise data center buildings in some land-constrained markets, like Singapore, Hong Kong, and London, introducing multistory operational risks.

About the providers

Colocation space abroad is offered from both huge international data center providers and local operators.

Large U.S.-based providers, including Digital Realty Trust, Equinix, Stack Infrastructure, CyrusOne, Iron Mountain, Vantage, and Cyxtera, have international portfolios, enabling customers to efficiently contract with them for data center placement worldwide. Other large data center operators headquartered outside the U.S., including NTT, Global Switch, Keppel, Tata, Colt, and Telehouse, generally offer modern data centers with similar designs, infrastructure, operational professionalism, and reporting standards as available from the largest U.S.-based providers.

"Within Stack, our extensive North American footprint is complemented by a spectrum of active and under-development projects across key international markets spanning EMEA [Europe, the Middle East, and Africa] and APAC [Asia-Pacific]," said Ty Miller, chief commercial officer for the Americas at Stack Infrastructure. "Specializing in delivering highly reliable, scalable, AI-ready data centers while adhering to local codes and environmental standards, we ensure a consistent experience globally. Additionally, we offer easily accessible online portals, reporting, and insights into our compliance processes for our global clientele."

In smaller international markets, local and regional operators provide many data center alternatives, but prudent users should perform thorough due diligence to identify the best providers and facilities. In some small international markets, customers’ options are limited to local providers. For example, a country like Bolivia in South America might only have a handful of small data centers operated by local IT services or telecom companies.

Many colocation providers offer sophisticated managed services performed by skilled on-site staff, which is particularly valuable to multinational customers who may not have internal IT staff near the desired location. Some providers also offer private cloud or bare metal to complement colocation space and power.

Colocation is everywhere

Colocation data centers are ubiquitous, and users can choose between primary, secondary, and tertiary markets.

Primary markets are the “money center” cities in the largest international economies, where new mega-campuses host both corporate and hyperscale customers, some with 40-100 mW of installed capacity. Primary markets in EMEA are Frankfurt, London, Amsterdam, Paris, and Dublin, often termed the “FLAP+D” cities. Primary markets in APAC are Tokyo, Hong Kong, Singapore, Sydney, Mumbai, Beijing, and Shanghai. In the Americas (excluding the U.S.), the primary markets are Sao Paulo and Toronto.

Secondary markets are major international cities featuring smaller data center campuses and fewer local public cloud installations than found in the primary markets. Some secondary markets are growing because they have immediately available utility power while nearby primary markets’ power constraints have suspended data center expansion until more utility power becomes available in a few years.

Secondary markets in EMEA include Madrid, Milan, Zurich, Stockholm, Brussels, and Johannesburg. Secondary markets in APAC are Seoul, Osaka, Melbourne, and Jakarta. In the Americas (excluding the U.S.), secondary markets include Santiago, Queretaro/Mexico City, and Montreal.

Tertiary markets are smaller regional cities that typically have a handful of colocation data centers which vary greatly in size, reliability, and available managed services. Some are highly reliable and run by excellent providers with stellar compliance and reporting practices, while others are local startups with spotty track records. Occupancy costs in tertiary markets are usually higher than in primary and secondary markets. Some multinational corporate users hesitate to place critical computing with local providers in tertiary markets unless they have specific telecom latency or regulatory requirements to support local business divisions.

The China question

Many multinational corporations have extensive operations in China, either for manufacturing or providing goods and services to the massive Chinese marketplace. Beijing, Shanghai, and Hong Kong all have modern and reliable colocation data centers offering space and redundant network connectivity.

However, data ownership and control in China is tricky due to its unique telecom network access regulations and active government oversight policies. Many companies maintain within China only certain data that is essential to support their local operations. There is also historical suspicion that the Chinese government or Chinese companies controlled by the government have accessed corporate data processed in Chinese colocation facilities without customer consent, leading to intellectual property theft in some cases. Years ago, companies seeking a single APAC data center might have favorably considered Hong Kong alongside Singapore and Tokyo but have now downgraded Hong Kong in their comparative evaluations.

Show me the money

International colocation data center space generally costs more than comparable domestic space on a U.S. dollar-equivalent basis. Primary markets in Europe tend to be 10% to 25% more expensive per kW of capacity than the largest U.S. markets, like northern Virginia, Dallas, and Chicago. Primary markets in Asia and Latin America tend to be 20% to 40% more expensive per kW of capacity than the largest U.S. markets, but a few outlier markets, like Singapore can be about twice as expensive as the largest U.S. markets.

Pricing from different providers operating within specific international markets varies, and older data centers with less reliable designs or lower cooling densities can offer significant discounts to newer colo facilities. Most large, multinational firms seeking international data center space prioritize reliability (along with network connectivity and regulatory compliance), and don’t usually choose the cheapest provider over a solid deployment option at a reasonable cost.

Wholesale versus retail contracts

International colocation space is available using both wholesale and retail pricing models. In a wholesale contract, the customer pays rent as a function of total kilowatts of critical power supplied by the provider, plus a reimbursement for metered electricity consumed increased by a PUE multiplier. In a retail contract, the customer pays rent for specifically installed electrical distribution circuits — typically both an “A” active circuit and a “B” backup circuit that originates from a different UPS module — and the customer can deploy its hardware using the designated electrical circuits without paying a separate power reimbursement.

Rental rates are typically lower using a wholesale pricing model, but some sophisticated users who can accurately estimate their electrical load several years into the future can negotiate a better deal with retail pricing. Some providers offer wholesale contracts for commitments only above a threshold size, such as 250 kW, relegating all smaller contracts to a retail pricing model. Other providers only offer one pricing model or the other.

A specified quantity of data center space — in either a private suite or a cage with biometric or badged access control — is provided under both pricing models.

Many multinational corporate users who are accustomed to self-operating owned data centers in the U.S. are especially interested in leasing an entire private suite within a larger international colocation data center. Customers leasing non-shared suites can customize standard operating procedures or maintenance windows, modify audit and compliance practices to satisfy corporate or regulatory requirements, and obtain non-shared critical systems components like UPS modules, generators, and chillers.

Contract durations are similar for international colocation contracts as in the U.S. — usually three to 10 years. Many multinational users procure 10% to 20% more capacity than is forecast to be needed to allow for unexpected growth, especially when coupled with optional reduction rights of up to 50% of contracted quantities in later years of a contract to provide spending flexibility.

No “funny money”

Most contracts for international colocation are denominated in the currency of the country where the data center is located, although contracts between a U.S. customer and a U.S.-based international data center provider usually can be denominated in U.S. dollars instead. Corporate customers often prefer colo contracts in local currencies, since the data center occupancy costs are likely to be internally allocated to regional operating divisions.

You have the power

Electricity is typically the second largest occupancy cost (after rent) for data center users, and power cost estimates should be budgeted and factored into the location decision. Electricity utility costs vary widely worldwide, will vary over time, and may vary by specific utility within a country, but several generalizations can help in planning:

• Commercial power rates are 40% to 70% higher in Japan, France, Mexico, and Hong Kong than typical power rates in the largest U.S. markets.
• In Singapore, Australia, Ireland, and the Netherlands, rates are around two times higher than in the U.S.
• In Germany and the United Kingdom, rates are about three times higher than in the U.S
• Rates in Brazil, India, and China are similar to U.S. rates.
• Power is less expensive than the U.S. in some oil-producing countries, like Saudi Arabia and Nigeria.

Users should be aware that some providers have clauses in their retail colocation contracts allowing them to raise rental rates if the underlying utility rate increases over time.

Many multinational companies focus on their global environmental footprint and, therefore, evaluate prospective data center locations in part based upon the availability of power generated from renewable sources. Unfortunately, electricity worldwide is still mostly produced using fossil fuels, but some countries are “greener” than others. France produces more than 80% of its electricity from nuclear, wind, solar, and hydro. At the other end of the spectrum, China and India both produce more than half of their electricity from coal, the dirtiest source fuel.

As a credit to the colocation industry, many providers worldwide have secured renewable electricity contracts, and the green price premium is typically modest. Some governments — especially in Europe — are evaluating more stringent data center operational regulations to benefit the environment.

Sophisticated users should also factor electricity reliability into selecting an international data center location, because some utilities in emerging markets are far less reliable than their U.S. counterparts. Users should review data center facility designs to ensure adequate design and dependability of UPS and generator backup power systems if the local utility’s uptime record is poor.

Everything takes longer

The processes for U.S. and international data center selection and procurement feature similar tasks, including scoping, prospective vendor identification, requests for proposal, selection, negotiation, and contracting. However, the process typically takes longer for international projects due to language and cultural differences, additional internal approval layers, and the challenges of scheduling tours and follow-up sessions for teams based around the globe.

Users should carefully plan key tasks and milestones along the procurement path and allow for unforeseen delays. Project leaders should seek consensus among corporate IT leaders at both headquarters and regional offices, and internal approvals typically take longer with “more cooks in the kitchen”.

Negotiating complex colo agreements can also be delayed by time zone differences. Only a few conference call time slots may be available during working hours for all project team and vendor staff, and some participants may need to dial-in late at night in their local time zone when parties are scattered across Europe, Asia, and the Americas.

The colocation contract review process also typically takes longer for international procurements than for similar U.S. projects. While colo contracts are available in English for data centers in most major cities worldwide, the customer’s procurement and legal teams may have participants from both U.S. and foreign offices, including local counsel to review site-specific legal issues and provide related protective language to the customer. Language differences among team members and the colo vendor, both for actual language proficiencies and nuanced voice tone differences during conversations, can create obstacles and delay progress.

Get it on paper

Colocation contracts have three main components — the master agreement, service order, and service level agreement (SLA_ — but could also include additional exhibits as necessary to capture other commercial or service terms.

The master agreement, which could go by other names depending upon the selected provider, governs global business and legal terms between the parties without much regard to individual data center details. A service order states the specific commercial and delivery terms for each individual data center placement, including the size, power, engineering, telecom, pricing, and managed services to be provided for the customer’s new suite. An SLA specifies the performance metrics for reliability and reporting that the colo provider must meet, plus financial consequences to them if the targets aren’t met.

Once a mutually acceptable master agreement has been executed between a multinational customer and an international data center provider, the parties can execute additional service orders for new data center deployments in other global locations, accelerating the process for efficient multi-site procurements.

Enhancing project results

Many multinational users form an internal project team with representatives from IT, facilities, and sourcing departments (plus other specialists, including network, compliance, and legal) based in both the U.S. headquarters and regions where local data center capacity is needed.

Many large corporate users also engage experienced independent advisors/brokers to assist them in planning, selecting, and procuring data centers by completing project tasks and conserving the customer team’s time. Advisors deliver valuable market and colocation provider information and help customers refine their project scoping.

Advisors assist in the down-selection of prospective colocation providers, distribute requests for proposal, evaluate and score proposals, coordinate data center tours, and perform many due diligence tasks around facility reliability, telecom, and audit and compliance procedures. Advisors provide economic benchmarking, negotiate advantageous commercial terms, and assist the customer’s procurement and legal teams in structuring the colo contract to provide flexibility rights. Advisor fees are typically far smaller than the contract savings they help negotiate.