I don’t wish to put a bit of a downer on the growing Black Friday excitement but I’m just not sure of the effectiveness of such promotions in the B2B world. Indeed I must admit I’ve always been a bit sceptical about the role of pricing as the main driver in winning data centre services and an email in my Inbox this morning with a Black Friday colocation promotion has prompted me to see if any of my industry friends and colleagues agree?
In most of the colocation projects I’ve been involved in PRICE is usually one of the last issues to be considered and the length of time it takes to conclude most data centre transactions must surely also work against such short term promotions?
I find that other factors usually seem more important than price alone: for example access to certain carriers, exchange points or more recently (and as I only described the other day on the Crosspoint website http://bit.ly/2m8wNXW ) access to cloud direct connection nodes may be the main driver for the customer. In most of these cases the customer will end up paying nearly twice the price per kW to access specific networks than if they had simply looked for the best value site available in the London data centre market, a factor that underlines the long term strategic driver of colocation ecosystems and hence why there has been such a “land grab” around the world for these strategic sites.
Or with another project I closed earlier this year the customer, a large financial institution, had quite a “technical” requirement wanting the right quality data centre in the two “right” locations, with a vital layer of hardware support needed across both sites. Yes there was a negotiation on price towards the end of their due diligence process, but it certainly wasn’t the main driver and the client had to feel comfortable with all the other issues before bothering to negotiate what they felt was a fair commercial outcome for their business.
The other factor that makes me a bit sceptical about short term pricing promotions is the time it takes most data centre transactions to occur. Looking at the number of contracts I’ve closed over the past year, with both my businesses, I’d say the quickest is maybe a month or two from initial contact to go live, but this is not the norm. The transaction referred to above I’d describe as being quite quick for a large deal (200kW in total), at just under a year. Indeed a fair portion of the deals I’ve closed have taken longer than a year. It would therefore seem to me there are very few clients who can move quickly enough to take advantage of a short term price offer.
Perhaps the usefulness of a headline grabbing price promotion is to at least start a conversation with a potential customer? Even if the client can’t move fast enough to benefit from the promotion, the operator may at least be in with a chance of winning the business when it eventually happens, having at least encouraged the initial contact. I’d also be fairly certain the customer will still want something close to the promotional offer terms even post the so called “promotional period”, with the operator having already once offered them! But in the meantime I think the end-user will spend much more time focussing on issues other than price before signing a contract.
I’ve devoted quite a large part of my 2017 review of the London Colocation Market to both the drivers behind the ongoing industry consolidation as well as the pricing premium the key colocation ecosystems can command. If you’re interested to know what this premium is then my report should be a useful read. I also look at the overall cost of colocation when you include other items such as onsite support and cross-connect costs, where there are also a huge range of charges now being applied in the market. A follow up meeting with myself to go over the report and help with any follow up questions is always included as part of our report package.
Now onto the Colo-X “Black Friday” promotion:
If anyone would like to prove my thoughts about the uselessness of any “gimmicky” Black Friday promotions in the B2B world wrong I’m prepared to offer a £500 discount on all license types for the Colo-X 2017 report on any purchases before the end of this year, equivalent to a 15% discount on the Corporate License Fee, just contact me to arrange. Full details of the report can be found here: http://bit.ly/2s3JHI1
With apologies!
Tim Anker, November 2017