Colo Agents Form Consortium

 one-time referral commissions to monthly residuals, and some have evergreen clauses while others do not.

And, while agents typically have some leverage to move customers to which they have sold circuits should a carrier cancel their commissions, Loehr said with colocation this isn’t the case. “With colocation, it’s so sticky and hard for the client to move,” he said, noting this puts agents at the mercy of the providers that might decide to cut commissions when their properties are full. For this reason, he said, it’s critical that agents “stay involved contractually and actually.”

Murphy, offering another example, said consolidation among colo providers also put revenue streams at risk. “At some point larger players will start to buy smaller players and that may leave you exposed,” if the smaller supplier had an agent-friendly agreement and the larger one doesn’t support the channel. Making sure the contract is written with that in mind is critical to sustaining revenue, he said.

Palermo said he expects the efforts of the combined companies to have some success based on the volume of business they represent. Unlike agents that request quotes for five racks never to be heard from again, he said the consortium members sell thousands of racks a year. Colo providers, he said, would want to figure out how to put that sales machinery to work for them.

According to Palermo, there are more than 200 colo agreements between the three members of the consortium. As the alliance matures and becomes a legal entity, he said he expects that it will hold its own agreements. Meanwhile, the three members are sharing information about the desirable terms and conditions. Loehr has been working with an attorney to put legal language around these items and plans to contribute that information to the collaboration.

Already, the consortium members are planning to ride each other’s contracts for facilities where they don’t yet have their own agreements. Some of the reciprocal agreements facilitating such cooperation already were in place between GCN and the other two members prior to three-way talks.

Meanwhile, the group will be sharing information about the locations where they have done business and leveraging those relationships among the members. Loehr’s company has expertise in the U.S. Pacific Northwest and Europe; Murphy’s has expertise in New England and other parts of the United States, and Palermo’s is strong in the Asia-Pacific region, South America and Europe.

In addition, the consortium will be able to share best practices regarding end-user contracts and services as well as agency agreements with the colo providers around the world.