Monthly Archives: December 2013

Everything is Blurry…

I penned a comment in an article on Data Center Knowledge about colocation outlook for 2014 (http://www.datacenterknowledge.com/archives/2013/12/30/retail-vs-wholesale/) and how the market was getting blurry as far as what constitutred a colo deal vs a retail deal vs some other deal. The fact is the blurring has been happening for at least the past three years as all deals got fewer and far between and when the validation from Digital Realty came that their wholesale tenants were slower to take up space, combined with their deliberate entry into the colocation end of the business the blurring was undeniable. It’s every man for himself – the free market at work. What happened?

Anyone with inventory (conditioned power and 3+ carriers) wanted to do a deal. This created tension with wholesale players offering colo, since many of their existing customers were colo providers and no matter what, the landlord always has the upper hand on price. Digital shopped their stranded inventory (marketed as colocation) to several players and they didn’t want it, so Digital decided they would do it themselves, so for those that have said to us, ‘Yeah but Digital is a Wholesale provider, they should stay out of colocation’ the truth is they tried, no one bit, and the fact remained they still had inventory to move and no one saw it as a good business decision until Digital decided it was a good business decision. By then it was too late and whiners are left with sour grapes.

In general, this colo vs. wholesale vs. cloud vs. *aaS points to where we see the market going with our clients. It’s where it has been headed for at least the past 8 years – a utility. For all of the terms, definitions, market research, conference keynotes, and other spinning of the industry we endure year after year it is really a pretty simple business. It’s made complex and kept expensive to keep others out because it’s a great business to be in. It’s not rocket science if you know a lot about rockets.

If we peel back of the segmentation, acronyms, and other ‘definitions’ we try to use to explain the data center business at the end of the day the data center business is about providing more reliable electrical and telecom infrastructure than electric utilities and telecom companies are designed to provide on their own, apart from each other. Why? Because computers didn’t exist 100 years ago so the utilities and telecom providers served the market that did exist, and did the best with what they had to keep up with it. Then computers entered the picture and they change way faster than communication protocols or generating power does.

We see a day in the not too distant future where the CIO pays for both electricity and network costs as a function of their role in a company vs the facilities people who often get the power bill and purchasing who gets the telecom bill. Instead of keeping the lights on the CIO keeps the lights blinking. With our growing reliance on computing the reliance upon power and network connectivity has more value. As a utility it has the responsibility and burden of getting more reliable and less expensive like the computing equipment driving its use and consumption. Computing is the next utility and we believe there are exciting times ahead for the data center business because of this.

So the more we look at drivers for making predictions in the next ________ (insert whatever unit of time or measurement you like) remember this:

1. We have an intrinsic unit of measurement built into every piece of the data center business – cash (cost)

2. The future of the data center is driven by how important the stuff that goes inside it is to its users

To that end, those who understand how to drive out cost, increase reliability, and exploit the differences between the buildings and the stuff that goes in them will dominate the new utility business. Those who think it’s still a real estate play will be profoundly disappointed when they realize a data center can go anywhere.  The places that make the most sense are in the lowest risk, and lowest cost places on earth where reliable communications and power can be made more reliable and less expensive through better design.

We’re ready, are you?

 

A Top Data Center Consultant’s 2013 – Year in Review

For Blunt Hammer Consulting, 2013 was pretty interesting. 

We started the year continuing work with a group on the West Coast to develop a business plan of deploying modular data centers. We exited the year working with a midwestern municipality that surprised us quite a bit with what they have to offer as a legitimate data center site, and with a cabinet manufacturer that has designed and manufactured some of the highest quality product we’ve seen that is backed by a 99.9998% customer satisfaction rating (measured by returns).  In between, we worked with six other clients consulting about business formation, gaming infrastructure, the financial outlook for the data center industry, and short term ‘state of the industry’ type engagements. It was busy.

On a pure business standpoint, our revenue was up over 100% and our profitability was not only maintained, it grew. It was an awesome year looking back, and 2014 looks even better and here’s why:

1. Clients (and prospective clients) we talk with are less interested in good enough and are genuinely interested in doing better by trying new things. They are speaking with their checkbooks.

2. Our specialization in modular data centers. The business of modular continues to grow in spite of those who are still stuck on defining what it is. All that says to us is that if you still need a definition, you’re not ready for what’s here. If you don’t have a strategy for it, then you aren’t part of doing better, you are legacy. In this industry it means jumping the shark.

3. The value of what we do is increasing exponentially. The number of times we have heard ‘but they add no value’ this year dwarfs the past three years combined. We get calls from people looking to find another way to select data centers besides talking to a real estate broker who wants to talk cap rate instead of adiabatic cooling and its actual effect on PUE. Sorry brokers, step up your game (or call us) , your clients are talking to us.

4. The data center industry is moving towards being the next utility, something we have been saying since 2007. People are less concerned WHERE they get their reliable computing resources from as they are THAT they get the most reliable computing resources. The ideal is now that norm – always on. Period. 

We hope 2014 is a year of continued growth for us and for our clients, that it’s another year of exceeding expectations, and ultimately that we find $40M for a project to cannibalize the complexity of a data center and do better. 

Merry Christmas and a Happy New Year from us at Blunt Hammer!

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Another Step Forward…

I read an article this morning in the New York Times by Quentin Hardy about how HP is Tying More Business Systems Together, and it lends support to what we have long since believed – that computing will be the next utility.

In many ways it is already there, but we still have a long way to go.

The ways it is already there is the fact that at least in the US, there is near ubiquitous internet access in most cities. You fire up your favorite endpoint (computer, smartphone, tablet, etc.), open a browser and off you go. Looking for answers, sharing data, backing up files, the capabilities of tasks are almost endless. They are also one thing – computing.

These endpoints compute, the network hardware computes, the servers and storage boxes compute, and they do it together, separately, and sequentially running commands to get things done and make computing important to us. This utility relies on two utilities – power and telecommunications- to deliver its value to us users. Both those utilities are regulated. Computing is not.

So the macro opportunity is there to make a giant evolutionary step forward and tie together the data center, the gear that runs inside it, the networks that connect data centers to endpoints – without the burden of regulation. We still have the spying to contend with, but in an unregulated market, that problem will get fixed faster than in a regulated market because someone will just figure it out and do it. I will venture to say that Apple and Google are the closest to being that utility, with the edge given to Google.

The micro opportunity is to improve the resiliency of access to the computing by using the strengths of both telecom and power utilities to evolve into a more reliable experience for users at the endpoint. Eventually computing will go back to the future and be like the light switch – on or off. Pretty binary after all…