2013 was pretty good for us here at Blunt Hammer. Towards the end of the year, we went out to validate assessment data we had been performing remotely for a month and a half to insure that things were as advertised. They were.
There were some seemingly minor things that happened on our trip that point to larger issues within the data center business and could be a reason behind the uptick in our business last year. They deal with credibility.
One of the meetings was with some big wheels at a client of ours. Blunt Hammer was there to validate infrastructure, data, and positioning relative to what was already in place. Too often we see that what is said or presented comes across as being the Gospel truth, when in fact the infrastructure isn’t there, and is a plan (a/k/a dream) to put something in place one a developer has enough information about what they should do. In this case, our client did in fact have the power, the fiber, and the water infrastructure IN PLACE and has two existing data centers from respectable financial services firms in their zip code as well. Clearly not a dream, clearly not something in the planning stages – this client had delivered and had two tenants there already.
You could imagine my surprise when we were discussing what mentions they may have received as a legitimate data center site and they told me that they aren’t on anyone’s radar. I was stunned. I asked if anyone in the data center brokerage community ‘had reached out or even said anything at all’ and I was told that the city had received a negative mention at a trade show panel over the summer from someone in the data center space. My follow up question was ‘When were they here to meet with you to check things out?’ and the response was ‘Never’.
Imagine that! Someone saying something untrue without investigating the facts? No, they weren’t from a network news outlet either – This isn’t broadcast media folks. This is the data center industry where people die and millions are lost if we don’t do our jobs well every single day. What is more upsetting is that someone would be willing to commit credibility suicide by saying something (positive or negative) without doing their homework. Especially when you can get in your car and drive to go check it out for yourself, or in my case fly 1800 miles to make sure that before I say it’s a legitimate site, that it’s a legitimate site. Makes me wonder what else this ‘data center professional’ is telling their clients…
The second ‘minor’ thing that happened was someone passing me an article written by Wired Magazine about ‘Five Reasons Today’s Data Centers are Broken’. The author is Patrick Flynn – who works for IO Data centers – a company we are quite familiar with and genuinely like what they’re doing to evolve the data center. At the end of the day, the article should have been titled ‘Five reasons the data center business is broken’ and taken that approach. Saying that data centers are broken – which the article goes on to define – is like saying cars are broken because there was leaded gasoline in the 1960’s or because whitewalls look stupid. I understand that IO makes data centers so from their perspective saying data centers are broken I get, but Wired not taking an industry wide perspective on how modular fixes things in our opinion makes this a paid marketing placement vs. journalism. Maybe it was, in which case their credibility can now be called into question as a news magazine for tech.
The reasons cited for data centers being broken are:
1. Fear of the unknown
2. Lack of data
4. Value engineering
5. Snowflake design
Our position is that it is the business that is broken, not the facilities. We could always take the easy way out and be politically correct, or we can can call a spade a spade and say it’s the business that is broken. The way data centers are financed is flawed. The way they are sold/leased is confusing (we did a study with a third party) and are weighted towards satisfying financial projections pulled together by people whose computer of choice is still an HP. An HP 12C calculator. Ask ANYONE in finance how they actually value a data center deal and you know what the answer is? ‘It depends’. Depends are adult diapers, not decision criteria.
I have spoken to hundreds of finance people in the past 5 years starting various businesses so I can make this statement because I have been through data center modeling many and the result was the same – money would rather continue to believe their own stories, vs do their homework and make decisions based on unchanging criteria they set at the beginning of due diligence. If the criteria changes, it’s either not important or not clear what the objective is. They also trust people who haven’t walked the talk. My new favorite questions are – ‘so who have you talked to there?’ and ‘when did you validate what’s in the listing’. Try asking them yourself.
If you have seen the movie Good Will Hunting, you might remember the scene when Robin William’s character (Sean Maguire) is meeting with Matt Damon’s character (Will Hunting) on a bench at the Boston Public Garden and calls him out on his being ‘just a kid. You don’t have the slightest idea about life. It’s OK, you’ve never been outta Bahstin (Boston)…If I asked you about art, you could give me the skinny on every artist; Michelangelo, you could tell me all about him…Life’s work, political aspirations, him and the Pope, sexual orientation, the whole works, right? I’ll bet you can’t tell me what it smells like in the Sistine chapel.’ BAM! Knowledge vs. Wisdom.
There it is – you can study this industry until you’re blue in the face, read about what everybody else is doing, read 10K’s every quarter, talk to analysts weekly. But can you explain to investors what happens at One Wilshire when a submarine cuts a cable in the Red Sea and what to do in a global network event? Can you explain why two different approaches in design can be $26 million difference in price? Can you tell a client why a data center someplace they don’t have on their list makes sense, and then cost justify it?
We can, because we have. We’ll tell you what it smells like. Just because it’s a Ferrari, doesn’t mean the passenger didn’t throw up in it last night. That said, it’s still a Ferrari and we know how to get the Vodka/RedBull/Burrito smell out.
mark at blunthammer.com