Zooming out

I don’t get sick a lot. I wash my hands often, carry hand sanitizer, eat well, and get 7-8 hours of sleep a night. Not the ‘I got 8 hours of uninterrupted sleep during hell week’ kind of sleep either. Well, last week I got sick – just a cold – first one I have had in a few years. I am a big baby and an awful patient when I get sick and prefer my solitude vs. being fussed over or cared for. It is in this solitude that I get a chance to feel different and by extension think differently.

It hit me after the third Emergen-C cocktail before lunch as the Advil was wearing off that my rants and unwavering belief in modular data centers being the next major evolution in the industry have far less to do with the data center industry that I thought and have led many to believe. Feel uncomfortable=think different.

Modular data centers are about advancing the reality that computing is the next (6th?) utility vs modular data centers being better traditional ones are. I believe the latter is also true by extension of the former, so we’ll focus on the utility of computing.

Utilities are commodities. Cable, phone, power, sewer, and water are all utilities, and by extension, commodities. They operate at scale and are consumed my millions of people worldwide when available in industrialized countries, and delivered inexpensively because of their scale. I will focus on the US for this post because it is where I have spent the bulk of my career.

There are similarities across all of the utilities – electricity, cable, telephone, sewer, and water and it is these similarities that has led me to the belief that computing is the next utility. In fact it’s already here, it’s just not being sold that way.

With electricity, the power company doesn’t care if you plug in a hair dryer, a 40 watt bulb, or weed wacker. It provides the electricity over infrastructure required to support the end points/devices. Cable is the red headed step child because the cable companies DO care what cable box you plug into their cable and they in turn control what you can and see. The similarity here is that they don’t care how may ‘i’ or ‘p’ your tv has – you can watch what you signed up for. Telephone companies don’t care what brand of phone you plug into their wires either – corded, cordless, speakerphone are all ok. Sewer and water don’t care if it’s a toilet or a faucet connected to their lines, and the downside if you get these confused is evident immediately so sewer and water have built in idiot proofing.

Computing uses power and cable or telephone to make another commodity – data – useful. Internet service providers – whether they use cable, copper or fiber – provide networks to our businesses and homes and they don’t care if we have an iPhone, iPad, laptop, or Galaxy tablet connected. The power company delivers the electricity to power the devices used to consume the commodity – data.

Data centers are the new treatment plants, the new substations, the new central offices for this utility of data. There is a subtle shift going on as data center companies understand this and that the business they are in is a commodity business. It wasn’t for the past 30 years – it took that long for us to get where we are, and the changes in the last 5 have been more numerous that the 25 before them. So as this rapid change happens around the data centers the change is happening with the data center industry as the realization settles in that data centers are in a commodity business. Real estate isn’t a commodity, but data centers are. Paying more for a commodity isn’t a successful business model. Supply and demand drive pricing which are the controls in commodity businesses. A freeze in Florida means orange juice prices skyrocket because there are fewer oranges.

The point?

The point is that in the next two to three years data center companies will be retooling to cut costs, the number one cost is electricity by the way. So to cut electricity costs you look at efficiency of the facilities you have and get them dialed in. Expansions happen where there is cheap power, and to get really cheap power you dial in workload to stabilize electricity load. Tenants will look at restructuring leases because they will be more efficient, or at least they should, otherwise they are paying more for their inefficiencies while the landlord improves their efficiency and laughs all the way to the bank.

One thing is certain, the company that understands AND realizes that they are in the utility business will win the commodity game. The winners will shave costs, focus on sameness of product offering, with small nuances of differentiation and deliver ubiquitous proliferation of reliable service in a lot of locations and they will win the game.

Time to get a glass of orange juice and watch what happens…

mark at blunthammer.com

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