The Data Center Frontier Executive Roundtable features insights from industry executives with lengthy experience in the data center industry. Here’s a look at the insights from James Leach of RagingWire Data Centers for the fourth quarter of 2017.
James Leach is the Vice President Marketing at RagingWire Data Centers. Leach is the overall marketing leader responsible for a data center portfolio of 1.5 million square feet and 113 megawatts of critical power in the United States. As a marketing executive, sales leader, and systems engineer, James Leach has enjoyed a 30-year career building technology and services businesses for commercial and government organizations. For the last 15 years, Leach has been at the forefront of developing innovative Internet services for enterprises. He was part of the core team that introduced ultra-high availability data center colocation, second generation cloud computing solutions, virtual private networks (VPNs) and route optimization, application hosting, content delivery networks (CDNs), internet registry and DNS (domain name system) services, and web performance monitoring and testing.
Here’s the full text of James Leach’s insights from our Executive Roundtable:
Data Center Frontier: What is the one trend you believe will be most significant in shaping the data center industry in 2018, and why?
James Leach: We see renewable energy becoming a critical element in data center colocation in 2018.
For the last few years, data center companies have been ‘”talking the talk” when it comes to renewables. In 2018, look for the leading data center companies to “walk the walk” and roll out affordable renewable energy options as part of their colocation offerings.
In the past, we saw companies buying Renewable Energy Credits (RECs) to give them the right to say that they were using renewables, when in fact they were using traditional, mostly carbon-based energy supplies. A few hyperscale cloud companies started installing their own solar farms, but leaving out the local utility was problematic to guarantee supply, especially on cloudy days.
In 2018, expect data center companies and energy utilities to partner to deliver true renewable energy options. The utilities like working with data center companies because data centers require a predictable amount of energy and offer economies of scale. Data center companies like working with power utilities because utilities are experts in reliable energy transmission and they know how to work with regulators to establish contracts, service levels, and pricing.
Data Center Frontier: 2017 has been an interesting year for wholesale data center providers. Some have focused on winning huge hyperscale deals, others on expanding into colocation and interconnection, or targeting key industry verticals. How do you see the landscape for wholesale providers evolving in 2018, and what do you see as the keys to success?
James Leach: For wholesale data centers, we are seeing new hybrid resiliency models emerge.
In the past, resiliency designs for wholesale data centers were based on a “more for less” approach. Wholesale buyers got more space, power, telecommunications, security, etc. than they could build themselves and at lower prices. Now wholesale requirements for resiliency are changing to a “less for ‘even more’ less” approach without sacrificing overall availability. How is this happening?
Wholesale data center providers are increasingly being asked to deliver just what is needed, without a lot of backup. In the industry, this approach is known as the “N Model” where “N” is the amount of equipment needed to deliver a service.
What happens if “N” breaks? In the old days, we would deploy “N+1” or “N+2” or “2N” to prevent downtime. Now resiliency is being built into the computing systems and the application itself. It’s a multi-layered approach where the apps, systems, and data centers are designed to absorb failures instead of avoid them.
Data Center Frontier: Data center geography is a hot topic. What geographic markets will be strongest in 2018, and why? What are the up-and-coming markets that may make headlines in 2018?
James Leach: We all know that top local markets matter in the data center industry. The top 15 data center markets globally represent 70 to 80 percent of global data center sales. The top 6 US markets represent about 70 percent of US sales, and the US represents about 50 percent of the world’s data center sales. Once you get momentum in a local data center market, it’s hard to stop.
Data centers might be local, but applications are inherently global. As soon as you plug your application into the Internet, it instantly becomes global. Whether you have one user, 10 users, or 1 million users, you need to design your computing architecture from Day 1 to support a global user base.
So the strategic question is how are we integrating local data center markets to become a seamless, global data center platform? We need global reach, along with global design, capacity, and operations.
Currently there are a few data center companies with truly global reach. Let’s take a look at the top three data center companies worldwide. Equinix is in 21 countries. Digital Realty is in 11 countries. NTT Communications is in 20 countries. The challenge is that many countries require that global multi-nationals create independent companies to operate within their borders.
A global data center company may have a common brand across all countries, but they typically don’t have a common contract for customers. Customers are often asked to sign and manage multiple purchase agreements governed by the laws of different countries and jurisdictions. We need global agreements to support global data center deployments.
From a design perspective, how often do you tour data centers from the same company that have significantly different designs? Globally this problem is significantly exacerbated. We need consistent reference designs that can be deployed globally while allowing for local modifications.
For capacity, customers need to be able to sign up for a defined capacity across multiple data centers worldwide and have the option to move capacity between data centers as the needs of their business change.
Lastly, we need a global operational model that enables a single customer team to manage their deployments in multiple data centers worldwide with common metrics and procedures. This operational model should be developed from the ground up and leverage best practices and centers of excellence.
Data Center Frontier: The data center industry has seen growing interest from new investors and a wave of mergers and acquisitions. How might these trends shape the competitive landscape in 2018?
James Leach: According to industry reports, both the volume and size of M&A transactions in the data center industry have been growing at unprecedented levels. There are more deals and bigger deals in the Internet infrastructure sector every year.
Given the volume of these transactions and the decreasing number of available and established data center companies, we believe that there will be more of a “wait and see” attitude in 2018 regarding M&A in the data center industry.
There will continue to be M&A deals in 2018 particularly for companies entering new markets. These deals will be largely driven by buying real estate assets and meeting Wall Street growth projections, as opposed to strategic acquisitions or innovation.
While real estate economic models have been driving investment in data centers over the last few years, data centers have always had a dual personality of real estate and technology. Our view is that data center companies will increasingly become a platform for integrated information and communications technology solutions or ICT. Look for “tuck-in” acquisitions that bring unique ICT services to the data center colocation solution portfolio.
We can watch this trend in the market place. Two of the three largest data center companies in the world, Equinix and Digital Realty, are both Real Estate Investment Trusts (REITs). The remaining data center company of the Top 3, NTT Communications, is an ICT solutions company.
Clearly there is a need for both REITs and ICT companies in the global data center industry. However, we see that in 2018 the added value of ICT will become a key differentiator for enterprise and cloud companies when they select a data center partner.