An all-out data center war has ensued in many maturing marketplaces throughout the world between variations of data center providers. While many data center firms continue to grow and thrive during these battles the consumer is primed to gain the most as we head toward commoditization of data center infrastructure.
[subtitle3] How did this war get started? [/subtitle3]
The lines between wholesale and retail were once pretty clear with 1.2 megawatt’s of dedicated power infrastructure in a private hall or building being the starting point for a typical wholesale offering. It was not long ago that retail colocation providers found prosperous working relationships by leasing wholesale space and carving it up amongst smaller users. Some of these same retail providers began to move upstream as they found larger opportunities they used as anchor tenants for new campuses and began to compete directly against the wholesale providers. Essentially at the same time many of the wholesalers beginning to lose opportunities to smaller, more service intensive providers became enticed by the rich margins being garnered in the retail space and began to move well below the 1.2 mW wholesale mark. Early methods of moving downstream came when 1.2 MW “pods” or “suites” were subdivided into what are commonly known as “PDU breaks”. Each PDU break was approximately one quarter of a pod or 300 kW of available power delivered in approximately 2,500 sq. ft. of caged data center space.
[subtitle3] Who has the advantage in this war? [/subtitle3]
Data center providers with a retail colocation service background have more experience in managing large amounts of customers on shared infrastructure. The retail model is geared to be an “all-in” service with the provider handling everything from power installations to running cross connections. To succeed these companies were required to have strong sales and marketing cultures that developed brand recognition in the geographic markets they operate in. They have advantages when a customer needs assurance of service support and the confidence of a recognized name they have heard of.
Data center providers with a wholesale service background tend to have cultures based primarily on high finance and real estate. They are used to dealing with large customers that are difficult to conduct transactions with from a commercial and legal standpoint. By the nature of wholesale they did not need to have everyone know their name – just the set of partners, typically real estate brokers, and customers that swam in the very large infrastructure space. In addition they have little experience and understanding of managing and servicing many customers within data center environments.
With the lines between retail and wholesale blurred – those with the retail backgrounds that have been able to structure themselves in a manner that gives them access to large amounts of low cost capital have the advantage. They are able to now play both games effectively while the wholesaler must play catchup in learning how to provide effective, scalable multi-tenant service.
On the other hand – the retail providers that have not been able to get themselves in a position to deploy large amounts of inexpensive capital are in a tough spot. The survival of these companies will depend on how quickly they can catchup in the capital game or their ability to adapt from colocation to a broader range of high value services which will give them an advantage for customers looking for more holistic service packages.
Both retail and wholesale providers also face the prospect of being an acquisition target if they are unable to adapt to the changing landscape.
[subtitle3] What are consumers gaining from this war?[/subtitle3]
In short customers are getting a better technical product at lower prices. Lots of capital both public and private has been pouring into the major and mid-range data center markets all over the world often via highly efficient, modular style builds which allow the providers to build at a much lower cost per kilowatt than ever before.
While this may result in lower prices, customers shouldn’t allow it to lead to reduced or scaled back service. In order to ensure top tier support you will need to be mindful that your Service Level Agreements reflect your expectations of service. Additionally, it is very important to have an understanding of data center staffing and operational procedures as these may affect the overall level of service.
[subtitle3] What does the future hold? [/subtitle3]
It is always difficult to accurately predict the future – especially in the technology sector where disruptive inventions lurk around the corners. How variations of cloud service impact the data center industry at the wholesale and retail levels is in the process of playing out. The ability to move data and workloads more seamlessly at greatly reduced costs is already upon us. The only thing to be sure of is that there is plenty of money to be made – and lost – as well as great efficiencies and productivity to be gained.