Data Center Wars – Battleground Houston

Houston, Texas is being described by many as an absolute boom town with substantial growth across many verticals.  Well known for being a global energy sector capital it has become a resilient and well-diversified economy with twenty-six Fortune 500 companies making their home in the Houston area.

Many data center firms have taken advantage of this growth by building significant capacity in the market. Well established public data center companies such as CyrusOne (CONE), Digital Realty Trust (DLR) and Internap (INAP) have all made recent investments in putting additional infrastructure in Houston to keep up with the high demand.  CyrusOne expansions are currently underway in Northwest Houston, Digital in the Northside Greenspoint Area and Internap in Downtown Houston.  Traditional real estate firms have also eyed the market in recent years with Stream Realty building a major wholesale campus in The Woodlands area of Greater Houston in 2012 with much of it already under lease.

While Houston has previously been a market with few data center players relative to other major metropolitan areas new firms have entered and are making major investments often with new, innovative approaches.  With intense competition rapidly on the rise, a local data center war has heated up which is giving customers very attractive options for local colocation service.

 

 

[subtitle3] Westside Providers Building to Serve Big Footprints [/subtitle3]

Katy, TX based StratITsphere recently made the decision to exit the retail colocation business by entering into strategic partnerships with customers like Alpheus and Scale Matrix in order to focus on its own wholesale service model.

StratITsphere CEO Darin Cook shares his thoughts on what he sees in the Houston market.

“In general, I believe there to be a shortage of supply within the Houston data center market place even with all of the recent builds.  Most of the competitors in Houston are disciplined and, to this point, have stayed focused on core retail or wholesale products.  Houston is beginning to mature with new providers moving into the market with both retail and wholesale products.  As new competitors come to Houston, the boundaries of wholesale versus retail will remain as a majority of the opportunities in Houston are mid-market enterprise companies that traditional wholesale focused providers shy away from.”

Dallas based Skybox Datacenters has a sizeable 20 acre campus and 96,000 SF facility under construction on the west side of Greater Houston providing dedicated, 1.2 MW private data halls for wholesale customers.  This is their first facility in the local market and they are looking to make a big splash with a focus on large footprints typically operated by tech savvy major enterprises and large technology service providers.

Rob Morris, Managing Partner of Skybox provides us insight into the rationale for this major capital investment.

“We have made this significant investment in Houston because we observed a lack of true wholesale data center space over the past several years.  While very common in most primary markets, it has yet to really make its debut in Houston.  Larger customers typically opt for wholesale data center leases for the cost, control and flexibility they provide their operations.  Wholesale should not just be about getting a better per unit price because you are purchasing more.  The real wholesale value is in receiving complete transparency in operations, complete pass through power and operating expenses as well as long-term operational flexibilities that simply can’t be effectively provided in traditional colocation.

We are not everything to everyone and we won’t try to be.  We want to make sure we are providing the absolute best solution to each of our customers.  For large, mission critical, enterprise grade requirements we are seeing a very positive response to this new offering.”

 

[subtitle3] High Touch Northside Centers [/subtitle3]

The Westland Bunker, with its data center campus located in the far north of the Houston area in Conroe, Texas is well known for its highly resilient underground facility which was converted from an expansive nuclear shelter that sits 345 feet above sea level.  This facility has provided production, disaster recovery and business continuity services to organizations seeking high security as well as safety from natural disasters.

Due to the high Houston area demand an additional above ground expansion is underway at the site to bring additional capacity of 50,000 high density engineered square footage in the initial stages of the build plan capable of servicing customers looking for private suites, cages or individual locked cabinets.

Westland Bunker Vice President of Sales Brock Nieves is optimistic about the overall landscape of Houston colocation.

“We have seen substantial demand for growth within our existing customer base while new demand has clearly been on the rise.  The appetite for outsourced data center services has brought new opportunity for us as well and other providers in the area.

We are experienced in handling large requirements and customers that could be considered wholesale but we differentiate ourselves by providing a high level of personal 24/7 service to all of our customers in helping them achieve their specific business goals.  Regardless of whether they have a full private suite or a single cabinet it is our goal to do everything possible to assist them in growing with us on our campus.  Our new build is a commitment to making sure we have an easy path forward for them to do so.”

Scheduled for completion in the first quarter of 2015, Austin-based Data Foundry’s “Houston 2” will be its largest greenfield data center situated on 18 acres in North Houston.  The carrier neutral facility is being designed with fully redundant power and cooling infrastructure capable of servicing high density, mission-critical footprints.

Data Foundry CTO Edward Henigin has been with Data Foundry since the very beginning as employee #1 when they were known as Texas.Net, one of the first 50 ISP’s in the United States.  He has definitely seen a lot of market change in Houston over the past 20 years.

“We are making a significant investment in Houston to take advantage of the rapidly increasing local demand for data center services within a variety of verticals.

For Data Foundry it is all about the finished product not just the backend data center infrastructure.  Our hands-on service takes away all of the headaches of facility management not just the financial ones.  We put significant resources in place in the form of facility and customer service staff to provide tailored services to customer requirements that have commonality across the customer base.  We see that many Houston organizations are eager to take advantage of this style data center service offering.”

Fibertown is another data center firm that believes in the hands-on, high-touch service approach.   They are well known for providing Houston companies with disaster recovery data center and business continuity services out of their Bryan, TX data center.

Fibertown Vice President of Sales, Craig McClusky talks about their decision to build closer to the center of Greater Houston which is located in the Greenspoint area of North Houston.

“Houston companies are seeing a positive investment in outsourcing data center services to experts who can become an extension of their IT team. This has spurred a rise in demand for high performance, secure data centers close to the office. The robust Houston economy and thriving oil & gas and health care industries will continue to create demand for colocation among the mid-market which is our core focus.

Our customers tell us that they appreciate our passion, accountability and approach to personalized customer service. Our customers with large data requirements and production systems needed a facility closer to home, and we delivered by opening a Houston data center.

At Fibertown, we are delighted to see a vibrant and expanding market for colocation.  Lots of companies are making the decision to move to much more secure locations for their computing needs.  Security and uptime are industry givens but the differentiator can easily be the NOC and the human touch points.”

 

[subtitle3] The Future of the Houston Market [/subtitle3]

With new data center campuses popping up all over the Houston area it is indeed an exciting time for the local colocation market.   It is estimated that well over 50% of Houston based companies still operate their core production data centers in-house.  These companies evaluating moving into colocation facilities now have many options to choose from at rates that have typically fallen from where they were in recent times due to lower building expenses per kW and increased competition.  Those that have already moved but are unhappy with their current provider now have multiple avenues to relocate.

In the Data Center Battleground of Houston there appear to be many winners and few losers.  Houston companies looking for data centers will surely continue to win as this healthy competition continues.