Thursday, January 28th, 2016

Time	Event
1:00p	Data Center Colocation in 2016: What to Expect Edge data center users and companies with Internet of Things applications may breathe new life into secondary data center colocation markets in 2016. However, when it comes to large-footprint deployments, it appears 2016 will unfold in a similar manner to last year. That’s according to Bo Bond, a managing director at the commercial real estate firm Jones Lang LaSalle. JLL recently released its Winter 2016 North America Data Center Perspective report, which examines the leasing activity and sale-leasebacks by data center providers. Customers are Getting Savvier Corporate customers are increasing looking to outsource hosting of day-to-day applications, such as email, accounting, and customer service, usually to cut cost or to free up capital for core business initiatives. Savvy corporate clients also realize that they can offload risk through Service Level Agreements with a major data center provider, Bond said. But enterprise interest in data center colocation for core business and high-performance applications is growing too. These often require sophisticated connectivity and hybrid cloud IT architecture. Read more: Digital Realty Leans on IBM, AT&T to Hook Enterprises on Hybrid Cloud Tenants are also concerned about the rampant M&A activity in the data center provider space. In certain situations clients are insisting on lease clauses providing for an option to terminate the lease if the facility is purchased by certain competitors. In other cases, there are requests for non-compete clauses or exclusive rights to provide a service. It’s Not Just about Cost Increasingly, the ability for a data center colocation provider to offer flexibility to expand or reduce square footage, increase power density, or add more services is a priority for tenants. While location and price are still important, flexibility is now almost always a top-three consideration for clients, Bond said. Read more: Modular Cooling System Enables on-Demand Data Center Capacity In fact, flexibility in the lease contract and the SLA can be more important than price for many customers. Tenants are Sticky In situations where there has been a good working relationship, tenants are generally inclined to renegotiate a lease renewal or extension with their current landlord. Landlord brand equity in the marketplace can be a key factor initially, but, Bond emphasized, colocation data center operators shouldn’t “rest on their laurels.” Often, the IT refresh cycle can be a catalyst for a client to relocate. It can be more efficient for tenants to move at the end of the lease, if there are acceptable alternatives in the market. In markets like Silicon Valley, where demand is high and supply is low, landlords set the agenda. Conversely, a market like Houston is likely to see tenants with the upper hand in 2016, due to the low price of oil, and, most notably for Houston, natural gas. Bond expect to see tenants lock in some longer-term leases at attractive prices in markets with relatively little new demand. While landlords like CyrusOne have exposure to the oil-and-gas sector, they have contracts signed with some of the most creditworthy sector stalwarts. Additionally, the data center architecture in the energy sector for large high-performance computing deployments is somewhat unique, which is another factor adding to customer stickiness. Demand not Letting up in Top Markets There was a tremendous amount of space absorbed in Northern Virginia during 2015. The demand for data center capacity near the big connectivity hub in Ashburn has spurred a flurry of land purchases and development activity for 2016. Bond expects to see steady demand in Northern Virginia for 2016, which should benefit all of the larger landlords, including Digital Realty Trust, Equinix, and DuPont Fabros Technology. Market by Market Dallas – Legacy telecommunication, healthcare, financial services, and airline industry provide a pool of older data centers to help drive migration from customer-owned facilities to third-party landlords. Technology firms have recently started to locate in the area, adding another industry to the mix for the Dallas-Fort Worth metro area. CyrusOne has a long history in Dallas and a “home court” advantage. QTS is now active in the marketplace with a massive campus. Digital Realty and RagingWire are both “moving dirt,” which will add to customer choice for large MW deployments, according to Bond. Read more: RagingWire Takes its Massive-Scale, Luxury-Amenities Data Center Model to Texas Dallas-based Bond is bullish on the data center colocation prospects for the market, citing an overall business-friendly climate in Texas as one of the reasons more corporations are relocation regional headquarters there. Chicago – Bond is bullish on the Chicago market for 2016 and beyond. He views the market as “healthy” and sees substantial demand for the new supply being constructed by Digital Realty, DuPont Fabros, and QTS. He pointed out that the former Chicago Sun-Times property being developed by QTS will offer a new location for customers to consider between downtown and the suburbs. Atlanta – Considered a tier-two market, Atlanta is likely to see significant growth in the future. There, corporations looking to locate a facility in the Southeast can “check off most of the important boxes,” such as: minimal coastal risk, existing national and regional headquarters, a major airport and airline hub, a large existing employee base, and prestigious universities. However, Bond sees a chicken-and-egg problem when it comes to supply. QTS has been the dominant player in the market with two large facilities. Customers like to have choice when they are considering a new location. Telx has an Atlanta presence, and Bond believes that looking ahead to 2017 and 2018, if Digital Realty, Telx’s new parent company, were to choose to expand in Atlanta, there would be demand for that type of product. Minneapolis – Bond sees Minneapolis-St. Paul as “quietly being a great market.” It is also a tier-two market, but it has not attracted much attention from the public REITs. The incumbent private data center providers, including ViaWest and IronGate, continue to knock down deals, but typically they are less than 1MW. Minneapolis is a lower-cost Midwestern alternative with plenty of land and good connectivity to Chicago, Colorado, and Dallas. Outlook for the Usual Suspects When it comes to the six publicly traded data center REITs allocating capital in 2016, Bond used a basketball analogy: “Why attempt a 15-foot shot, when a layup also counts as two points.” Northern Virginia, Dallas, Chicago, and the supply-constrained Silicon Valley will remain the data center markets with the greatest demand for 2016. However, built-out capacity constraints in tier-one markets may help some of the smaller markets land a few larger deals. (Comment on this)
5:06p	Traditional Network or Virtual? Five Tips to Help You Decide Paul Andersen is Product Manager for Array Networks. In today’s world of virtualization and public and private clouds, there are more options than ever for infrastructure and operations teams. On the one hand, this degree of flexibility and choice gives IT professionals many more tools with which to build networks and address challenges. On the other hand, it can also lead to confusion with respect to when and where to use these options to best effect. While not definitive, the following tips – gleaned from real-world customer interactions – provide a starting point for understanding the pros and cons of five common traditional and virtual deployment models. Traditional Bare Metal Bare metal servers in enterprise owned and operated data centers have been around forever. While they no longer dominate the market, they remain a go-to-solution for business-critical applications that operate on a long-term time horizon, support a large volume of traffic and need a high degree of performance to ensure specified service level agreements (SLAs). Like any solution that is enterprise owned and operated, traditional bare-metal servers afford a greater degree of control and security, characteristics that lend well to environments where compliance is a key consideration. Virtualized (Private Cloud) Like traditional bare-metal servers, virtualized servers – commonly referred to as private clouds when sufficiently large and automated – are also enterprise owned and operated. Like traditional bare-metal servers they offer superior control and security as compared to public cloud services. Because servers have been virtualized, they can be used to service multiple applications and multiple communities of interest. In this manner, a much higher degree of utilization and ROI can be achieved for each server. When paired with virtualization management capabilities, virtualized servers achieve an even higher degree of ROI because infrastructure and operations teams can behave as a cloud provider for an organization’s internal customers – spinning up and spinning down highly portable resources on demand. Cloud-Hosted Bare Metal While not as prevalent as public cloud yet, infrastructure-as-a-service (IaaS), cloud-hosted bare-metal offerings are on the rise. Cloud-hosted bare metal is somewhat of a mash-up between traditional bare metal and public cloud virtual offerings. The offering provides the exact same performance advantages of traditional bare-metal servers; however, it makes the servers available as an on-demand cloud service (usually billed monthly). Additionally, these cloud-hosted bare-metal servers are tied into a robust cloud management platform that allows the services to be enabled in a moment’s notice – as compared to weeks or more for dedicated servers offered from managed service providers. Cloud-hosted bare metal makes a lot of sense where performance is important, but OpEx is preferable to CapEx or where demand for a service is either dynamic or experiencing rapid growth. Cloud-Hosted Virtual (Public Cloud) Cloud-hosted virtual, or public cloud, is experiencing massive growth – as demonstrated by the dramatic rise of the two leading providers in this space (as well as an increasing number of new competitors). Cloud-hosted virtual servers operate in a truly shared environment and are provisioned, managed and billed using state-of-the-art cloud management capabilities. Public cloud services are a great choice for workloads that are transient in nature, for businesses that are starting out, for paying for applications infrastructure in direct proportion to customer demand for services, and for developing and sizing new applications and services. Due to the highly agile and portable nature of virtualized solutions, services are not only available on-demand, but are also available in hourly increments. Hybrid (Private and Public Cloud) Hybrid clouds connect private and public clouds. While the deployment model is still in its infancy, it is predicted to become the de-facto solution in the years to come. It will allow businesses of any size to strike the right balance of enterprise-owned and operated and cloud-hosted resources for their organization. For example, a business that owns and operates a dedicated data center or private cloud may choose to burst to the cloud to cost effectively handle seasonal traffic, such as during a holiday season. Conversely, a business that started out in a public cloud may realize that the time is right to bring certain workloads in-house for greater cost-efficiency and control. All five deployment models are viable, and success will hinge on understanding how your business relates to each – and from there making an informed decision on which approach best suits the current and future needs of your organization. Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library. (Comment on this)
6:04p	VMware to Cut 800 Jobs, Public Cloud Investment By The WHIR Approximately 800 jobs will be lost in the first half of 2016 to restructuring at VMware, many in cloud computing, as the company narrows the focus of its cloud services portfolio. The announcement was made as part of VMware’s Q4 2015 earnings report Tuesday and signals a significant withdrawal from the public cloud services market. CEO Pat Gelsinger described VMware’s last quarter as “solid,” and the company’s total revenues grew by 12 percent (on a constant currency basis). Cuts to the workforce of VMware’s vCloud Air, Fusion, and Workstation groups, as reported by Fortune, started Monday. The layoffs will affect employees in the EMEA region, Burlington, Canada, and Colorado, according to Fortune. Gelsinger specifically addressed vCloud Air in the earnings call, saying it would focus on providing innovations distinct from other public cloud providers to its vCloud Air Network partners. “VMware is creating cloud software and cloud services for cloud providers,” Gelsinger said in the call, according to Seeking Alpha. “It’s important to note that given that’s narrower focus, we believe the capital expenses we’ve already invested in vCloud Air will be adequate for our needs and that we expect our vCloud Air service to be accretive by the end of 2017.” When asked during the earnings call about choosing to narrow the company’s public cloud strategy rather than “doubling down,” Gelsinger referred to the decision to walk away from a planned Virtustream joint venture with EMC as part of the same process of focusing its strategy on highly differentiated products. He said hybrid services, including data center extension and disaster recovery, are unique services, and that the vCloud Air Network is growing and profitable. VMware updated its vRealize suite to enhance its resource delivery standardization and automation capabilities in December, one of a number of private and hybrid cloud service announcements in 2015 by the company. This first ran at http://www.thewhir.com/web-hosting-news/vmware-announces-800-job-cuts-narrower-cloud-focus (Comment on this)
11:22p	Report: Digital Realty Mulling Interxion Acquisition Digital Realty Trust is considering an acquisition of the major European data center colocation provider Interxion, according to reports citing the investor news service DealReporter. Interxion, one of the largest data center providers in Europe, may be in need of a big next step, following the merger of its two major competitors, Equinix and TelecityGroup, which created a behemoth in the market that will be tough to compete with for smaller players. The Equinix deal last year interrupted a previously agreed to merger between Telecity and Interxion. San Francisco-based Digital Realty, which traditionally built and sold wholesale data center space, recently shifted gears and went after the retail colocation and interconnection market, the domain ruled by the likes of Equinix, Telecity, and Interxion. Following the $1.9 billion acquisition of US retail colocation heavyweight Telx with a big acquisition in the market across the Atlantic would give Digital a much stronger international retail colo story. A Digital Realty representative declined to comment on the record. Read more: Telx Acquisition Closed, Here’s Digital Realty’s Plan Jabez Tan, senior data center infrastructure analyst at Structure Research, said an acquisition of Interxion would make a lot of sense for Digital Realty. It would be difficult to build a colocation and interconnection presence in Europe that was as strong as the Telx play in the US organically, and Interxion is the only provider with a pan-European footprint that could be a viable acquisition target, he said. Digital Realty currently has about 20 data centers in Europe, while Interxion has 40 data centers in 11 European countries, according to its website. “It’s a compelling combination, given Digital Realty’s strategy with Telx,” Tan said. Interxion stock was up more than 2 points (about 8 percent) at market close Thursday, following news of the potential acquisition. (Comment on this)

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