Monday, May 16th, 2016

Time	Event
12:00p	How Long Will the Cloud Data Center Land Grab Last? US data center REITs reported record leasing for the year’s first quarter, attributing their success primarily to a digital land grab by public cloud giants, who are racing to expand capacity. The biggest data center providers are now operating in uncharted waters. The rising tide of public cloud deployments, combined with the paradigm shift in enterprise IT toward hybrid architectures, which combine cloud services with colocation, has created a perfect storm of demand for providers. According to Equinix CEO Steve Smith on his Q1 earnings call, “Interconnection-oriented architectures represent a fundamental shift away from centralized, legacy enterprise IT models to distributed and dynamic models.” Is Cloud Demand Distorting Markets? Demand for large data halls and connectivity to multiple clouds from one location has never been higher. While a good problem to have, it presents a different set of challenges for data center providers moving forward: Will this trigger a building boom that will result in oversupply? The unprecedented demand by the Big Three public cloud providers has changed the supply-demand dynamic in major US markets. Read more: Report Confirms Large Cloud Providers Drive Q1 Leasing According to Digital Realty’s latest investor presentation, this has accelerated absorption two to three times in several key data center markets. Source: Digital Realty – May 2016 presentation Essentially, customers have been leasing space at a faster rate than the industry can provide it. Chicago Supply Grows Notably, Chicago wasn’t one of the top data center markets in 2015, because of a lack of product available to lease. However, that situation will be remedied in just a few short months. Digital began development in February of a 180,000-square foot phase there, which can accommodate an IT load up to 16 MW. This space is planned to come online in the first half of 2017. QTS Realty is bringing the initial phase of its 30-acre Chicago Sun-Times campus online this summer. Read more: QTS to Launch Huge Chicago Data Center in July Also in Chicago, DuPont Fabros Technology is accelerating its CH-3 redevelopment, because 89% of CH-2 is already committed, with leases scheduled to commence during the third quarter of this year. CyrusOne made the biggest splash in the Chicago market, announcing a 15-year sale-leaseback of the 428,000-square foot CME Group Globex data center. Read more: CyrusOne Plans Huge Expansion at CME Data Center Campus in Chicago On its earnings call, CyrusOne CEO Gary Wojtaszek announced the intention to build a single 500,000-square foot data center on the 15 acres of land acquired from CME as part of the deal. While the timing of this project was not revealed, CyrusOne has received unprecedented interest from financial firms since announcing the CME deal. Lease it While You Still Can During the past twelve months, DuPont Fabros leased 78 MW of wholesale space compared with a 30 MW historical average, notably including a 16 MW build-to-suit in Santa Clara, leased at an initial yield 200 bps higher than previous phases. According to DuPont CEO Chris Eldredge on his Q1 earnings call, “We are in the early stages of cloud; I’d say we are in the first inning…” His major concern was not having enough space to satisfy customer demand. QTS recently announced it had leased 4 MW to a hyperscale cloud customer in Dallas, and then revealed that the customer requirement had doubled to 8 MW. CoreSite also announced record Q1 leasing, including an 80,000-square foot pre-lease in Santa Clara. Read more: CoreSite Shares Spike as Cloud Data Center Leasing Accelerates In response to the high demand, CoreSite has accelerated the development of its entire 236,000-square foot SV7 facility. Cloud Demand is Global There was also significant activity in Asia Pacific, EMEA, and Latin America. In addition to major projects in New York and Silicon Valley, Equinix announced expansion in Hong Kong. Equinix has over 16 expansion projects underway, including Sao Paulo, Amsterdam, London, and Sydney. CEO Smith said they were “…seeing a resurgence of subsea cable projects to support global cloud deployments and growth of international data traffic, which are creating new opportunities for Equinix.” He mentioned there were more than 50 global submarine cable projects under consideration over the coming two years. Read more: Amazon’s Cloud Arm Makes Its First Big Submarine Cable Investment Digital Realty pre-leased the entire first phase of its new Osaka data center to a cloud customer, and is expanding into the Frankfurt market in Germany. Related: Big Cloud Provider Leases Digital’s Entire First Data Center in Japan Landlords Adapt To Cloud While it might seem like marketing 101, design changes have also made a huge difference in the willingness for large cloud providers to lease space from third-party landlords. Most notably, the flexibility to deliver different levels of resiliency (N, N+1, N+2) within the same large building shell has been a major factor. Digital’s SVP of sales and marketing, Matt Miszewski, addressed this on the Q1 2016 earnings call: “I think over the past six months they have been satisfied that multitenant data center providers like us have the ability to hit their needs, and their capital is better spent focusing on the strategic imperatives that they have in front of them. While they may have hit a gap with their own builds, they all have sort of come to the realization that leasing is something that they need to not just explore but execute on.” Previously, wholesale landlords provided generally an N+2 product, which is what they thought most customers wanted based upon past experience. Investor Takeaway How long will this upswing in demand from public cloud providers last? Unfortunately, there is no easy answer to that question. However, a major takeaway from the 2016 Q1 earnings season was that despite record leasing for two consecutive quarters, the pipeline of new deals remains as robust as ever. While the potential exists for overbuilding in some markets, it appears unlikely to become a major issue for any of the publicly traded data center REITs. Streamlined construction methods allow for phased developments to provide just-in-time data halls. This contributes to high utilization of facilities, which helps to drive double-digit returns on invested capital. Wall Street has forced the sector to become good at allocating capital carefully, which imposes development discipline. This is reflected in the sector continuing to hit all-time highs, as investors are confident management will navigate these uncharted waters with one eye towards the horizon and the other on the bottom line. (Comment on this)
3:00p	Five Basic Rules for Improving Data Center Efficiency Nate Clyde, PE, is the Director of Data Center Design for Parallel Technologies. To remain competitive in an increasingly competitive world, it is important to continually seek opportunities to boost operational efficiency, reduce expenses and improve the bottom line. Within every corner of business, improving efficiency is a never-ending journey. As a significant capital investment, data centers are often under the microscope when it comes to improving performance. Within the industry, there is little doubt that data centers need to run as efficiently as possible to avoid tying up valuable (and often, unnecessary) company resources. In our business, we talk to data center managers every day and hear from them about their successes and frustrations when it comes to improving data center efficiency. It is evident from these conversations that there are five key areas where improvements can be made. Most importantly, these areas don’t require a lot of internal bandwidth but if done right, will go a long way towards an optimized data center. Data, Data, Data – For years, the American Society of Heating, Refrigerating and Air-Conditioning (ASHRAE) has recommended an increase in data center ambient temperatures. The reason for this is all about energy efficiency. Depending on the type of cooling system in the data center, each increase in ambient temperature (1 degree F) can result in a 2 to 5 percent decrease in annual energy utilization. Data center managers are reluctant to change the temperature because there is a lack of data that shows that the data center will still run effectively operating at the higher temperatures. Data centers that run at the ASHRAE recommended temperatures feel hot and I.T. people like data centers that feel cold. Unless there is data that shows that every device is operating within acceptable limits, the higher temperature simply don’t happen. However, there are now plenty of drop in solutions which provide operators the data they need to see that a higher temperature is not going to affect the data center and can actually result in energy savings. Plus, return of investment on these type of solutions is short, ranging from one to three years, making this approach a no brainer. Assets, Assets, Assets – Businesses move fast these days which requires I.T. infrastructure personnel to respond to constantly changing directions the business demands. Because of constantly shifting priorities, assets are often forgotten which can lead to “zombie servers”, which are assets that serve no purpose yet consume valuable data center space and power. To compound the problem, staff turnover is common and with little or no documentation left behind explaining the servers’ purpose, employees don’t know what to do with them or even know what they do! Too often no action is taken out of fear of causing an outage to customers leaving zombie servers sitting idle. The good news is that there are now a host of new solutions available that can ferret out zombie servers to ensure managers keep an accurate count on available capacity and avoid wasted resources. Back to Basics – Like everything, data centers have a growth cycle and unfortunately, many data centers are a mess, plain and simple. There are so many things that can pull a company in different directions but the key is to get back to basics in the data center. It may seem too basic but things like making sure abandoned cables are taken out and racks are sealed off from top to bottom can go a long way running an efficient data center. Without basic blocking and tackling in place, the rest of the data center will suffer. It’s All About Strategy – In response to ever changing business demands, I.T. infrastructure is also constantly changing. The need to build a bigger data center is an easy concept for leadership to get their minds around even when there is a company downsize. It’s important to make sure the data center strategy matches the company’s growth strategy. Otherwise, it results in unused capacity that doesn’t support the company goals. It is critical to have a strategic downsize strategy in place that ensures the data center continues to run effectively to meet the needs of the company. The Big Picture – We all know that I.T. assets are expensive and it can be tempting to consider purchases on the basis of lowest cost. However, it is important to look at the big picture as the cost to operate certain assets over their three to five year lifetime can sometimes exceed the cost of the device itself. For well-designed data centers, each kW of power draw that can be eliminated (generally through more efficient server/storage) counts twice for operations since the cooling system doesn’t have to account for that heat either, resulting in a double savings. For these reasons, it’s important to take the lifecycle of the equipment into account when making asset buying decisions. There are a number of vendor agnostic tools now available that can help end users make total cost of ownership comparisons between different I.T. equipment vendors. It may take more time but it’s certainly worth the extra effort in the long run. While there are a lot more than five ways to optimize your data center, implementing these five steps will not only improve your data center operations but contribute to the overall performance of the business. 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)
5:13p	Digital Realty Buys Eight Equinix Data Centers in Europe Digital Realty Trust has acquired eight data centers in Europe from Equinix, which committed to selling the facilities last year as one of the conditions for regulatory approval of its $3.8 billion acquisition of the European data center giant TelecityGroup. The companies announced the deal Monday. The acquisition, expected to close in the second half of this year, will instantly expand San Francisco-based Digital’s capacity in three major European data center markets. The company has agreed to pay about $874 million total for four Telecity data centers in London, two in Amsterdam, and one in Frankfurt, as well as one Equinix data center in London. Digital has had data centers in London and Amsterdam, but Frankfurt is a new market the company has been eyeing for some time. Earlier this year it announced a land acquisition in Frankfurt where it plans to construct a three-building data center campus. Ownership of Telecity’s Lyonestrasse facility in Frankfurt and contracts with its tenants are likely to accelerate capacity take-up on the future campus as those existing customers look to expand in the market. Related: How Long Will the Cloud Data Center Land Grab Last? This Tuesday, Digital will join Dow Jones’s S&P 500, one of the most widely tracked stock market indexes, becoming the second company in the index focused solely on data center services. The other one is Equinix, which joined the index last year. Digital will replace Time Warner Cable, which is being acquired by Charter Communications. Equinix’s blockbuster Telecity acquisition, which closed in January, radically changed data center market dynamics in Europe. By securing the deal, the Redwood City, California-based colocation provider instantly became the top data center provider in the region. The acquisition disrupted an agreed-to but not yet closed merger between London-based Telecity and the Dutch data center provider Interxion, at the time two of Europe’s largest players. Had the merger gone through, it would have been nearly impossible for Equinix, or any other provider, to take the top spot in the European market in the future. Digital, which historically focused on wholesale data center services, providing large chunks of data center capacity to the likes of Equinix (still one of its biggest customers), recently pivoted to a strategy that includes both wholesale and retail colocation services, competing more directly with Equinix. Last year it acquired Telx, one of Equinix’s biggest competitors in the US, in a deal that doubled its retail colo business. Read more: Telx Acquisition Closed, Here’s Digital Realty’s Plan Besides the acquisition of eight Equinix data centers by Digital, the companies also agreed on a binding option for Equinix to acquire a Digital facility in Paris, where Equinix leases and operates two data centers, for about $215 million. There’s no guarantee at this point that Equinix will exercise the option. The portfolio Digital has agreed to buy contains about 213,000 square feet of data center space and 24.4MW of IT load total. About 650 customers are using the facilities, occupying 72 percent of available power, Digital said in a statement. The portfolio also includes the potential to add another 15MW and close to 90,000 square feet of data center space in London and Amsterdam in the future. (Comment on this)
7:13p	Aligned Beefs up Management Team with Hires from Rival Firms ViaWest, Digital Realty, CBRE, and AT&T are some of the companies that recently lost team members to Aligned Data Centers, a recent entrant into the US data center services market that’s launched a data center in the Dallas market while building another one in Phoenix. Since about one year ago, the company has been beefing up its senior management team, attracting eight new members from rivals as well as companies it does not compete with directly, the company said in a news release issued Monday. According to their LinkedIn profiles three of the hires came on board in May of last year: Brandon Keesee, former director of engineering at CBRE, who joined Aligned as data center director; Jack Edwards, who joined as director of data center services after about three years at AT&T; and Ted Martin, who joined as facilities director after a year at QTS. The others joined more recently. Jeff Johnson and Tim Chandler, formerly with ViaWest, joined this year as VP of channel sales and VP of sales engineering, respectively. Suzanne Williams left a sales manager position at Digital Realty to join Aligned as VP of business development; John Greenwood, former executive VP of sales and marketing at Vazata, took a similar role at Aligned in December. Another new hire, who joined in March, is Clay Ashworth, former sales operations director at Wave Broadband. Aligned Data Centers is part of a holding company called Aligned Energy. Backed by the hedge fund BlueMountain Capital Management, it includes two other affiliates: Energy Metrics, which sells data center infrastructure management software, and Karbon Engineering, a data center consulting, design, and commissioning services organization. (Comment on this)
9:54p	Rackspace Brings Fanatical Support for Microsoft Azure to Europe By Talkin’ Cloud Rackspace is expanding its Fanatical Support for Microsoft Azure across its European regions, and is launching two new service levels, according to an announcement on Monday. Rackspace chief technologist Jeff DeVerter said that the launch of Fanatical Support for Microsoft Azure last year “marked an important expansion of [its] strategy to offer the world’s best expertise and service on industry-leading technologies, and is a natural progression of [its] 14-year relationship with Microsoft.” According to DeVerter, the two new service levels – Navigator and Aviator – address two different customer groups. The Navigator level offers access to tools and automation related to infrastructure support for Azure environments. It also offers on-demand access to Rackspace’s Azure architects and engineers as needed. The Aviator level builds on Navigator by offering a fully-managed Azure experience, including fully-custom architecture design and 24x7x365 operational support. Rackspace said this level is “for customers who want a more comprehensive support experience, including guest virtual machine management.” The news comes as Rackspace has reported its Q1 2016 earnings, reflecting a growing demand for Rackspace managed cloud services, including its services for Microsoft Azure. Recently, Microsoft offered free support upgrades to its Enterprise Agreement (EA) customers’ worth up to $12,000. This first ran at http://talkincloud.com/cloud-computing/rackspace-brings-fanatical-support-microsoft-azure-europe (Comment on this)

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