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Thursday, July 7th, 2016
| Time | Event |
| 12:00p | How to Choose a Colocation Data Center Provider Whether driven by finances, disaster recovery planning or simply wanting to focus resources on core competencies, more and more companies are making the decision to move a portion or all of their data center operations to a third-party data center colocation provider. Depending on a company’s business drivers, colo providers are often an attractive alternative to maintaining an in-house data center (and all that goes with it). Often companies find that an internal data center is not accomplishing the goals and objectives tied to the business strategy. The benefits of having a vendor house a company’s IT assets range from realizing a large reduction in future capital costs, increased reliability, simpler management, a smaller number of employees dedicated to managing the data center, and the flexibility to expand or reduce the amount of data center space used. However, for many, making the decision to move data center operations to a colocation data center is a monumental task. It is a complicated and emotional decision that at its core requires significant change. Despite all the benefits that come with moving to a colo solution, the apprehension that comes with changing the status quo is often the biggest obstacle to making the leap. Once a company decides to make the move to a colo, it takes a lot of careful planning to ensure the right strategy is selected for the business. To determine the best approach for their corporate needs and objectives, companies should take five key considerations into account: Determine the Data Center Goals Across the CompanyTechnology supports a company’s business goals and objectives, and the data center supports the technology. Therefore, the company must clarify what its long-term data center goals are, and what they mean for everyone involved in data center operations. Different departments often have varying goals and objectives that impact data center strategy. The first step to getting everyone on the same page is identifying all data center strategy stakeholders. To avoid disconnect among the stakeholders, it’s important to have a diverse cross section of employees weighing in on the overall data center strategy, goals, and objectives. This group should encompass senior leaders as well as subject matter experts, such as systems administrators and software developers. This ensures that all perspectives and data center use scenarios are examined. For example, upper management may not be aware of issues technicians encounter, such as lack of monitoring and alerting tools for the network. Likewise, the subject matter experts might not be aware of potential acquisitions that will alter the direction of the business. An important step in this process is interviewing the stakeholders and identifying their data center goals and objectives. Stakeholders’ goals should be longer-term, high-level items they want to achieve, such as improving data center uptime or reducing time spent running a data center. Their objectives would be short-term milestones that support each of their goals, be measurable, and include specific start-to-finish timelines. Each stakeholder should then rank these goals by importance in meeting the overall company objectives. After the interviews with goals and objectives identified, the next step is to bring stakeholders together and form consensus on what the most important data center-related goals and objectives are. From there, they can brainstorm the tactical execution of how these goals and objectives can be achieved, setting the stage for a comprehensive data center strategy. Determine the Colo Provider’s Role in Achieving Data Center GoalsOnce a data center strategy is developed, discussions should shift to determining the level of involvement the colocation data center provider will have in executing the strategy. Many colo providers offer more services than just power, cooling, and server cabinet space for IT equipment and can be used to help augment staffing requirements. Colos often provide a range of options, from managed services to cloud offerings. They can also offer a hybrid approach that combines both company-owned IT equipment in cabinets and services in the colo’s cloud. The key parties must take the overall goals into consideration when deciding which colo services they need. As a side note, even after a colo provider has been selected and your company moved into a colocation data center, it is important to continue reevaluating the services provided by the colo and their level of involvement with your data center operation. Technology changes quickly and by exploring any new services available, additional ways to improve efficiency, and options for reallocating precious internal resources without compromising reliability can be uncovered. Create a Strategic RFPOnce data center-related goals and objectives are in place and it is determined what colocation data center services make sense for the business, it is time to develop a request for proposal (RFP). Building an RFP that addresses your specific business requirements is essential for finding the right colo provider. Beyond background on your company, a comprehensive RFP includes clear instructions on what information to include, a list of your company’s mandatory requirements, an estimate on the initial number of cabinets, and the power necessary to support current and future growth projections. Additionally, it is key to give colo providers the opportunity to describe all aspects of their offering, from electrical infrastructure to how they handle deliveries. The RFP should also request information relating to pricing and terms, sample agreements, and floor plans showing where your company’s IT equipment would reside, electrical one-line diagrams, and facilities maintenance records. Finally, as you prepare the RFP be mindful to make sure that all the questions and requested information is clearly worded so that the colocation data center providers include the right information from the start. This saves time for everyone and eliminates multiple requests for more information or clarification on responses. It also demonstrates to the prospective colos that you have thought through the process and are prepared to make the transition – in effect demonstrating that you will be a “good tenant” and one that they WANT to have in their facility. Selective DistributionRFPs take a lot of time to develop and even more time to evaluate. To improve the effectiveness of the RFP process, it is important to be selective when distributing the request. Most states have several colo providers available to choose from, but upfront research will help determine which colos are the best fit for your data center needs. Potential candidates should meet your mandatory requirements listed in the RFP. For example, let’s say the colocation data center is for a disaster recovery site, which makes its location important. If your company requires that the site be less than 25 miles away, it automatically eliminates colos that are farther. If you require that the colo must provide remote-hands services, such as rebooting hung up servers or swapping out hard drives, colos that don’t offer this service will not make the cut. Taking time to do important preliminary research before sending out the RFP saves time for both you and the colo in the long run. Choosing the Right Colo: Use a MatrixOnce all colo RFP responses are received, make an apples-to-apples comparison to determine the best candidate. This sounds easy in theory, but most RFPs have multiple questions and each question varies in importance, depending on the company’s needs. The amount of information generated by colocation provider RFPs is large and complex. To try and make a comparison to determine the best colocation data center can be overwhelming. An effective way to compare each RFP is to create a weighted score matrix. This matrix consists of a spreadsheet listing all colocation providers and all questions from the RFP. Each colo provider is scored on how well their responses meet your company needs. This could be a number from 1 to 5. Also included in the matrix is a weighting from perhaps 1-20 in increments of 10. For example, if a particular colo scores 3 out of 5 points on “technician response time” and this is extremely important to your business, this question may get a weight of 20. In this case, that colo receives 60 total points for that question (3 points X 20 weight = 60 total points). Cost is another important factor when selecting a colcation data center provider. No two colo providers have the same pricing model so this requires extra attention. While one colo may directly pass all power utility costs to the customer, another colo may include the cost into the monthly rent charge. Either way, the most effective method for making an apples-to-apples comparison is to add up all costs each colo provides for the services needed. Then, to provide a fair comparison regardless of each colo’s pricing model, break down what your monthly cost will be, as well as your three-year total cost of ownership (TCO), five-year TCO, seven-year TCO, and 10-year TCO. A data center strategy requires careful planning and consideration, and choosing the right colocation provider can be crucial to meeting the company’s goals. Following these five considerations will ensure you make the right choice for your colo needs and reap the benefits of data center colocation to help achieve your company’s goals and objectives. About the Author: Tim Kittila director of the Data Center Practice at Parallel Technologies. He oversees data center consulting and services that help companies with their data centers. Earlier in his career at Parallel Technologies Kittila served as Director of Data Center Infrastructure Strategy. In that role, he was responsible for data center design/build solutions and led the mechanical and electrical data center practice, including engineering assessments, design-build, construction project management and environmental monitoring. Before joining Parallel Technologies in 2010, he was vice president at Hypertect, a data center infrastructure company. Kittila earned his bachelor of science in mechanical engineering from Virginia Tech and holds a master’s degree in business from the University of Delaware’s Lerner School of Business. |
| 5:23p | Johnson & Johnson to Move Most of Its Apps to Cloud by 2018  Brought to You by Talkin’ Cloud Johnson & Johnson is planning to have 85 percent of its applications in the cloud by 2018, joining a growing list of enterprises that are making plans to ditch on-premise deployments in favor of cloud-based infrastructure. According to a report by The Wall Street Journal, the company is already halfway there, with more than 500 terabytes of data stored in Amazon, Microsoft Azure, and NTT’s cloud platform. This multi-cloud approach certainly supports what many industry pundits have predicted is the future of enterprise cloud. In a recent interview with Talkin’ Cloud, VMware CEO Pat Gelsinger said that in the future, every enterprise will leverage a multi-cloud approach. See also: How Juniper IT Went From 18 Data Centers to One Improving productivity and driving efficiencies are some of the key drivers for healthcare companies adopting cloud services, according to research by Frost & Sullivan. In addition to having consolidated 40 percent of existing software applications to save on technology maintenance expenses, Johnson & Johnson turned off its last mainframe last year. See also: Slow Waning of the Enterprise Data Center, in Numbers Storing data in the cloud has also improved how its research is conducted, according to Sandi Peterson, group worldwide chair, ultimately enabling the company to speed up product development. To that end, by 2024 Johnson & Johnson will launch about 20 new products. This first ran at http://talkincloud.com/cloud-computing/j |
| 5:47p | Microsoft’s Nadella Reshapes Top Management as COO Turner Leaves (Bloomberg) — Microsoft CEO Satya Nadella announced a broad reorganization of the company’s senior executive ranks as long-time COO Kevin Turner prepares to leave for another job. Instead of naming a new COO, Nadella appointed two executives to divvy up the sales responsibilities and report to him. Jean-Philippe Courtois will be in charge of global sales, marketing and operations spanning Microsoft’s 13 business areas, Nadella said in a note to employees Thursday. Judson Althoff will lead the worldwide commercial business, including government and small and medium-sized businesses. Other executives already reporting to Nadella will take on parts of Turner’s job, with Chris Capossela leading worldwide marketing, Kurt DelBene leading IT and CFO Amy Hood taking over the sales and marketing team’s finance group, which had been separate. See also: After Microsoft Deal, What Happens to LinkedIn Data Centers? Next LevelAt Microsoft, Turner, 51, was known for instilling rigor and discipline in sales and operations organizations that had lacked it, and helping boost sales of enterprise software. But he also presided over declining sales growth in the final years of CEO Steve Ballmer’s reign as the company’s flagship businesses aged and it lost out on mobile and operating system sales to Google and Apple. Turner is leaving Microsoft after more than a decade at the company to become CEO of the securities unit at financial-services firm Citadel. He will join Citadel after a short transition period, the Chicago-based firm said Thursday in a statement. Turner was a candidate to replace Ballmer as CEO in 2014, but was passed over in favor of Nadella. He’s been searching for a CEO job for several years, according to a person familiar with the matter. See also: After Break, Internet Giants Resume Data Center Spending Nadella said in the note that he and Turner had been discussing what needs to be done in sales and support to help Microsoft “continue to reach for the next level of customer centricity and obsession.” In order to do that, Nadella said he made the decision to more closely embed Turner’s unit in the rest of the company. The reorganization dismantles what had become something of a parallel organization within Microsoft, where Turner had his own finance, marketing and communications staffs. Microsoft Chairman John Thompson also noted in an interview in May that the board was considering whether there were changes to be made to the sales and partner organizations to more quickly increase cloud revenue. The company declined to say Thursday whether Thompson’s comments were in any way related to Turner’s departure. At Microsoft, Turner was known for red-meat speeches at partner and sales events that amped up the rivalry with competitors like Oracle, Alphabet’s Google and IBM and for an equally fierce competitive streak that saw him personally intercede to woo back customers flirting with non-Microsoft products. A habit of peppering his speech with folksy maxims delivered in an Oklahoma accent, such as “the biggest room in our house is the room for improvement,” belied a tough manner and a refusal to accept shortcomings, that along with some of the rigid processes he put in place had both fans and detractors among employees. Turner came to Microsoft from Wal-Mart Stores with a brief to instill more process and discipline in the company’s operations and salesforce, which at the time didn’t even have quarterly notes. Turner introduced procedures such as a “conditions of satisfaction” document that details what Microsoft will provide each client. A screw-up required a “correction of errors” in which employees autopsied the mistake and laid out steps to ensure it didn’t happen again. He also created standard scorecards with 30 categories to measure each subsidiary’s performance. Microsoft was up 0.3 percent to $51.54 at 10:10 a.m. in New York. The shares were down 7.4 percent this year through Wednesday. |
| 6:39p | Brexit: Keep Calm and Hold Onto Data Center REITs Britain’s vote to exit the European Union surprised both the political pundits and “smart money.” While Brexit spooked global financial markets, US-based Real Estate Investment Trusts, including data center REITs, are one asset class exhibiting relative strength compared with the broader market. Brexit has already had many unintended consequences, most notably, a record devaluation of the British pound and a lower Euro valuation versus the US dollar. There has also been a downward spike in interest rates for sovereign debt. The rate of interest for US 10-Year Treasury Notes is ~1.37 percent as of this writing, flirting with an all-time low. Here is why this fact is crucially important for data center REIT investors. Low Rates Drive REIT Prices HigherThe conventional wisdom is that most REITs are viewed as being “bond-like” because of the legal requirement to pay at least 90 percent of taxable income to shareholders as dividends. The recent plunge in interest rates means that both bond and REIT investors are willing to accept lower dividend yields. Since bond prices move in the opposite direction of yield, this has the effect of driving up the price of US REIT shares.
Notably, data centers have been the top performing REIT sector, already up an average of ~50 percent during the first six months of 2016. This is great news if you already own data center REIT shares, and disappointing news if you were waiting for shares to pull back from record high prices prior to initiating or adding to a position. See also: US Data Center Giants in Europe: the Brexit Effect What About Europe?Equinix, the world’s biggest data center REIT, now derives just over half of its revenue from international markets, with substantial operations in the UK and throughout Europe, which became much more substantial early this year, when the company closed its blockbuster $3.8 billion acquisition of the London-based European data center giant TelecityGroup. The deal made Redwood City, California-based Equinix the biggest data center provider in Europe. Equinix was the only data center REIT that initially exhibited weakness, trading down 2.46 percent to close just under $378 per share on Friday, June 24th (the first trading day after the Brexit vote).
Fast forward a few days, and the entire data center REIT sector, including Equinix, was trading at 52-week highs on June 30, 2016. This Tuesday, Goldman Sachs initiated Equinix at a Buy rating with a $435 price target, representing another 12 percent upside from the prior close. That same day, Equinix and Digital Realty finalized the sale of the eight data centers which the European Commission required Equinix to divest as part of the approval for the TelecityGroup acquisition. Read more: Why Equinix Data Center Deal is a Huge Win for Digital Realty This Wednesday, Bloomberg reported that “panic” withdrawals halted four UK property funds, which served to underscores how dicey retail and industrial properties had become. Meanwhile, Digital Realty shares continued to rise despite having acquired five UK data center assets from Equinix, plus facilities located in Amsterdam and Germany. Digital Realty shares closed at yet another all-time high of $112.10 on Wednesday. Why is Mr. Market giving US data center REITs with significant European operations a free pass, despite the gloomy view regarding UK and European commercial real estate? Data Center REITs are DefensiveThe fact remains that data center REITs are not levered to employment, GDP, and consumer confidence like offices, hotels, and shopping centers.
Source: Digital Realty – June 2016 During the Great Recession, Digital Realty steadily grew its earnings and continued to raise its regular dividend distribution each year. The exponential growth of global data and secular drivers, including cloud computing, Big Data, streaming media, wireless data, and the Internet of Things will continue to drive data center deployments. Existing customers are not only sticky, they continue to expand and typically account for 50-80 percent of new lease signings every year for data center REITs. Investor TakeawayAll financial markets hate uncertainty. The Brexit vote is an unprecedented event in history. It is still unclear how this drama will play out over time. However, investors currently fear that the European economies will slow down and that the UK will drift into a recession. These concerns often become self-fulfilling prophecies, as corporations tend to reduce capital spending and defer new projects in uncertain times. Data center REITs provide a cost-effective alternative for corporations to continue to operate and scale up IT operations in uncertain times. Investors should keep calm and continue to hold onto their data center REIT shares. |
| 8:00p | Merged CSC-HPE Threatens Up to 15% of CSRA Revenue (Bloomberg) — CSRA faces intensified competition for five of its federal government contracts after former parent Computer Sciences Corp. merges with the enterprise-services arm of Hewlett Packard Enterprise. Contracts at risk include Enterprise Computing Services ($250 million), Alliant ($200 million), IT-70 ($152 million), ITES-2S ($68 million) and Encore II ($21 million). Combined, annual obligations from these contracts make up about 15% of CSRA’s estimated $4.3 billion in annual revenue. Bloomberg Government forecasts all but one of the recompete contracts to be awarded in just over a year and a half: the new health information technology component of IT-70 by October; and Alliant 2 and ENCORE III by October 2017. The NGEN II and ITES-3S contracts should be awarded by January 2018, while the ECS contracts won’t expire until 2020. Computer Science’s acquisition will close by March 31, 2017. HPE has competed with CSRA on some of the contracts, and both CSRA and the combined entity will likely bid on recompetitions, most of which are underway. For other contracts, HPE and CSRA have been two of many bidders. The federal market is far more important for CSRA than HPE-CSC, which was obligated about $1.1 billion in fiscal 2015 on six major at-risk contracts. That’s 4 percent of a predicted $26 billion in total combined revenue for HPE and CSC. HPEs contracts at risk include $716 million on NGEN, $109 million on Alliant, $105 million on ECS, $79 million on IT-70, $48 million on ITES-2S, and $10 million on Encore II. HPE’s fiscal year runs from November to October, which is different from CSRA’s April to March fiscal year. CSC has no federal work, according to the terms of the November 2015 spinoff and merger involving CSC and SRA. While contract obligations, reported by the federal government, don’t immediately turn into company-reported revenue, the ratio of obligations to revenue made in the same time period is a solid guidepost on which to evaluate trends. (Laura Criste is a federal market analyst with Bloomberg Government where Kevin Brancato is the director of government contracts research) |
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