Thursday, September 29th, 2016

Time	Event
12:00p	New Player Enters Secondary Data Center Markets With Modular Design Six years ago, Chattanooga, Tennessee, became the first city in the US (and one of the first in the world) to offer gigabit-speed internet service to home and business users. Built by the city-owned utility EPB, the fiber network resulted in part from the utility’s own need to implement a smart grid and was funded by $111.5 million in federal stimulus money and $220 million in municipal bonds. Fast-forward to 2016, and the city’s mayor can be heard speaking about an economic revival that has taken place there over the past three years, attributing some of it to the Volkswagen plant that opened in Chattanooga in 2011 and a lot of it to the investment in fiber. Unemployment rate has been slashed by nearly 50 percent, and wages have grown, the mayor, Andy Berke, said while speaking at a conference in June. Fast internet connectivity boosted the tech sector in the city, he said, which is now home to a number of startups and even a startup incubator, called Gigtank. As the tech scene, and business overall, grows in the city, so does demand for data center services. Chattanooga is one of many cities around the US with plenty of demand but relatively few data center providers to choose from. Serving these so-called secondary data center markets has become the core business strategy for a number of companies, including some that were formed just recently to tackle the opportunity. Read more: Growth Continues in Secondary North American Data Center Markets The latest example is dcBlox, the Atlanta-based data center provider formed in 2014. It launched its first data center, in Brookhaven, Georgia (just outside Atlanta), in June and is currently building one in Chattanooga to take advantage of the demand created by the economic revival. This month, dcBlox raised $15 million in private equity from Atalaya Capital Management, which will help it fund construction of the 1MW site in Chattanooga and expand its Brookhaven site to 1MW from the current 500kW. There is still a lot of demand in tier-two markets, “especially in the southeast,” Jake Ring, dcBlox co-founder who serves as the company’s president and CEO, said. Chattanooga has a lot of demand and little available capacity, he added, also pointing out the city’s active tech sector and the fiber infrastructure that’s helped fuel it. See also: How TierPoint Quietly Built a Data Center Empire in Secondary Markets There’s More to Chattanooga Than Fast Internet In addition to its fast last-mile fiber network, Chattanooga, as a data center market, benefits from its location. A major long-haul fiber route runs through the city, with lots of long-haul carriers operating on that route. Department of Energy’s Oak Ridge National Laboratory in nearby Knoxville, a major center for material, nuclear, and neutron sciences, as well as national security, clean energy, and supercomputing, means there are lots of highly educated people living in the area. Finally, people are drawn there by low cost of living and the surrounding outdoors, full of rivers and mountains, Ring said. While it may be underserved, Chattanooga has more data center providers than many other second-tier markets, Dan Thompson, analyst at 451 Research who specializes in such markets, said. One of those providers is EPB itself, but it’s short on capacity, he said. There are a few others, but they tend to operate in specific niches. Airnet, MCA Technology Solutions, and Peace Communications all provide data center services in Chattanooga, but they specialize in various managed services. Its competitors in Chattanooga aren’t pure-play colocation providers – most players in secondary data center markets aren’t – but neither is dcBlox. Its primary user base there will be comprised of small and mid-size businesses, Thompson said, and most of them will be interested in services beyond colocation. See also: Peak 10 Finds Winning Formula in Tier-Two Data Center Markets Modular Design, High Density, Private WAN dcBlox hopes its modular data center design will be a big differentiator. Similar to Phoenix-based IO, the company installs pre-manufactured container-like modules filled with IT racks and infrastructure equipment inside large building shells. The modules are designed by Myoonet, a company run by dcBlox CTO, Joshua Reyneveld. They are manufactured by a variety of IT suppliers subcontracted by Myoonet, which sells them to dcBlox exclusively. There can be 18 to 30 racks per enclosure, with variable power density – up to as much as 30kW per rack, Ring said. By pre-manufacturing the modules and shipping them to the data center site, where they are plugged into a centralized UPS plant, chilled water supply, and network, dcBlox speeds up the deployment process. Ring considers speed to market and the ability to offer variable power densities major competitive differentiators for his company. Another differentiator is its private fiber network, which currently links the Brookhaven data center to the big carrier hotel at 56 Marietta St. in Atlanta, and which the Chattanooga facility will be plugged into as well. What Really Matters in Small Data Center Markets Speed to market and high power densities may end up being differentiators in the long run, but the things that will help a company like dcBlox succeed in a market like Chattanooga are more basic. The modular design may help keep construction costs low, which in turn will enable it to offer competitive rates. That will probably resonate more with SMB customers than speed to market, Thompson said. However, speed to market may help dcBlox in the future, if demand grows quickly and the company is able to deliver inventory faster than its competitors. There’s also little demand for high power densities in these markets, at least today. While this may change in the future, as companies upgrade to newer, more powerful IT gear, most companies are still operating at 10kW per rack or less, Thompson explained. In addition to price, connectivity, and managed services, a personal touch matters a lot more in markets like Chattanooga than it does in the top markets. A sales person may have a hard time if “you don’t know all the IT people by first name, because you didn’t grow up with them,” Thompson said. “The key with these small markets is that local presence. As long as they have a local sales staff, and people that know the community, I think they could have a decent success story.” (Comment on this)
4:32p	Will Internet of Things Ignite Power by the Hour? Brought to You by IoT Institute A manufacturer of an industrial-strength soap dispenser had a novel idea: Add sensors and connectivity to the dispenser to monitor soap usage, give away the dispenser, and make money on replenishing soap. Thanks to the Internet of Things, the ability to monitor in real-time translates into the ability to predict when the customer needs to replenish—a practically insurmountable competitive advantage when selling consumables. Disruptive business models are the great promise of IoT, right? Not so fast. The cost of putting connectivity over cellular on every soap dispenser adds up quickly, which McKinsey & Company found after doing the math. The manufacturer would not have been able to recover the cost of giving away the dispenser, even if it locked in the consumable sale over the lifetime of the hardware. “The consumption-based model appears to be pretty powerful for unlocking a lot of opportunity, but we have to be careful how we get to it,” says Mark Patel, a McKinsey partner. In B2B scenarios, the road to IoT and the digitization of the enterprise must be tread cautiously. Hidden costs, technical hurdles, cybersecurity threats and cultural pitfalls abound. Such challenges have sent many manufacturers retreating into the shadows. In January, McKinsey surveyed 300 manufacturing experts in Germany, Japan and the United States and found that only 16 percent have a digitization strategy in place. (At the upcoming IoT Emerge conference, McKinsey will be available to discuss the latest IoT trends.) Related: View the IoT Emerge Agenda Related: Take Advantage of Special Discounts for Readers! Register now using these discount codes: $200 off IoT Emerge Conference or Extreme Passes: IOT200NOW Complementary Expo Pass: IOTEXPOPASS Manufacturers shouldn’t remain idle, either. There are lots of IoT-related savings on the table. Industrial IoT can predict when equipment needs repair, McKinsey says, reducing maintenance costs by up to 40 percent and cutting unplanned downtime in half. Self-driving vehicles in mining raises productivity by 25 percent and reduces the number of workplace accidents. Tagging items in the supply chain improves efficiencies and flattens inventory. And that’s just the beginning. Connected equipment unleashes valuable usage data, which fuels product development. Little used features can be discarded, critical features improved, and new features brought to market. Usage data can be collected from multiple customers and analyzed to unearth industrywide trends and best practices. Data-based decisions replace intuition. Beyond this lies the bigger prize: IoT usage data can spur new business models that shift competitive dynamics within industries, McKinsey says. The thinking goes, if IoT can predict maintenance, forecast demand and minimize unplanned downtime for valuable equipment, why not charge for the use of the equipment (as in, “power by the hour”) rather than sell it? Why not become a services company? Such business disruption, though, isn’t for everyone. It wasn’t right for the soap-dispenser manufacturer, says McKinsey’s Patel. Internet of Things Institute sat down with Patel to talk about the challenges facing manufacturers and how they can chart a sensible path through IoT’s lightning storm. Where are we with industrial IoT? Patel: Now we can better articulate IoT—the technical implementation of sensors, connectivity, processing—and have moved beyond to business outcomes. We can predict things, develop models and apply analytics around real-time data flows. It’s much more about the potential economic impact, and the numbers get quite big. You can really take waste out of the system, in terms of lost productivity, lower asset utilization, quality, safety. It’s less about the connecting of things and more about getting the outcomes and some value. All too often, I see situations where folks think the outcome is the analysis on a dashboard. That’s not an outcome, that’s information. The outcome is that the equipment is running with a higher utilization or higher quality. Are manufacturers achieving business outcomes? Patel: It’s still early. We have yet to see the outcome in most cases. Consider preventive maintenance. All the enthusiasm is about building models based on machine data to predict when [equipment] is going to fail and then change the planning of maintenance activities to prevent it. We’ve been building some of these predictive models for clients and showing what it takes to make them work. We figured out we can get the data, build these models, and usually get to a decent level of prediction, but actually affecting change in operational performance isn’t trivial. What makes this so hard? Patel: You need a maintenance team to do almost a 180-degree swing in the way they think about their jobs, type of work they do, and ability to interpret and act on analysis. When you go into industrial environments, folks say, “Our job is to apply our expertise when it fails.” It’s very different to say, “Actually, your job is going to be part data scientist, part service operator.” You’re actually trying to eliminate the need to have deep experts only available on demand. It will take a number of years, if not a generation, to really work through this. Related: 2017 Salary Guide: IoT’s Captains, Data Stars, Security Pros, Developers To get to the outcomes, we’re increasingly seeing you have to align folks end-to-end in the value chain in order to deliver it. For example, in healthcare, there might be a wearable device generating awesome data. But getting the payer, provider, physician, in-home care provider aligned to using, interpreting and applying the data isn’t easy. For anyone in the chain, there’s a potential loss of value for them, such as a lost revenue opportunity or a reduction in the number of times you’re going to visit them. We have to make sure that everyone has incentive to get to that outcome and that you can align them together. There’s a lot of talk about IoT driving consumption-based pricing. Should manufacturers move toward this model? Patel: With consumption-based pricing models, you’ve got to watch out for a few things. If you’re a provider that’s not able to sufficiently participate and ensure the outcome, then you’re exposing yourself to risk in the process. In moving to a service model, you actually introduce a lot more volatility into the outcome for you. For example, GE’s “power by the hour” engine, or managing the engine while it hangs on the wing, is extremely well-instrumented. There’s real-time data and visibility into all necessary parameters for making decisions about interventions on maintenance, on how things are being run, in order to ensure outcomes within a certain range. That’s hard to achieve if you’re selling individual components or parts in a system. If you’re a pump manufacturer or motor drive manufacturer, it’s much harder to be close to the outcome in a way that ensures you’re going to get your share of it. There’s also the potential that you end up destroying some value along the way and never being able to get it back. Sounds risky. Patel: Everyone can do the math. A consumption-based model makes sense if you have a relationship with a customer where the majority of what they’re paying you for, on an ongoing basis, is an asset that has a well-defined functionality and purpose, like a tractor or car. You have a well-defined lifetime of that asset and a well-defined model for financing that you can underwrite to very easily. You’re also creating a contract under which it’s easy for you to layer on additional services, which may be small today but become bigger over time. I think that’s a great situation. In some areas, IoT is going to be the critical enabler for some of the most dramatic changes. When we talk about sectors that make physical things, IoT becomes a much bigger part of the digital story. Machine learning and robotics on automating activities are also going to have an incredible impact on overall productivity and society. Tom Kaneshige is editor of Five2ndWindow, an independent news channel that is part of Internet of Things Institute covering mobile, IoT, marketing and the digital enterprise. You can reach him at tom.kaneshige@penton.com. This first ran at http://www.ioti.com/iot-strategy/will-internet-things-ignite-power-hour (Comment on this)
5:54p	Ex-Telecity Man Rob Coupland to Run Digital Realty’s EMEA Business Digital Realty Trust has appointed Rob Coupland, a former executive from TelecityGroup, the European data center provider recently acquired by Equinix, Digital’s biggest competitor, to run its business in Europe, Middle East, and Africa. In a statement, Digital Realty said Coupland’s appointment was related to its own acquisition of eight European data centers. The San Francisco-based data center REIT (Real Estate Investment Trust) bought those facilities from Equinix, which was required to sell them in order for European antitrust authorities to approve its $3.8 billion Telecity deal, closed early this year. Only one of the facilities was an Equinix data center; the rest had been operated by Telecity. The portfolio included four Telecity data centers in London, two in Amsterdam, and one in Frankfurt, as well as one Equinix data center in London. In February, Coupland was appointed as CEO of the business entity that was created to oversee the portfolio before it was sold to Digital for $874 million. Coupland’s appointment comes at a time of big changes in the European data center market. The Equinix-Telecity merger rearranged the pecking order in the market, creating a new dominant player that’s unlikely to be surpassed by any company in the near future. There is also a lot of uncertainty about what the UK’s vote to exit the European Union will mean for the region’s data center industry. The UK has been the biggest European data center market, and there is a lot at stake as British and European officials structure the post-Brexit relationship between Britain and the EU. Read more: Interxion CFO Sees Silver Lining in Brexit Equinix: We Didn’t Want to Stay Number-Two in Europe Forever Why Equinix Data Center Deal is a Huge Win for Digital Realty As Digital Realty’s new managing director for the EMEA region, Coupland will report to Chris Kenney, senior VP, international. “Rob is uniquely qualified to lead our growing EMEA platform, given his extensive industry and leadership experience in the region, and we are delighted to expand his role within the organization,” Digital Realty CEO William Stein said in a statement. Coupland joined Telecity in 2007 as strategic product director, was later appointed as COO and then as managing director, UK. Prior to Telecity, he served as head of marketing at NTL, and before that spent 13 years at Cable & Wireless, according to his LinkedIn profile. (Comment on this)
6:11p	Oracle Reduces Ellison’s Pay to $41.5 Million, Co-CEOs Cut (Bloomberg) — Oracle Corp., which has faced shareholder opposition to its compensation practices, cut pay for its top executives in 2016. Co-founder and chairman Larry Ellison received $41.5 million, a 35 percent decrease from last year. Co-Chief Executive Officers Safra Catz and Mark Hurd each received about $41 million, a 23 percent decline. The drop for the co-CEOs is accentuated by one-time stock awards valued at $9 million that they received when they were promoted at the end of 2014. The three executives were among the 20 highest-paid in the U.S. last year, according to the Bloomberg Pay Index, which values equity awards at fiscal year end, continuing a trend of generous pay for Oracle’s bosses. More than half of the company’s investors have voted against its pay practices in each of the last four years, making the company an outlier. About 1 percent of Standard & Poor’s 500 companies have lost in their most recent non-binding votes, and the average support level is 93 percent, data compiled by Bloomberg show. Catz and Hurd received the same number of annual stock awards that they did last year. Ellison’s awards were reduced to a level commensurate with the co-CEOs’. The executives failed to earn their cash bonuses, which could have been worth as much as $15 million, after missing profit targets. See also: Oracle’s Ellison Takes Shot at Amazon With New Cloud Services Security System Redwood City, California-based Oracle paid $1.5 million in security-related costs and expenses for Ellison and $176,156 in security for Hurd. Catz “was offered a security system paid for by Oracle but opted instead to maintain the existing security system at her residence,” according to the filing. Ellison increased the amount of Oracle stock pledged against personal indebtedness and lines of credit to $12.4 billion, or 315 million shares, an increase of 15 million over last year’s figure. He has a net worth of $43.1 billion, according to the Bloomberg Billionaires Index. See also: Microsoft and Oracle Gobble Up Data Center Space in Virginia Oracle filed a presentation to the U.S. Securities and Exchange Commission earlier this month that highlighted changes to its compensation practices. The company has reduced the number of stock options it pays executives and began paying stock awards that are tied to performance goals in 2015. It also cut in half the period of time executives have to exercise options to five years. Thomas Kurian, the president of product development, received $35.7 million and  John Fowler, executive vice president of systems, got $13.8 million. (Comment on this)

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