Wednesday, January 11th, 2017

Time	Event
1:00p	Digital Realty Signals the Gloves are Coming Off in 2017 Digital Realty Trust appears ready to step on the gas in 2017. After a two-year focus on leasing up finished inventory and limiting speculative development, the San Francisco-based data center REIT’s outlook for 2017 includes spending up to $1 billion on new data center construction. Digital, one of the world’s largest data center landlords, released its initial guidance after the bell on January 3, prior to presenting the next morning at the Citi Internet, Media and Telecom conference. Its upbeat presentation described a one-two punch: first flexing the company’s considerable balance-sheet muscle to ramp up development in 2017 and then staking out its claim as a low-cost provider in the wholesale data center market. A Subtle Strategic Shift When Bill Stein took the reins as CEO back in 2014, he immediately put a halt to speculative development of powered shells and focused on leasing up existing inventory to drive higher returns for shareholders. There has also been an initiative underway to dispose of non-core properties, which is winding down. Last year at the Citi conference the emphasis was on partnering with customers like IBM and AT&T to land enterprise customer hybrid cloud deployments. (More on that here: Digital Realty Leans on IBM, AT&T to Hook Enterprises on Hybrid Cloud) During 2016 there were many large data center deals signed with hyperscale cloud providers, who were (and still are) looking for speed to market and attractive pricing for 10MW-30MW deals. Digital didn’t sign as many of those deals as some of its competitors did in the first half of the year. This year its Citi presentation had an underlying drumbeat of a more flexible development program in top markets with an eye toward “longer-term value creation.” This was in addition to capital being deployed to support overseas expansions, including phase-one developments in Frankfurt and Osaka. The company’s CTO, Chris Sharp, also emphasized the evolution of Digital’s higher-margin colocation and interconnection offerings, including the Service Exchange initiative, which can provide scalable, elastic private access to public cloud providers. Digital is leveraging a partnership with Megaport to provide this “connectivity as a service.” Read more: Digital Realty Challenges Equinix With Cloud Connectivity Platform All of these projects are encompassed in the $800 million to $1 billion CapEx guidance for 2017. A Bold Start to 2017 Digital shares were bid up nearly 10 percent during the few trading days following the presentation — spiking higher on both the 2017 initial guidance and the bullish tone during the Q&A at the Citi conference. Notably, the six data center REITs were are up an average of 8.4 percent during the following five trading days, while the broader REIT sector index (RMZ) gained 4.8 percent. Source: Finviz.com Wholesale data center providers have led the way, with DuPont Fabros Technology also spiking 11.8 percent and CyrusOne shares delivering a 9.5 percent gain. Inorganic Growth At this point, with the exception of finding a scale location in Tokyo, Stein feels that the existing portfolio has sufficient pins in the map to support Digital’s global strategy. While some of data center provider Interxion’s assets in Europe were described as attractive, any acquisition still has to meet the criteria of being: 1) strategic; 2) accretive to shareholders on a risk-adjusted basis; and 3) capitalized on a leverage-neutral basis. Digital has been trying to solve the Tokyo riddle for several years. So it did not sound like M&A would be factoring into the equation, at least during the first half of 2017. Apples to Apples Comparisons? There was a lively discussion surrounding confusion regarding “all-in” costs per MW not being apples-to-apples across the industry. Stein was quite direct in his discussion of Digital’s 13-year history of optimizing supply chain with vendors and having a clear cost of capital advantage compared with REIT peers. Another point emphasized was that build-to-suits for single-tenant hyperscale 10MW-30MW requirements are cheaper than developing multi-tenant data centers. Digital suggested that analysts and investors need to look at what is included on a consistent basis. Is it just the cost of IT load, or is the full redundancy included? What about land, carry cost, and leasing commissions?  Digital includes all of the hard and soft costs on a consistent basis, according to Stein. CFO Andy Power addressed the elephant in the room when he said that Digital builds the lowest cost product. I suspect this topic will be revisited multiple times during 2017. Initial 2017 Outlook Digital Realty guidance for 2017 included: Core funds from operations (FFO) per share to $5.90-$6.10 per share, representing year-over-year growth of ~5.25 percent. Foreign currency headwinds of approximately 1-3 percent in 2017. On a constant-currency basis, year-over-year core FFO per share growth is expected to be ~7 percent. Digital forecasts 10-12 percent stabilized yields on the $900 million of development CapEx at the midpoint. Gross margins forecast to be in the range of 57-59 percent, with a low G&A expense margin of 6-7 percent. Despite the rising interest rate environment Digital expects to be able to issue $400-$600 million of long-term debt in mid-to-late 2017 at rates of 3.75-4.25 percent. This last point supports the Digital Realty assertion that it can be a low cost provider of wholesale data centers. Investor Takeaway Leasing from a trusted third-party like Digital Realty can provide a time-to-market advantage for the massive public cloud, IT services, and software as a service providers. However, one lesson learned from record cloud leasing during 2016 was the need to have adjacent land entitled for future development and powered shells where data halls can be built-out rapidly, in order to capture some of this “lumpy” demand. On the other hand, capital need to be deployed prudently in order to generate adequate returns for shareholders. A “new normal” continues to evolve regarding what the net-absorption will be for large-scale deployments in major data center markets including: Northern Virginia, Dallas, Chicago, Silicon Valley and Portland/Seattle. REIT management, analysts, and investors will need to monitor these dynamics closely when data center REITs report Q4 and full-year 2016 results. (Comment on this)
4:00p	Speed and Flexibility Will Shape the Future of Critical Infrastructure Gary Niederpruem is Vice President, Global Marketing and Strategy for Vertiv. We are fortunate to participate in an industry where there is a good blend of legacy assets operating in the same environment as new infrastructure.  Sometimes the merging of old and new creates conflicts, but most times it creates opportunities; and those companies that adapt by being focused on speed and flexibility will create the most opportunities for themselves and their customers. Being several years into the cloud era of computing now, the pace of change is accelerating. The unrelenting growth in data driven by mobile devices, video streaming and IoT has greatly impacted the capacity needs of all data center segments. That has made speed and flexibility driving forces in infrastructure innovation. In this post I want to dig a little deeper into two trends that have broad impact and are connected by a common strategy: using integration to achieve the speed and flexibility data center operators now require. Today, organizations have multiple options in meeting their capacity demands. They can choose to locate resources on-premise, off-premise or access cloud services. Many are combining multiple approaches in a hybrid model, with capacity spread across on-premise, colocated, cloud and edge facilities. While availability is still the overriding consideration, speed has become almost as important. If you can’t meet the demand for capacity as it arises, you risk enabling competitors or missing opportunities for growth. In that context, the two- to three-year development cycle for a new data center becomes difficult to justify. The traditional data center development process allows little parallel activity between discrete stages and is too dependent on time-consuming stick-build construction to erect the facility shell. The industry has responded by re-engineering the traditional data center development process. A more streamlined process has emerged in which entire facilities, including critical infrastructure, are designed as modules that can be prefabricated offsite and then shipped to the site for assembly and commissioning. This approach has cut development times by approximately 30 percent and resulted in tightly integrated, highly efficient data centers. As more vendors develop the full suite of capabilities required to execute this approach — including critical infrastructure expertise, design and engineering and sophisticated project management — data center development times will shorten and the industry will become more agile in its ability to react to large shifts in demand. A similar trend is occurring on the network edge. Distributed IT and the Industrial Internet of Things (IIoT) are pushing IT resources closer to users and industrial processes. While the data center remains core to delivering many applications and services, network closets and micro data centers are growing in number and importance. Responding to these changes, organizations are turning to pre-configured micro data center solutions that support fast deployment, greater standardization and remote management across distributed locations. The range of pre-configured solutions now available, from fully integrated IT-ready racks and rows to containers, allows a pre-configured solution to be deployed for virtually any edge application.  Integration, standardization and modularity are becoming as important in distributed IT as they are in large data centers. Infrastructure technologies and associated services continue to evolve to deliver the speed, flexibility and efficiency data center operators require today, whether they are developing a new hyperscale facility or moving IT resources closer to users and industrial processes. Integration, in processes and technology, is emerging as one of most significant trends shaping the infrastructure that will be deployed in 2017 and beyond. Opinions expressed in the article above do not necessarily reflect the opinions of Data Center Knowledge and Penton. 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)
5:33p	Report: AWS Quietly Acquired Cybersecurity Firm Harvest.ai Brought to You by The WHIR Amazon Web Services (AWS) acquired San Diego-based cybersecurity firm harvest.ai for a reported $19 million sometime in early 2016, investor Fred Wang has confirmed. Wang, a general partner with harvest.ai investor Trinity Ventures, declined to confirm the terms of the deal, but told GeekWire “it was a good win for the investors and for the management team.” “The company works in an area called data-leakage prevention,” Wang said. “At one time a lot of companies got into it, but most of them didn’t get much traction. Harvest.ai automated looking at file-access patterns to detect which are normal and which are not.” It does this by using neural nets, natural-language processing, and other AI algorithms, and tracking data storage and access, and components, applications, and users on the network. Its flagship product is called MACIE Analytics, and while AWS does not list it among its products, Wang told GeekWire that it is already selling harvest.ai’s technology. Harvest.ai was founded by two former NSA employees in September 2014, as 405Labs, and had received just over $2.7 million in two rounds of seed funding, according to Crunchbase. Wang said the company’s 12 employees had moved to Seattle as part of the deal. The company had been an AWS customer, and was featured in an AWS Startup Spotlight in August 2015. As the big hyperscale cloud providers compete for market share, security and features like AI offerings will play a major roles in attracting and retaining customers, according to a survey released last week by Clutch. AWS jumped into the VPS market with the launch of Lightsail at re:Invent in late 2016. This article first appeared here, on TheWHIR. (Comment on this)
5:57p	Microsoft, Qualcomm, Citi Join Israeli Cyber Syndicate (Bloomberg) — Team8, founded by veterans of an elite Israeli intelligence unit to solve what they consider the world’s most pressing cybersecurity problems, welcomed Citigroup Inc. and the venture arms of Microsoft Corp. and Qualcomm Inc. into its syndicate. The group of military veterans, who have raised more than $92 million, plan to launch two companies this year. Existing portfolio companies Illusive Networks Ltd., which entices hackers to trigger an alarm by planting false data, and Claroty, whose platform secures critical industrial infrastructure, generated $22 million in sales last year. Security breaches are growing increasingly sophisticated. At the end of 2015 hackers took out power in the Ukraine. In February 2016 more than $80 million was stolen from Bangladesh’s account at the Federal Reserve Bank of New York. U.S. intelligence services recently said Russia was behind hacking during the 2016 U.S. election campaign, which disproportionately affected the Democratic Party. “We aren’t talking about more of the same,” Nadav Zafrir, co-founder and chief executive officer of Team8, who commanded the Israel Defense Force’s 8200 unit, said of the intensifying cyber threats. “Adding the powerful brands of Microsoft Ventures, Qualcomm and Citigroup will dramatically improve our research capabilities and access to the world’s biggest enterprises.” Egos Aside Team8 starts with a research team that pinpoints and seeks to solve a major cyber vulnerability, then spins off the technology into a company that gets initial financing from the group. It created the syndicate as a way for the corporate world to share information and get ahead of the attackers. “We need to put our egos aside,” Zafrir said. “The level of collaboration in the world of cyber attackers would blow your mind.” Qualcomm, Microsoft and Citigroup join the group’s existing syndicate partners, who include Cisco Systems Inc. AT&T Inc., Accenture Plc, Nokia OYJ, Temasek Holdings and Sumitomo Mitsui Financial Group Inc. Team8 employs 180 people in Israel, the U.S., the U.K. and Singapore and plans to hire another 100 staffers this year. Microsoft and Qualcomm made undisclosed investments in the group, Zafrir said. Burgeoning Threats Yoram Yaacovi, chief executive officer of research and development at Microsoft Israel, said cooperation is important in a world where the number of unique cyber threats has grown to some 700,000 each week from 20,000 just two years ago. Nagraj Kashyap, Microsoft Ventures’s corporate vice president, said in the group’s press release that the company will work closely with Team8 to research cybersecurity challenges. With mobile networks increasingly used for managing finances, paying bills and shopping online, Qualcomm plans to work with Team8 to find ways to mitigate risk, said Quinn Li, vice president and global head of the company’s venture arm. Itai Jaeger, head of Citigroup’s security innovation center in Israel, said he planned to work with Team8 to design and develop solutions for enterprises, close product gaps and brainstorm on emerging threats. Zafrir said that in the coming year the team plans to take on the challenge of embedding cybersecurity in the initial design of autonomous cars and smart buildings, so that it becomes “part of the tapestry.” (Comment on this)
8:06p	Panzura Raises $32M to Make Cloud Storage Feel Like On-Prem NAS Panzura, a nine-year-old Silicon Valley company whose technology makes it easier for companies to combine storage in their own data centers with enterprise cloud storage services by the likes of Amazon, Microsoft, and Google, has closed a $32 million funding round led by private-equity investor Matrix Partners. Cambpell-based Panzura’s current CEO, Patrick Harr, is best known as a co-founder of Nirvanix, a once promising cloud storage startup that went out of business in 2013, four years after he left the company. Panzura, which Harr joined last year, operates in a different market environment, one where he believes it is more likely to succeed than his storage startup was. This is Panzura’s fifth funding round, bringing its total money raised to $90 million. The company’s storage controller, installed in the form of physical appliances in customer data centers and as virtual instances in the cloud of the customer’s choice, makes cloud storage appear the same as the customer’s in-house storage network to their applications. Its software also does network-wide deduplication, regardless of the number of locations a file is being used in, real-time file locking (to keep the most current file version consistent across all users), as well as compression and encryption, at rest and in flight. Panzura has hundreds of customers, from mid-size to some of the world’s largest companies, according to Harr. Customers it has named publicly include the US Department of Justice, Electronic Arts, Milwaukee Tool, Fluor, and Chevron, which also participated in the latest funding round. In addition to Matrix and Chevron, the round was joined by Meritech Capital Partners, Opus Capital, and Western Digital. In an interview with TechTarget last year, Harr attributed the demise of Nirvanix to timing. He called Panzura a “continuation” of what he started with Nirvanix, which arrived on the market at a time when there were still many security, performance, connectivity, and regulatory concerns with cloud. The industry has moved past those concerns, he said. See also: Cold Storage in the Cloud: Comparing AWS, Google, Microsoft (Comment on this)

<< Previous Day

2017/01/11 [Calendar]

Next Day >>