Tuesday, June 20th, 2017

Time	Event
12:00p	DCK Investor Edge: Is Aligned Energy Building a Better Mousetrap? Few would disagree with the observation that CTOs and CIOs tend to be conservative by nature, or that engineers tend to be highly skeptical when it comes to adopting new or unproven technology. Perhaps even more so when claims are made regarding efficacy of innovative solutions compared with “tried and true designs.” Explaining the advantages of a novel approach to data center cooling and winning over any cynics will certainly be part of the job description for Andrew Schaap, Aligned Energy’s recently hired CEO. Schaap joined the Aligned team after an 11-year career with Digital Realty, including his most recent tenure as senior Vice President of Global Solutions. Schaap told Data Center Knowledge in an interview that he was “attracted to Aligned Energy’s culture of innovation and customer-centric approach.” Aligned has attracted a notable group of senior-level data center executives with extensive data center experience. In April, Anubhav Raj joined Aligned Energy as CFO, coming over from TIER REIT. Raj worked at CyrusOne as VP and treasurer during the 2013 IPO and helped the data center provider raise over $3.5 billion in capital markets during his tenure. In recent conversations with DCK, Aligned Energy executives, including Schaap and the former CEO, company founder and CTO Jakob Carnemark, discussed how innovative technology and usage-based pricing options go hand-in-hand in creating unique solutions for their clients. Leveraging Patented Technology Aligned Energy is a holding company backed by the hedge fund BlueMountain Capital Management. There are four companies under the Aligned Energy umbrella: Aligned Data Centers – currently operates data center campuses in Dallas and Phoenix with critical loads of 30MW and 62MW, respectively. The Phoenix facility could expand up to 120MW, at full build-out. Inertech Systems – manufactures patented cooling systems for data centers (and other commercial and industrial uses). Energy Metrics – provider of facility management software and hardware, including sensors and dashboards to monitor energy usage. Karbon Engineering – data center consulting, design, and commissioning services. Inertech’s patented cooling technology is touted by Aligned Energy as delivering a total cost of ownership advantage for customers due to lower monthly energy bills and reduced water consumption. Racks are placed on a solid floor in a traditional aisle layout, as shown below. Notably, there is flexibility to deploy varying density within aisles, up to 50kW per rack. Source: Inertech Systems website The Inertech design is an air-cooled adiabatic cooling system comprised of modular components shown above, including (left to right): eSYNC fan-coil units, eOPTI-TRACK CDU (cooling distribution unit), 2N Pipecage, and CACTUS 500kW heat rejection unit. According to company literature, this design offers “up to 80% energy savings, up to 40% less electrical infrastructure, and up to 85% less water than traditional systems.” Read more: Modular Cooling System Enables On-Demand Data Center Capacity Members of the commercial brokerage community told Data Center Knowledge in an e-mail that the willingness for Aligned to enter lease contracts based upon a guaranteed 1.15 PUE in climates like Dallas and Phoenix “is an absolute differentiator in the TCO model for customers.” The Aligned Energy value proposition appears to be gaining traction in the marketplace. Utilization Based Pricing Aligned Energy’s modular cooling solution can ramp up equipment in a just-in-time fashion, allowing customers to contract and pay a variable rate based upon actual power utilization. Aligned offers “utilization curve pricing” which is a good fit for tenants planning to ramp up capacity over time. An example illustrated below would be a contract allocation of 1MW, where the customer initially utilizes 500kW and either ramps up over time or releases the unused capacity. This approach could be particularly attractive to “land and expand” colocation customers looking to match expenses with projected revenue growth. Source: LinkedIn – March 2016 The system monitoring capability allows for power billing flexibility for tenants as small as 300kW — the smallest increment leased directly from Aligned Data Centers. (Additionally, smaller cages and rack space could be sub-leased from managed services providers who lease from Aligned). However, it can be difficult to change how large organizations procure colocation space, even when it could result in a more favorable arrangement for the tenant over time. At the end of the day many large enterprise companies will still prefer the certainty of a fixed contract. Essentially, this would entail the customer working with Aligned to select a point along the pricing curve which is then billed as a fixed monthly payment. Private Equity: Advantage or Disadvantage? Most public cloud providers have stellar investment-grade credit ratings. This makes owning a state-of-the-art data center with one or more public cloud providers signed up on a long-term lease highly desirable. When it comes to attracting super-wholesale deals on long-term contracts, perceived stability of the financial counterparty and operational track record as a landlord are certainly going to be customer considerations. These are areas where publicly traded data center REITs can have an advantage, along with their access to debt and equity capital markets at relatively attractive rates. However, Carnemark pointed out that a nimble privately held company has some advantages of its own, “including the ability to match a custom capital solution for each hyperscale deal.” These types of deals can be attractive to pension funds and insurance companies as joint venture partners or purchasers, either before or after development. Size Matters It remains to be seen if Aligned Data Centers will be able to take significant market share away from some of the larger players in the industry. One metric that is not entirely clear is the cost per megawatt of the proprietary Inertech cooling solution versus a more traditional approach to wholesale or super-wholesale data center design. The recently announced Digital Realty merger with DuPont Fabros underscores the differences between wholesale leasing success in the 500kW-5MW range and winning hyperscale design-build contracts. Read more: DCK Investor Edge: Digital Realty Signs Biggest Hyper-Scale Deal After All Aligned did not reveal the size of the recently signed hotel and airline reservation customer DHISCO Inc. this past May in Dallas. Management explained that leasing velocity has been ramping up, but NDA agreements prohibit public discussion of other tenant signings. Notably, both case studies other than Aligned Data Centers on Intertechsystems.com were relatively small installations: 1) Canadian telecom TELUS — three modular data center installations totaling 6MW; and 2) Lenovo — 12 lab retrofits in N. Carolina and a Santa Clara expansion, totaling 3.5MW. Carnemark had mentioned in previous interviews that Inertech designs work particularly well at scale, which was one reason given for the 550,000-square foot design for the Aligned Data Center campus in Phoenix. Obviously, Aligned is expecting to sign some large customers in Phoenix, a facility that could ultimately grow to 120MW over time. International End Game? The “killer app” for Aligned Energy going forward could be in adapting Inertech’s modular data center approach for use in third-world countries. Schaap has considerable experience in selling data center solutions in overseas markets which appears to have played a role in his being selected as CEO. Carnemark told DCK, now with Schaap on board, he can devote more time to modular designs “intended for hot, humid climates where the power grids are not stabilized.” Aligned Energy’s ability to serve emerging markets like India could become an interesting “blue ocean” strategy. In such a scenario, Inertech’s valuable patents could easily become the better mousetrap. (Comment on this)
3:00p	Edge Data Centers in the Self-Driving-Car Future If you listen to analysts and tech evangelists, the next few years will see a big wave of deployment of computing clusters in cities, at cell-tower sites and telco central offices, in big-box retail outlets, airports, and manufacturing plants. These so-called edge data centers will crunch massive amounts of data being generated by sensors, surveillance cameras, smartphones, production equipment, self-driving cars, and everything else that’s today collectively referred to as the Internet of Things. IoT software will run at every level of the computing and network infrastructure — a single application will have to orchestrate accumulation, analysis, and flow of data generated by end-node devices at those edge computing nodes, in core data centers (both in-house corporate server farms and the hyper-scale facilities operated by cloud providers), and possibly at the end-node devices themselves (an autonomous vehicle has so much computing power you can practically call it a data center of its own). Mesosphere, the San Francisco-based startup backed in part by Hewlett Packard Enterprise and Microsoft, says its Data Center Operating System, or DC/OS, can help companies make deploying IoT software across every level of the network simple. In large part due to its potential to enable the IoT future, Mesosphere was recently named a World Economic Forum Technology Pioneer, and its founder and CEO, Florian Liebert, is headed to China to take part in Summer Davos, one of the two big annual WEF gatherings. We visited Mesosphere headquarters last week to ask Liebert what being a WEF tech pioneer means, but also to understand how exactly Mesosphere and DC/OS fit in the vision of an interconnected future and why today’s data center pros should pay attention. Here it is, The Data Center Podcast, featuring Florian Liebert, founder and CEO, Mesosphere: Stream or download from SoundCloud Stream from SoundCloud right here: (Comment on this)
6:04p	Street Sees Dollar Signs as Microsoft Invests in Cloud, Artificial Intelligence Brought to you by IT Pro Microsoft’s investments in cloud and artificial intelligence have not gone unnoticed on Wall Street as MSFT shares were up one percent during midday trading on Monday. Morgan Stanley analyst Keith Weiss reiterated his “Overweight” rating on Microsoft, increasing his price target on the stock to $80 from $72. In a note, he said that he expects Microsoft to report higher profits next year due to strength across its top line drivers: Azure, data center, and Office 365. The growing trend of machine learning will also drive demand for Azure, with the potential to add up to $110 billion in market value for Microsoft, Weiss said. Microsoft has been building on investments and research in the artificial intelligence space as its biggest cloud competitors – AWS and Google – do the same. Recent numbers by Research and Markets illustrates the overall growth opportunity in AI, with annual worldwide AI revenue expected to grow from $643.7 million in 2016 to $38.8 billion by 2025. The company formed the Microsoft AI and Research Group last year, led by 20-year Microsoft veteran Harry Shum, to “accelerate the delivery of new capabilities to customers across agents, apps, services and infrastructure.” In terms of investment in the AI space, Microsoft Ventures has been on a bit of a tear lately, participating in Element AI’s recent $102 million series A round, the $15 million investment in CognitiveScale, and a $20 million funding round in CrowdFlower. The application for artificial intelligence and machine learning are certainly widespread. This week Microsoft detailed how it used machine learning to help the Federal Trade Commission track down tech support scammers, and how the team from deep learning startup Maluuba, which Microsoft acquired this year, used artificial intelligence to get the maximum score on Ms. Pac-Man. As the public cloud war continues to play out, it is worth watching how artificial intelligence will drive investor interest in Microsoft. (Comment on this)
6:43p	Amazon Is ‘Just Getting Started’ With Web Services Push in Canada (Bloomberg) — Amazon.com Inc. is continuing its push into Canada by beefing up hiring and expanding its profitable data center business north of the border. The internet giant will add 200 people to its Toronto office to work on sales and technology, taking total headcount to 800 in the city and 2,000 including warehouse staff across Ontario, the provincial government said in a statement Tuesday. It also set up local data centers in December for customers who don’t want their information stored on U.S. servers. “We’re going to continue to listen to what our customers are asking us to do, to continue to invest in Canada,” Jeffrey Kratz, head of Amazon Web Services in Canada and Latin America, said in an interview in Toronto on Tuesday. “We’re just getting started.” Amazon and rival Alphabet Inc. have stepped up competition in Canadian cloud services as privacy and security concerns increase demand for local servers. Cloud accounted for most of Amazon’s operating income last year; Amazon Web Services’s sales increased 55 percent in 2016, while profit more than doubled. The push is just one part of Amazon’s expansion into Canada. In December, it introduced its Prime video streaming service, adding another major player in a market that Netflix Inc. has been defending from domestic players like BCE Inc. and Rogers Communications Inc. Rogers shut down its Shomi streaming service last September, just months before Amazon Prime arrived. (Comment on this)
7:33p	5.5 Million Devices Operating with WannaCry Port Open With all of the press the WannaCry ransomware exploit received last month, you might be excused for thinking that by now everyone would have battened down the hatches and locked down potentially dangerous ports — at least those that are vulnerable to this exploit. According to two separate reports, that’s not the case. And while it’s true that many of the vulnerable devices are in the hands of consumers who don’t know any better, it’s a good bet that the majority are servers running in data centers, under the care of sysadmins who should know better. Last week, security firm Rapid7 issued its annual National Exposure Index report, the result of scans of over 3 billion IP-addressable, public internet devices, checking for exposed services on 30 different ports. It found 160 million devices with open ports that generally should’t be exposed to the internet. For file-sharing SMB port 445, the port associated with WannaCry, it found 5.5 million devices operating with the port exposed. About 800,000 of those were on Windows’ systems — meaning they’re directly vulnerable to the cryptoworm that targets Windows machines. Oddly, given the WannaCry panic, this is a higher number than last year when Rapid7 found only 4.6 million devices running with port 445 open. This follows another set of numbers released last week from John Matherly, the founder the Shodan search engine which allows users to search the internet by device type. He reported finding more than 2,300,000 online devices with open SMB ports. More disturbingly, 42 percent of these — almost 970,000 devices — were configured for “guest access,” making the data shared by way of the SMB file-sharing protocol available to anyone, with no authentication required. This also makes them vulnerable to simpler exploits than WannaCry. Of the devices running with guest access enabled, Matherly said 90 percent were running Samba, the Linux file-sharing application that enables Linux servers to interface with Windows’ clients. In both Windows and Samba, guest access is disabled by default, meaning admins have intentionally enabled the feature. Half of those were located on the network of Etisalat, a UAE-based ISP that operates in 17 countries across Asia, the Middle East and Africa, which Matherly sees as good news, but only because they’re confined to a single network. Although the Linux machines running Samba can’t be targeted by EternalBlue, the exploit believed to have been developed by the NSA upon which WannaCry is based, they’re not entirely safe either. Since late May, all versions of Samba released since 2010 have been vulnerable to an exploit called SambaCry in which a hacker can upload a shared library to a writable share and then cause the server to load and execute it. There are now patched versions of Samba available to deal with the SambaCry exploit, but with everything else going on, it’s likely that a considerable number of vulnerable Samba instances are still running. If I ran a data center, I think I’d be sending a security advisory out to my customers right about now. Obviously, not everyone is paying attention. (Comment on this)

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