The Issue of Scale - Part 2 - The Basketball through the Python

What a difference a week makes...

QTS announced they will bring up to 1M square feet into the market after they purchased a former chip fab plant in Richmond VA.

Digital Realty Trust announced they they are full as is DuPont Fabros in Northern VA and they will both be expanding to the tune of ~100K feet each. In total that is roughly 120 MW, I am not sure on the time period over which the inventory will be rolled out.

So given that coming into the year, about 9Mw were taken per quarter in Northern VA, and the recent leasing of at least that much in March means that things are growing not abating. That does not include the ~1200 MW that the Government will need to start planning for consolidation starting in 2011.

So this example brings me to the next issue of scale which is reality of expectations.

Specifically expectations that the available space will be there when needed. If the Government or the Systems Integrators think that 1200MW will just appear, then lets look at reality.

Lets say 12 agencies need 100MW each. With 10 -20MW available in any given quarter as move in condition - i.e. we tour it, we like it, we want it, price is fair, where do I sign, space is finished condition - this means in ten years the space will be there. Ten years to do a consolidation that has been set to take two years. For each agency.

At a cost of $1200/ft, and 10k ft = 1.2 MW and 1200 MW are needed/100 per agency... For 100 MW the capital needed is $1B. Times 12 = $12B. For ~1M sq. ft.

Investors are you listening? That is $12,000,000,000 that is needed to fund building data centers that are green, efficient, and presumably modular in design and deployment. For one project from one customer. In a two year time frame. I mentioned that the power had to be green right? Oh and did I mention that gear needs to be ordered to replace the old stuff, moved if it's still good and in working condition, and all brought together within specific windows to minimize downtime? People can't NOT get their Social Security checks.

Using an industry estimate of 4 months to complete a 10k ft computer room - 1,000,000 square feet/10,000*4 months/12 = 33 years if we start now. No, that does not factor in economies of scale/parallel building projects, etc.

If we deploy 1M square feet at once then maybe to get a shell up takes 2 years, but figuring out how to chunk it up is a different story, and also where the time gets eaten up.

How much of the space needs to be in a SCIF and/or adhere to DCID 6-9? Where is the failover site going to be to make things redundant? Is all the data and equipment at the same level of security? Should it be? How do we connect it all?

I can hear the Cloud pundits say - put it in 'the cloud!'

How many of them have 12MW of cloud deployed let alone 1200? Does the data stay in the US? Can they prove it? Are all the facilities secure? How secure? Why do I have to pay to move data from site to site? How many vendors, license agreements, leases, and operations people, technologies, and methodologies do we need to be aware of?

Some of the apps can move to the cloud, along with the associated data and some of it already has been, however I am willing to bet that it is less than 1%. So this is a big opportunity and I sincerely hope that we as an industry can help keep it simple, eat this virtual elephant in bites, and save money for the taxpayers.

The Issue of Scale...

I have been quietly spending the last few months contemplating scale. Specifically scale of data centers and the impacts of virtualization to the delivery of scale. This is the first installment of a multipart series discussing what is and what is not out there in the data center realm.

There have been few announcements about large data center projects worldwide over the past two years. Mostly from Single Tenant Facilities (STF) like Apple, Google, Microsoft, and Facebook. I chalk this up to the capital markets being as dry as Melba Toast on a summer day in Vegas, so there hasn't been any capital to tap into to build new facilities so the big companies with credit are about the only ones who can do a build.

This leaves the rest of the market with Multi Tenant Facilities (MTF) strapped for space in the X megawatts up to the XXX Megawatts scale. The MTF markets are already experiencing stress in that the prime Tier III space is being gobbled up rapidly. I have had several discussions with folks outside the data center industry, or at best peripherally involved in it (like they shop for new space once every 8-10 years) and they say 'I don't see what everyone is talking about, there seems to be plenty of space out there'. For 10 cabinets or 20 cabinets I'm sure there is. For multiple megawatts from a single provider in a specific market? Ha ha ha ha... That's a good one.

In Northern Virginia, dozens of megawatts move every quarter, and have, for the past year. Companies are reluctant to publicize it. Why? They don't want the remaining inventory sucked up and for their ROFO/ROFR to get triggered because someone else needs a big chunk of space. There are two companies with buildings in Northern VA today that sat mostly vacant a year ago and one has sold out and the other will be full by fall. Another company on the West Coast that has pre-leased the entire first phase of their project before it was completed. Now that market has a few pockets for a few dozen cabinets when it seemed like there would be plenty of inventory for 2010-2011.

At the Data Center Dynamics conference in New York a month ago, Jim Kerrigan, one of the speakers said that "32% of the leased data center space is up for renewal by 2013" which means even MORE stress on the market is on the horizon with very little building going on and customers expanding out of necessity if nothing else.

Hopefully this helps establish a baseline for people trying wrap their heads around the two sides of the discussion about whether or not the Data Center market is tight on inventory. If you need a few cabinets in a few markets - you're fine. If you need 10 MW in 5 markets... Not so much...