Lawyer Bait

The views expressed herein solely represent the author’s personal views and opinions and not of anyone else - person or organization.

Wednesday, November 9, 2011

Is innovation exclusively for single tenant datacenters?

I am a data center geek. I love to read about them, see who is doing what, learn about new stuff and approaches that are being implemented - all of it. What I have begun to notice is that the innovation that is happening - while totally awesome - will never fly in 95 out of 100 facilities in the world. I have begun to ask the question 'why' to other geeks and data center users.

Without question the number one response is - because when you run a single tenant facility you can take risks and do things that mitigate a common set of risks - and since one company pays, they can do what makes sense for their business alone.

Others include - 'because they have an innovation budget'; 'it's about controlling their destiny'; 'the penalties for an outage are not as severe as outside the single tenant walls'.

In my opinion I think it has to do with a combination of factors - most of which have been mentioned above with one exception - evolution. As companies move from a cabinet in the ghetto colo company, they evolve to require more choices and options, different configurations, and vendors who deal with companies the size they hope to become. Once they scale up to ~10MW (100,000 square feet) they evolve into looking at finish to suits and finally building their own. Why do I think this?

I saw it happen with Facebook. They started by leasing cabinets in a few key markets, scaling that, then taking cages, then taking suites, then floors of buildings and now are building their own. Their headcount for their data center operation grew to that of a mid size provider, and there does come a point where it is more cost effective to build your own than to have to keep moving like a shark looking for open suites, floors, or whitespace.

I have seen it happen in reverse with many banks too. They built their own and leased where they wanted, acquired with abandon, and then had an impressive footprint. Then they figured out - as many did - that the network was more important than real estate and so the consolidation began where they wanted to consolidate into fewer huge footprint super centers because it was more effective to run a few huge facilities vs. dozens of all different sizes.

So when I think about why does all of the innovation appear to happen in the huge facilities, I look at the evolution of Apple, Facebook, Google, ING, Citibank, Morgan Stanley, etc. and they all find a different path to the same location - a risk averse facility that makes economical sense. Innovation is tied to reducing risk or cost and when you are the only one who has to live with the decisions and their outcome, single tenant facilities will continue to out-innovate the multi-tenant facilities since they have an exponentially larger set of risks and requirements to service.

What do you think?