While mergers and acquisitions have proliferated in the colocation industry - each positioned to increase geographic coverage or higher order capabilities – in the last 6 months, a new trend has emerged: strategic divestitures, most prominently observed in the telecommunications space. Following the complete cycle, in 2010 and 2011, Centurylink, Verizon and Windstream made strategic acquisitions to increase their data center services portfolios, acquiring Savvis, Terremark and Hosting Solutions respectively. 5 years later, each firm has announced its intent to sell of some or all of these assets.
So, what went wrong?
While telcos had arguably given birth to colocation, the fact remains that network and carrier providers have had troubling competing against pure play colocation and data center service providers like Equinix and Digital Realty. In the past, telecom providers described colocation and data center services as a way to enrich existing customer contracts. In an interesting twist, these new intended divestitures have been presented as a way to refinance core assets, focus on what drives their business, and move away from standardized services with high overhead and lower margins. While vendors may keep their skeletons in the closet, I had some speculation as to what might be fueling these decisions:
- Buyers want carrier density and diversity. Even though all of these facilities support multiple connections into other carriers, customers tend to evaluate facilities by connectivity options instead of looking for carriers to provide data center capacity on top of network services. Additionally, many geographically dispersed companies are considering blended IP solutions to improve latency and performance across the globe.
While green and sustainable initiatives haven’t traditionally been a high priority for business technology decision makers, the growing urgency of climate change continues to place scrutiny on large resource users. In today’s hyper competitive marketplace, your customers, employees, partners, and possibly regulators are demanding more transparency in company operations and products.
In reaction to this trend, many organizations have already started to embrace sustainable initiatives as an opportunity to showcase creativity, technological achievement, as well as their brand’s commitment to the environment and broader community. In order to investigate this trend, my colleague and principal analyst Jim Nail and I set out to better understand the technology, processes and marketing strategy behind corporate sustainability initiatives.
The resulting report “Bolster Your Brand With A Greener Technology Ecosystem” outlines the buisness case and technology roadmap for sustainable initatives, intended to help your organization achieve and communicate operational excellence, while simultaneously providing further differentiation for your brand and organization.
Over the last decade, the colocation market has expanded and flourished – with more customers looking to outsource new facilities and more vendors emerging and expanding to meet this demand.
Colocation providers now offer a myriad of services beyond the expected physical space. Infrastructure is now table stakes, including enhanced power efficiency and physical security. The more impressive solutions offer a full portfolio of managed services to cloud, or host and steward a marketplace of third party services, offering close proximity to business partners and primary communications services. By “close” we mean VERY close, as in the same building, sometimes only meters away. Depending on the use case, proximity like this can make the difference between success or failure of a business function – financial trading is an obvious example but there are many more.
To get better acquainted with this ever expanding landscape of vendors and solutions, about this time last year I began a lengthy exercise to investigate and analyze the US colocation market. After three months, I identified 430 organizations through search engines and public profile sites. I then weeded out 112 firms that had inactive websites, were acquired, or did not clearly provide retail or wholesale colocation. Over the subsequent 3 months, I attempted to quantify the footprint of all qualifying facilities. Some key findings from this research include:
There are over 1430 data center facilities in more than 330 cities across the US, but 53% of vendors surveyed operated only 1 facility.
There is over 68 million square feet of reported data center space, and an estimated 90-120 million square feet in total. This projection includes a fair amount of assumptions as many vendors did not provide facility sizes.
While the basic technology behind 3D printing has been around for decades, recent hype and coverage has recast a spotlight on the industry. Over the last few years, incumbent and emerging vendors have been rapidly developing 3D printers, each more productive than the last, with an ever expanding variety of printable materials and possible use cases.
Outside of consumer hobbyists, 3D printing will have the greatest impact on businesses that design and manufacture discrete products, introducing rapid prototyping to speed up development cycles and an alternative production method for customized finished objects.
What does this mean for CIOs and technology management departments?
As the resident technology expert, you may be called upon to evaluate the hardware and feasibility of 3D printing for your business. Beyond assessment, businesses may demand:
Technology support and management. If your business decides to incorporate 3D printers, as a new networked device, support could entail adapting and integrating the 3D printing ecosystem into current product lifecycle management platforms and processes, not to mention troubleshooting hardware and software issues.
With budgets tight and new agendas for social, mobile and cloud, for many, green initiatives are middle to low priority, often considered but secondary to price and convenience. So why should you care about green?
Customers today are increasingly interested in green alternatives. In the recent report Why Every Online Retailer Needs To Think Green, Sucharita Mulpuru uses Forrester’s consumer Technographics® data to reveal that more than 50% of today's US online adults can be categorized as green consumers, interested in buying green products or buying from brands that engage in green initiatives, such as supply chain transparency or carbon reporting. For online retailers, this represents a significant growth opportunity, as the majority of this consumer segment is not only classified as “high spending,” but also willing to spend more on green alternatives, and more likely to advocate for these products.
Last week I had the pleasure of visiting the remote and beautiful country of Iceland. After a 5-hour flight and a brief history lesson, I was amazed to learn that in addition to its unique local attractions — geothermal springs, volcanos, aurora borealis — Iceland possesses a wealth of natural resources.
View of the run off from Ljósafoss Hydro-Power Station, located on the River Sog by Lake Úlfljótsvatn’s outflow
Straddling the North American and European tectonic plates, Iceland’s geological conditions supply its inhabitants with an abundance of natural resources ideal for renewable energy generation. Over the last century, locals have learned how to harvest these resources, constructing geothermal and hydroelectric power generation facilities and providing the country with 100% renewable, carbon-free electricity. With the current cost-prohibitive, technologically limited methods of electrical interconnection, Iceland’s public utilities have been investigating alternative ways to export their energy surplus in the form of finished products.
Technology and business leaders don’t always fully understand the true costs and risks associated with both building andoperating a data center. Data center facilities are one of the largest line items in an IT infrastructure budget, and these costs can run into the tens or even hundreds of millions over a data center’s lifetime. If you’re currently looking for more data center capacity, before you make a decision, it’s important to understand the cost and risk implications of your choice and justify the business case to your executives and budget holders.
Using Forrester’s Total Economic ImpactTM (TEI) methodology, we built an ROI calculator to help infrastructure & operations professionals evaluate three approaches to greenfield data center implementations: traditional builds, modular builds, and colocation. In this model, we quantify the costs, risks, and benefits associated with each scenario and calculate the net present value (NPV) of this investment over 15 years.