Data Centre – Behind the Curtain - #01 Introduction

As we humans always want more and to give less, I thought it’s time to pull back the curtain and give people insights into the world that desperately needs further transparency. I’m positive this is what many want as its discussed frequently, at the same time many do not for protectionism as it keeps the bread, butter and large performance incentives on the table, but it does not help the industry we all care about. For close to 18 years (on tools and management) I have been involved in, promoted and supported the industry, I feel it’s now time for some insights, many of you would already know these elements but it’s getting to those that do not is the challenge I am addressing. I have been not just involved in the industry but heavily absorbed in what I would confess to be a Data Centre Nerd, I am reading and absorbing content in the space daily (like many others) from new builds through to reading financial accounts for businesses(where the real truth lies), where I probably differ from most is my current tenure in the industry, my engineering and business studies do I feel lend me to view things potentially different from some, this may not be always right but as Ray Dialo stated

‘Unlike in school, in life you don't have to come up with all the right answers. You can ask the people around you for help - or even ask them to do the things you don't do well. In other words, there is almost no reason not to succeed if you take the attitude of 1) total flexibility - good answers can come from anyone or anywhere (and in fact, as I have mentioned, there are far more good answers 'out there' than there are in you) and 2) total accountability: regardless of where the good answers come from, it's your job to find them.’

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The world is now a different place than when I started in the Data Centre(DC) world in 2005, the evolution from enterprise services, on premise server rooms(cupboards), colocation and even telecommunication exchanges have now evolved into the new hyperscale cloud realm. There though are a few holes in the market that a few are still gathering decent revenue from the original business model whilst also adapting wanting to support the hyperscale Cloud compute facilities. Rack density has gone from watts per square metre to now an average of +13kWs per rack (so change of metrics also) through to now the evolution into the Artificial Intelligence realm pushing the 100KW per rack demands. The model for charging has moved from per rack to per Kw in hyperscale, and now pushing 100s of Megawatts these revenue streams become very appealing. The companies that need the space are evolving at a rapid pace, it’s even hard for them to keep up with themselves and need external suppliers to support growth aspirations.

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One thing that has not changed is the secrecy of the industry, this a known fallacy in the industry, as it’s only the outsiders that aren’t allowed in or to know what is happening, ‘behind the curtain’ most people know everything that’s happening or not happening in the market. This though is what keeps the industry hidden you can peak inside but cannot see, with barriers to entry climbing higher to the industry with what would be financial, limited understanding due to the business nature, speed to market, land and power availability and lack of skilled people at all levels sees companies struggling and evolving at pace.

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Where to start?

Once upon a time, no really when I began in the industry as an electrician in 2005 I had no idea any of this existed and it was interesting but also really was just a way for me to evolve my skillset, 2007 rolled around and I moved into data centre management, this then changed my life perspective. The industry wasn’t well known, it wasn’t anyone would say an emerging market at this stage, with the main focus in the late 90’s very earlier 2000’s with the dotcom boom focusing on the front end rather than the back of house, this then though should have been realized the need for that back of house requirements, but some seasoned players knew there was behind the scenes requirements to support these IT platforms. There were people active in the market, which still are today, the best view into this to date is Michael Tobin’s - Lifting the floor, a great read and I recommend this. As the back end slowly grew its arms and legs it wasn’t really till that late 2000’s the first large push saw the market grow with lots of new entrants, this though was premature and the market in a lot of areas was over supplied, and the emerging markets were not even a concept for most. These lead to mergers and acquisitions as the infrastructure was new with some revenue available, and the older players that had client relationship and leverage to utilise these spaces more appropriately (Equinix, Digital Reality Trust). A few really didn’t understand the market and didn’t follow the McDonalds model with leasing land, plant and even the buildings, as always undertaking cost benefit analysis against a long term plan you would like to have thought would be undertaken to make these decisions, this though I see is still happening and if it fits your business model great but if you understand how most ‘create’ revenue you would not do this.

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The financial gain that is now seen in the industry with compound annual growth rate (CAGR) from high single digits to double figures makes it a highly sort after investment path. With long term contracts and roll overs, such a sticky business making it hard to leave, to what I would call a McDonalds model approach sees this an extremely attractive industry. ?With skilled and not skilled staff shortages, build costs ever increasing and mergers and acquisitions slim on the ground (if they are then billions of dollars are required in many instances) we see an industry scampering for direction and positioning. People are looking at ways to change the dynamics and think outside the box, in most instances these have merit but also seem to be the ones that don’t really grasp the industry and what the goal is, Return on Investment (ROI)! If you want to make the world a better place deal with ROI first and then aim for the stars, you can't change the model, you can't beat the build costs and you definitely do not have the resources or the knowledge base compared to these extremely large companies (Google, AWS, MS), you need to come up with a viable solution that is quick to build, modular for expansion, ease for customer and gives the investors ROI.

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Investment companies have been gathering momentum over the last 10 years to get involved in this space but with the push from covid it has seen an uptake in DC space compounding and AI seeing people contract space before its even built, this is to gather that positioning as we know that the cloud came from AWS so their first person advantage has seen them well ahead of the other large players, which understand the gravity of the money on the table now and into the future.

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Not too much curtain lifting here but it's always good to start the story with a foundation just like any good DC company, number 2 will be power and then on from there.

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I hope you enjoy the content and have a great Day/Night!

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