T1R Industry Insight Internet Data Center Selection and Supply

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T1R Industry InsightInternet Data Center
Selection and Supply
Daniel Golding
Vice President and Research Director
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Overview

• Tier 1 Research specializes in hosting, Internet
  infrastructure, Software as a Service (Saas), IT
  Services, content delivery networks
• Daniel Golding, Vice President and Research
  Director
• 10 Years of experience at major Carriers and ISPs
• Global Peering Manager for AOL during major
  expansion
• Currently Chairman of Global Peering Forum
• Expert in colocation, data centers, Internet
  infrastructure, content delivery

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What is Colocation

• What is colocation?
• Outsourced data center
• Space, power, possibly managed services
• Not conventional IT outsourcing
• Not running your data center - its their own
  facility
• Two flavors
• Carrier - RBOCs and PTTs
• Carrier Neutral

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What is colocation
Carrier Carrier Neutral
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What is Colocation

• Carrier vendors provide traditional managed
  hosting -
• Server management
• Database
• Storage
• Carrier neutral vendors may provide
• Traditional managed services
• Internet interconnection services

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What is not Colocation

• Shared hosting and dedicated hosting
• Private Rack -style dedicated hosting
• IT outsourcing
• How to tell?
• Physical access to equipment
• Who owns equipmentusually
• Ability to put in whatever hardware is desired

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Colocation Pricing

• Space (square foot or cabinet)
• 600 to 1600 per cabinet
• 25 to 60 per square foot
• These are all monthly prices - not annual
• Prices vary based on market, quality, carrier
  neutrality
• Supply/Demand drivers in charge, not cost of goods

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Colocation Pricing

• Power
• Frequently sold on a per amp basis - 20 or 30 amp
  circuits
• Metering getting more common
• True utilization of power is tough to gage
  without a meter
• Managed Services
• Remote hands
• Managed network, security, database, OS

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Colocation Quality

• Significant quality differences in colocation
  facilities
• Premium Colocation facilities
• Power at least N1 in all components
• UPS, Generator sets, transformers
• N1 Cooling
• Multiple fiber entrance facilities
• Modern fire suppression and detection
• 24x7 staffing and security
• Tier III/IV, roughly

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Colocation Quality

• Significant quality differences in colocation
  facilities
• Standard Colocation facilities
• Less than Premium
• Generally less power redundancy
• Older facilities
• Generally Tier II
• If there are not n1 generators, its not premium

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How to pick a colocation facility

• Selecting a colo facility is entirely
  requirement-driven
• What are your requirements?
• Profiles
• Enterprise
• Carrier
• Content Provider/CDN
• Software as a Service

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How to pick a colocation facility

• Enterprises want
• High level of reliability
• Cost is less important
• High touch customer support
• Longer leases/contracts
• More managed services
• Carrier choices (but not peering)
• Enterprise profile F500/G2000 through SMB

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How to pick a colocation facility

• Service providers and CDNs want
• Reliability less important
• Cost more important - very price sensitive
• Shorter leases - 1 year
• No managed services, prefer automated customer
  service systems
• Need space available!
• High power density (CDN)
• Profile ATT, Verizon, Akamai, BT

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How to pick a colocation facility

• Software as a Service Providers want
• Carrier choice - more is better
• Managed services - SaaS specific
• Developer playgrounds
• Marketing assistance
• Merchant banking
• Enterprise-style customer service
• Many SaaS providers would be better off with a
  full managed hosting solution

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A Trip in the WayBack Machine

• 1999 Boomtime, selling pet food on the Internet
  Build data centers
• 2001 Bottom drops out New data centers are
  empty
• 2003 Recovery starts, data centers acquired for
  pennies on the dollar
• 2005 Data centers start to fill up, but no new
  cash for sector

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Colocation Status, Summer 2007

• Market for colocation space is tightly
  constrained
• Primary constrains are power and cooling, not
  floor plate
• Most highly utilized colocation facilities
• Premium Quality
• Carrier Neutral
• Top Markets

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Colocation Growth Drivers

• Carriers and content providers
• Internet is growing - 75 to 100 a year
• Driven by video and media
• Move to VoIP
• Enterprises and integrators
• SOX, Disaster Recovery, Business Continuity
• Obsolescence of enterprise data centers
• High cost of construction

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Supply/Demand
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Colocation Status, Summer 2007

• Supply is up, but demand is up faster
• In North America, demand up 14.7, supply up 6.5
• Utilization numbers seem low, but are deceptive
• Packing issues
• Power/cooling issues
• Installation issues
• Will never reach 100

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Colocation Status, Summer 2007

• Top Global Colocation Markets

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Supply/Demand
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Supply/Demand
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Why is there a shortage?

• If theres such a demand, why isnt supply
  following?
• It will eventually
• Its too early - capital not willing enough
• Whats hold the money back?
• Memories of the bust
• Concerns about an overbuild - condos
• Cost of construction - 1200 - 1300 sq ft

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Why is there a shortage?

• Why are they so expensive to build?
• Not just a shell (50/sq ft)
• Generators, UPS, HVAC
• Expensive and a long wait
• The right location is important
• Cost of land, power
• Availability of optical fiber
• Server-Hugging behaviors influence location

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But I heard there was a glut!

• During June 2007, rumors of a data center glut
  started
• T1R believes these were started by a Wall Street
  research analyst
• Either foolish or uninformed
• There is not glut because a massive data center
  construction boom never started
• There may be a glut one day - but not yet

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Colocation Futures

• What are the trends for new colocation
  construction?
• Higher quality - most new starts are premium -
  Tier III-ish
• Higher power density - 120 to 250w/sq ft
• Larger - most new sites are 100k sq ft
• Some are shells with multiple phases
• Carrier neutrality is prized
• These trends are set for 3-5 years

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Major New Facilities
Equinix
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Major New Facilities
365 Main
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Major New Facilities
Savvis
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More New Facilities

• London Interxion and IXEurope
• Paris IXEurope
• Atlanta Quality Technology
• Phoenix I/O Data Centers
• New facilities on the way, but too few
• We havent seen the end of explosive demand
  growth

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Conclusion

• Thanks! Any Questions?
• Daniel Golding
• Dgolding_at_t1r.com