Data Center Stocks

Not Another xUE Metric!

2016-06-13T18:38:00.001-04:00

By David Gross

This industry loves efficiency metrics. Power, space, cooling, disk, I/O, memory - whether for capacity or environmental reasons, you can spend all day running ratios to measure well a facility and the hardware inside its walls utilize their resources. But how do you know if you're measuring the right things?

I've never found all the "xUE" metrics that get heavily covered in the press to be that useful from a business standpoint. Moreover, while calculating basic utilization metrics isn't that difficult, they often need to be incorporated into larger equations to be useful as management targets. To capture this, one metric I've come up with is Weighted Average Cost per Utilized kW. To calculate this, I take Full Service Monthly Rent/Consumed kW. It can be measured across a pod, a facility, or for an entire portfolio.

I use full service rent because it not only captures all monthly costs, but it makes modified gross leases, which include management charges, comparable to triple net leases, which charge those fees separately. To be even more complete, you can add depreciation on internally built cabling and rack infrastructure to the numerator in order to make wholesale leases more comparable to retail leases.

You'll notice that this assumes power is the scarce resource, because the equation above makes no reference to space. While there has always been, and will likely always be, debate about power vs. space as the scarce resource in data center builds, I tend to focus on power. The reason for this is 2/3rds of the capex for a typical REIT-built data center goes to power and cooling infrastructure. Meanwhile, land is typically just 5%. Therefore, the scarce resource is power and cooling equipment, not space itself, which is why wholesale providers usually price leases by the kW, and not the square foot. Some exceptions to this, especially in downtown carrier hotels, but leasing a rack at 111 8th Ave is still far cheaper than leasing an entire room in Ashburn.

So what's a good Weighted Average Cost per Utilized kW? (or to be cheesy, WACU)

Depends on country mix, your company size, and if you've just taken on a large addition, but generally anything over $300 suggests you're overpaying, you're not big enough for wholesale leases, you're underutilized, or you've got a large footprint outside the U.S. This also assumes Tier 3/4 facilities. If you're going for lower tiers, or less redundancy, the meaning starts to get lost.

Lastly, why measure this?

Primarily because power, space, and cabling/rack capex can consume 20-40% of an IT or cloud budget, they require long-term leases, and aren't subject to Moore's Law unit cost reductions like compute cores, RAM, I/O, network, or disk. By measuring cost and utilization in one equation, you can get a quick view of how efficiently you're using your data center dollars.

Data Center Stocks Close at Record Highs

2016-06-07T17:20:00.000-04:00

By David Gross

Continued strength in bonds and investor giddiness about data centers helped push DLR, DFT, COR, CONE, EQIX, and QTS to record highs today. Except for EQIX, all were up over 2% today, ahead of the 0.53% gain posted for the NAREIT Composite Index, which covers REITs for all asset categories. Outside the REIT category, INXN also climbed nearly 2% to close at 38.79.

Outside of yesterday's post-close announcement that QTS was buying DFT's NJ1 property for a fairly low $7,000 per available kW, not much news behind today's surge. Still, the combination of possible rate hike delays and Wall Street analysts catching on to a trend long after it's started aren't hurting. Wells Fargo, for example, initiated DLR last week with an "outperform" rating. Of course, you can't call your broker and ask to outperform the stock, and even if you could, where was Wells in 2013 when Digital was at 45 yielding 8%?

Tier 2 Cities Get Much Needed Edge Data Centers®

2015-09-30T22:49:00.002-04:00

By Lisa Huff

The Internet edge network is primarily located in Tier 1 cities. These municipalities are defined as Tier 1 because they contain Internet Exchanges (IXs). IXs or peering points are physical points in the network where carriers and some content providers interconnect their networks. Originally, there were only a handful of these Tier 1 exchanges in the US. Now, Discerning Analytics (DA) would consider the following metropolitan areas Tier 1 markets: Atlanta, Boston, New York City, Washington DC/Ashburn, Miami, Chicago, Dallas, Denver, Los Angeles, Palo Alto/San Jose and Seattle. In addition, Phoenix, Houston and Las Vegas may soon be considered Tier 1. Just a review of the following table will show you why. It lists what DA currently considers Tier 2 markets. Some, like Phoenix, Houston and Las Vegas, already have sizeable IXs, while others do not. Those that have smaller or no IX would benefit from an interconnection service as well as an Edge Data Center®.

A Cross-section of Tier 2 Cities with Local Content Data Centers and Internet Exchanges
State	City	Size (sq-ft)	Data Center/IX Providers	Current Communications Service Providers	Known Content Providers
AZ	Phoenix	8,600	EdgeConneX	AT&T, CenturyLink, Cogent, Cox, ICFN, Integra, Level 3, XRP, Windstream, XO, Zayo	Akamai, Cox Communications, Google
		538k	IO Phoenix	Hibernia Networks, IO Data Centers, Layer42 Networks, TSIC, Login	Limelight Networks, Mozilla, TripAdvisor
		60,000	Phoenix IX, Telx Phoenix, Carpathia, CyrusOne IX, Swiftway	Over 20 network providers	Akamai, CloudFlare, Limelight Networks, Microsoft, TripAdvisor, Highwinds, Symantec
CA	Sacramento	6,700	EdgeConneX	CenturyLink, Comcast, Integra, Point to Point Communications, Sprint, XO, Zayo	Comcast
CA	San Diego	3,000	EdgeConneX	CenturyLink, Cogent, Cox, Level 3, Sprint, TelePacific, Verizon, XO, Zayo	Cox Communications, Google, Level 3
CO	Denver	6,000	EdgeConneX	AT&T, CenturyLink, Cogent, Comcast, Integra, Level 3, Windstream, XO, Zayo	Comcast, Level 3, Netflix
FL	Jacksonville	7,250	EdgeConneX	AT&T, CenturyLink, Comcast, DFS Fiber, FPL FiberNet, Level 3, Rail America, Verizon, XO, Zayo	Comcast, Level 3
		10,000	Cologix	Over 30 network providers	Amazon, Level 3
		?	Jacksonville Internet Exchange (JXIX), GoRack Datacenter	Avesta Networks, GoRACK, FPL Fibernet, Joytel Wireless, Nodes Direct, Packet Clearing House, twtelecom, Volume Drive	Akamai, Google, Level 3, Comcast
FL	Orlando	4,000	Level 3	Level 3, Cogent	Level 3
FL	Tallahassee	4,300	EdgeConneX	CenturyLink, Comcast, Level 3, Windstream, Zayo
FL	Tampa	9,116	365 Data Centers	AT&T, Bright House, CenturyLink, Cogent, FiberLight, FPL FiberNet, Level 3, TSIC, Verizon, XO, Zayo	Akamai, Netflix, Level 3, Earthlink, Time Warner Cable, Verizon
		10,000	WOW!business, Tampa IX (TPAIX)	WOW!, FPL FiberNet,	Akamai
		4,795	Level 3	Level 3, Cogent	Level 3
HI	Honolulu	20,000	DR Fortress Exchange	Over 10 network providers	Akamai, Microsoft

MI	Detroit	4,000	Detroit Internet Exchange (DET-IX), 123Net	123Net, ACD.net, Active Solutions Group, Clear Rate Communications, LightSpeed Communications, ManagedWay Company, Nexcess.net, Riverfront Communications, US Signal	A2 Hosting, MohoHost, Nexcess.net, Easy Online Solutions, LightSpeed Communications
MI	Detroit	10,000	EdgeConneX	AT&T, CenturyLink, CenturyTel, Cogent, Comcast, ComLink, Level 3, TelNet, US Signal, Windstream, XO, Zayo	Comcast, Level 3
MN	Minneapolis	45,000	Midwest Internet Cooperative Exchange (MICE), Cologix	Over 30 network providers	Akamai, Google, Netflix
MO	Kansas City	7,000	Kansas City Internet Exchange	1&1 Internet, Google Fiber, Hibernia Networks, Hop Off a Cloud Networks, Hurricane Electric, KanREN, MOREnet, Northern Lights GigaPOP, TSIC, Wholesale Internet	Google Fiber
MO	St. Louis	8,663	365 Data Centers	Over 10 network providers	Amazon
NE	Omaha	?	OmahaIX, Nebraska Colocation Centers (NCC)	Over 40 network providers	Akamai, University of Nebraska at Omaha
NV	Reno	?	TahoeIX	High Desert Internet Services, Packet Clearing House, Roller Network, Tahoe Internet Exchange, Verisign	Akamai (pending)
NV	Las Vegas	4,100	EdgeConneX	Cogent, Cox, Integra, Sprint TelePacific, XO, Zayo	Akamai, Cox Communications, Google
NV	Las Vegas	1M	SuperNAP (Nevada NAP)	Over 50 network providers	Ask.com, Box, FusionStorm, Limelight Networks, Microsoft, Mozy
NY	Buffalo	?	Buffalo Niagara International Internet Exchange, Data Centers Canada, ixColo	ClubMessage B.V., Fiber Networx, TeraGo Networks, WIN	Google, Yahoo!
PA	Philadelphia	230k	Equinix, Sungard, zColo	ATX Communications, Coretel America, DBSi, GTT, Hibernia Networks, Hotwire Communications, Inerail, Internap, Sting Communications, Xand	Netflix, EdgeCast Networks (now Verizon)
OR	Portland	6,000	EdgeConneX	Cogent, Comcast, Integra, Zayo	Comcast
OR	Portland	20k+	The Pittock Internet Exchange, Northwest Access Exchange, ViaWest, EasyStreet, LightPoint	More than 60	Akamai, Google, Netflix
PA	Pittsburgh	5,000	EdgeConneX	CenturyLink, Cogent, Comcast, DQE, Fibertech, Level 3, Sunesys, Windstream, XO	Comcast, Level 3
TN	Memphis	6,100	EdgeConneX	Comcast, Windstream, XO, Zayo	Comcast
TN	Nashville	5,500	EdgeConneX	Comcast, Cogent, Level 3, NESnet, Windstream, Zayo	Comcast, Level 3
TX	Austin	70,000	CyrusOne IX Austin	CyrusOne, Google Fiber, Inerail, InfoWest, Internet FX, Syringa Networks, Tonaquint Data Center, Veracity Networks	Google Fiber, Mozy, WebNX
TX	Houston	11,100	EdgeConneX	Alpheus, AT&T, Cogent, Level 3, Zayo	Akamai, Comcast, Level 3
TX	Houston	320k	CyrusOne IX Houston	Comcast, CyrusOne, Southeast Texas GigaPOP/Rice University Wolfe	Comcast, Microsoft, Netflix
UT	Salt Lake City	5,400	EdgeConneX	AT&T, CenturyLink, Comcast, Integra, Level 3, Utopia, Verizon, Windstream, XO, Zayo	Comcast, Level 3
UT	Salt Lake City	33,386	ViaWest	Google Fiber, Inerall, Level 3	Google Fiber
VA	Norfolk	5,100	EdgeConneX	Cogent, Cox, Level 3, Lumos Networks, Windstream, XO	Cox Communications
VA	Richmond	7,660	EdgeConneX	Comcast, FiberLight, Level 3, Lumos Networks, Summit IG, Windstream, Zayo	Comcast, Level 3
VA	Richmond	5,000	RVA-IX, Pixel Factory Data Center	Cogent, Comcast, Level 3, Pixel Factory Data Center, VA SkyWire, Global Web Solutions, Windstream, Zayo	Akamai, Comcast

This list is not meant to be exhaustive, but to demonstrate a few co-location data center companies that are addressing the content delivery issue in smaller municipalities. EdgeConneX leads the way. In fact, Edge Data Centers is EdgeConneX’s registered trademark. However, others like Cologix and 365 Data Centers are beginning to realize the business potential of providing content delivery nearer to the end users – or as some in the industry would say “closer to the eyeballs.” In addition to those that we mentioned above, some of these other cities, including Jacksonville, Austin, Buffalo/Niagara, Portland, Tampa, Detroit, Kansas City, Minneapolis, Richmond and even Omaha and Reno have actually formed new formal Internet Exchanges to help facilitate improved interconnection and content delivery. But, that really is not enough. While local peering points will facilitate local traffic, only edge data centers will alleviate overburdened content delivery network connections to Tier 1 points – where the content for many applications reside.

It is important to distinguish the difference between a Tier 2 edge data center and a co-location data center in a Tier 2 market. The main difference is that the Tier 2 edge data center truly moves the edge of the network closer to the end user – so the content is housed within this data center as opposed to being delivered from the “nearest” Tier 1 city. For example, EdgeConneX has an edge data center in Salt Lake City because its clients/tenants are delivering content directly from it to the consumers in the area. So far Comcast and Level 3 are the only content providers, but we expect to see many more based on relationships they have in other cities – like having Google in their Phoenix data center. In contrast, ViaWest has several co-location facilities in Salt Lake City, but no product for interconnection of content providers outside the greater Salt Lake City Area. That content comes from Denver, Chicago or Minneapolis where ViaWest connects to an Internet Exchange or content delivery network (CDN). There is an obvious advantage to having the content closer to you – in this instance; any of your video-on-demand programs from Comcast would load faster with less distortion because there is a much shorter distance that the signal has to travel.

CyrusOne is tackling the content delivery issues a little differently. They have launched a product known as National IX. Its marketing material claims its National IX “can be more resilient and deliver a better connection to your clients when connected to CyrusOne’s top-tier, highly redundant facilities using National IX.” This service really just connects all of CyrusOne’s data centers, which means if Netflix is one of its tenants, other tenants could connect to them. It still does not deliver data from the immediate area – it is not an edge data center. While Cologix and 365 Data Centers have content providers in their data centers, they do not have a concerted effort (at least that we can tell) to do this in all of their data centers.

It would be nice to be able to watch a Netflix movie without it freezing up or quitting all together because it has to travel on a shared network for more than 300 miles to get to the television. For many end users today, on-demand viewing can be very frustrating. All Tier 2 and Tier 3 markets would benefit from having true edge data centers. Hopefully, we will be seeing more co-location data center suppliers rising to the challenge of delivering them as well as more content providers taking space in them.

More Weather Excuses Coming?

2015-04-04T11:21:00.000-04:00

By David Gross

Friday's disappointing jobs report has many analysts asserting that weather contributed to the low numbers. However, if this were really the case, wouldn't that have been factored into more forecasts?
Either way, cloud and data center providers really have little reason to bring this up, though mother nature often finds a way of reaching the oddest corners of the economy during earning calls.

It will be interesting to see the breakouts when the state and metro data is released. Through January, seven states - Arizona, Florida, Nevada, California, Texas, North Carolina, and Washington - had accounted for over half of the country's 3 million new jobs over the previous 12 months. There were no weather reasons for hiring to slow down in these locations during March. Moreover, the Northeast Corridor, from Virginia to Maine, had only contributed 13% to national job growth over the year through January 2015. So how could bad weather have accounted for total job gains that missed expectations by more than 50%?

SDN and NFV are the Heart of New IP

2015-04-03T17:39:00.005-04:00

Head over to TechTarget to read Lisa Huff's latest post on SDN and NDV.

2014-11-30T21:03:00.002-05:00

Data Center Optics - TIA Data Center Workshop and 7x24 Exchange Delaware Valley Chapter Meeting

By Lisa Huff

I just finished a quick trip to Arlington, VA and Philadelphia, PA to participate in two events:
TIA Data Center Workshop and 7x24 Exchange Delaware Valley Chapter Meeting. Both had excellent discussions about the role of optics in the data center.

The panel I moderated at the TIA Workshop had representatives from Microsoft, Google, Dell and Sumitomo. The discussion brought home to me the fact that there is a large gap between the needs of the small, medium and even large enterprise data center and the needs of Internet Data Centers. The chart below, that was provided by Dell, tries to summarize the point.

Here in 2014, we still have many enterprise data centers that run 1G servers with uplinks of 10G. At the same time, Microsoft is moving from a combination of 10G and 40G servers with uplinks of 40G and 100G, to pushing for 25G servers to connect to one 100G top-of-rack (ToR) switch-port (a breakout cable). And, Microsoft is also currently working on 400G and above for the rest of its data center network. Clearly a vast difference in Ethernet application.

The diversity of data center needs will continue to broaden over the next five to ten years so the IEEE is trying to address this in its Ethernet standards development. Data rates like 2.5G, 5G, 25G and 400G are now being considered in order to address both ends of the market "spectrum." Pun intended.

At the 7x24 Exchange Delaware Valley meeting, I discussed this trend and more from our recent study on data center optics. Here is a link to a copy of the presentation.

More to come later on trends in data center optics.

2013-06-02T19:42:00.001-04:00

Review of Data Centre World London 2013

By Lisa Huff

I haven’t attended an AFCOM Data Center World Conference in almost five years because when I did, my impression was that the exhibits were not well attended by would-be clients of the company I was working for at the time. In fact, that year, we saw only two potential customers in our booth. People that have attended it recently have told me much of the same. They received less than a handful of good prospects to target.

Fast forward to 2013 when I’m temporarily living in the UK and have an opportunity to attend Data Centre World in London. I was pleasantly surprised to find, in my opinion, a much better event – and it was free for qualified attendees! Perhaps that was the difference. I found the conference program to be comparable to AFCOM’s and the exhibit floor to be much more crowded. The other refreshing thing was that while software defined networks (SDN) were mentioned, they were not the overwhelming theme. The program stuck to its intended subject matter, the data center market, its networks, facilities, clouds and hardware.

Some of my observations from attended presentations and visits to some of the booths:

Data center space demand throughout the world is expected to level off within the next five years due to server virtualization. SSE Telecoms showed this chart to illustrate this:

It was reiterated by CBRE in its presentation – a snapshot is below.

More than 75% of network traffic stays within the data center. Thus the trend to higher data rates and flattening of the data center network.
The vertical market customer drives data center needs. In other words, if you’re a healthcare organization, your data center may look much different from a state/local government data center.
“Shadow IT” is driving change in local area networks (LAN) and data centers. Bring your own device (BYOD) forces company networks to be more open to the employees using them, but poses possible security issues for the IT department.
Co-location is slowly becoming the norm for even smaller businesses due to the expenses associated with maintaining ownership of the data center.
Many connectivity vendors were there and they seemed to be getting healthy traffic in their booths. Some that I visited were 3M, Brand-Rex, CommScope,Corning, Draka/Prysmium Group, Fujikura, HellermannTyton, Lynx Data Cabling,Methode, Ortronics and Telegärtner. All were showing either copper and fiber solutions (or both) for the data center.

2013-01-10T10:23:00.002-05:00

Colocation Data Centers Structured Cabling Trends

By Tom Debiec and Lisa Huff

As companies look to embrace cloud computing or backup their existing data centers, many are evaluating colocation as an option. With this increased demand, colocation data centers are popping up all over the world and becoming a larger part of the overall data center market. In 2013, the colocation sector is expected to account for about 25-percent of the structured-cabling data center market. During the work to develop the structured cabling forecast for the soon to be released Bishop & Associates report, "Structured Cabling Technology and Market Assessment," we had the chance to talk to project managers that are responsible for implementing 10,000 - 20,000 sqft build-outs in colocation facilities. It was clear to us that a few key trends have emerged:

Whenever possible contractors recommend the use of pre-terminated copper and fiber cabling. The benefits of utilizing these components include cost reduction, on-time delivery and the project is easier to manage.
Although they are installing MPO cassettes on some jobs the cost premium often scares customers away.
More OM3 fiber is being installed than OM4. The up-sell to OM4 is difficult since OM3 covers the distances that are typically seen in these facilities (300m at 10G).
A majority of the copper cabling is being installed is Category 6.

A typical colocation lease averages about eight years. Since the clients don't know what their requirements will be in this timeframe, they are less likely to make decisions that "future-proof" the installation for reuse with upgraded active equipment. Tight budgets further preclude the addition of higher performing cabling products. They would prefer to re-cable in the future than to pay for it now. Since many of these installations are based on Top-of-Rack (ToR) architecture, re-cabling is viewed as a much simpler thing to do than to install new equipment when the cabinets are stuffed full of cabling. In view of this, we project that Category 6A and Category 7 cabling will only see very slow growth and that OM3 will be the mainstay over the next few years.

Telecom Exchange

2011-07-12T07:50:00.004-04:00

By Lisa Huff

I recently attended an event in New York City – Telecom Exchange. The format was originally developed by Hunter Newby and Rory Cutaia when they were at Telx. This year it was hosted by Jaymie Scotto & Associates (JSA). Unlike most trade shows, this affair puts large and small companies on equal footing. In order to provide a “network-neutral” environment, JSA arranged the exhibit tables in alphabetical order and they were the same size with the same-sized branding. No giveaways were allowed at the tables. To be frank, to me it was a refreshing change. Instead of spotlighting the next new thing, the event forced you to focus on networking with industry players and real business opportunities.

Some of my thoughts on the experience:

Containerized/modularized data centers: One prominent executive from a data center connectivity supplier said to me: “Brick and mortar data centers are dead.” We only had a short time to expand on this comment, but what I think he meant was that data center operators will need to move to more modular solutions in order to lower their PUE. According to him, if you move all your high-density applications to a containerized solution, your PUE can be as low as 1.1, whereas, any traditional building would be hard to get below a PUE of 1.5. His premise is that companies will need to lower their total cost of ownership of their data center and therefore will move to these solutions or be out of business. He hasn’t convinced me yet, but I intend to do some more research on the subject.

Allied Fiber (AF) and Dupont Fabros Technology (DFT): Allied Fiber is known for connecting data centers nationwide, but has never connected the “last mile” into the facility. That has now changed. AF and Dupont Fabros have struck a deal for AF to connect into DFT’s Piscataway, New Jersey facility with a straight path to Chicago, bypassing Manhattan. The agreement gives AF access to DFTs underground fiber ducting and DFT access to AFs direct fiber link to Chicago, lowering latency for both providers.

EtherCloud: Tinet, A Neutral Tandem Company, has now taken its Ethernet Exchange one step further. With its EtherCloud offering, it can provide end-to-end international connectivity to any company. It allows global coverage using VPLS through Juniper equipment in the core and Cisco in the access. Tinet is one of less than a handful of companies that can now provide direct Ethernet services on three continents.

Global reach: Telehouse America is known for its data center and managed services business in the US, but is quickly growing its reach internationally. It now has facilities on four continents – Asia, Europe, North America and Africa. Similar to Tinet, Telehouse is building out its Ethernet networks globally.

Co-location and Managed Services in Southeastern PA

2011-06-23T22:21:00.002-04:00

By Lisa Huff

There is a building complex just off route 183 in Southeastern PA that many don’t realize is a gem for co-location and managed services. Long known for his entrepreneurial spirit, Mr. Albert Boscov (of Boscov’s department stores) saw its potential and seized it in 2005. The two buildings are 292,000 square feet and house two data center co-location facilities along with several other businesses. What is unique about this property is that it is served by seven (7) telecom carriers – not only important to potential clients, but rare in rural PA. The facility also has two main telecom rooms and two separate power feeds.

Directlink Technologies, one of the buildings’ tenants, is owned by Boscov (President) and CEO Arthur Quinlan. Its co-location data center is 110,000 square-feet of raised floor, half of which is currently occupied. The company boasts of being carrier-neutral, SAS70 Type II certified with network latency of less than 2 ms to New York City (Hudson) and less than 15 ms to Chicago.

IPR International is another co-location/managed services provider that decided to lease space in the Boscov building. With corporate headquarters in Wayne, PA (just northwest of Philadelphia) and its continuous computing center in Wilmington, DE, IPR opted for a disaster recovery (DR) data center in Bernville, PA. While IPR started out as mostly backup and DR services, it can now provide everything from co-location up through totally managed services.

Another company, Distributed Systems Services (DSS), has its own facility in Berks County. DSS started in IT services and later expanded into data center co-location and managed services. Its 15,000 square-foot data center is housed in a 350,000 square-foot building. It is considered a Tier 3 data center and has three telecom carriers for data center connection to “the cloud.”

Reading, PA may not be an Internet hub, but is centrally located between two Internet Exchanges (New York and Ashburn) and within three hours driving distance of four major metropolitan areas – Baltimore, Philadelphia, New York and Washington DC. Compared to New York City, Berks county PA salaries for technical jobs are about 50 percent less, rental space is three to eight times cheaper and electricity costs about a third as much. These facilities could be just the answer for enterprises looking to outsource their IT – particularly those large healthcare and financial institutions in the northeastern US.

Telx and Carrier Ethernet Exchanges

2011-05-11T08:04:00.001-04:00

By Lisa Huff

Telx defines itself as “The Interconnection Company,” so it’s no surprise that it is the leader in the emerging Carrier Ethernet Exchange market. What is most interesting to me is how simple Telx has made their Ethernet Exchange connection. I recently saw this first-hand at its 111 8^th Ave NYC data center.

But first, what exactly is a Carrier Ethernet Exchange? It occurred to me that this question needed to be answered when I was on a panel on this subject at OFC/NFOEC. While many of the attendees should be interested in what they are and how they are progressing, they didn’t seem to be. The Metro Ethernet Forum’s formal definition of an Ethernet Exchange is “an interconnect point among service providers where Carrier Ethernet Services are exchanged.” This really just means that if you’re an end user, you want this service so you can have a direct Ethernet connection. Today, most enterprises are still encapsulating their native Ethernet data into TDM/SONET/SDH then de-encapsulating it at the other end. However, more and more, end users are seeing the benefits of Ethernet Services and perhaps eventually, the entire public network may be running native Ethernet.

While Telx is best known as one of the premier wholesale co-location providers, it was also at the forefront of Ethernet exchanges. Telx is a carrier-neutral data center co-location provider and has several facilities around the New York metro area which enables it to supply seamless Ethernet connection not only between carriers, but between any of its co-location enterprise customers as well. Its Ethernet Exchange services have a range of options depending on customer’s needs. It charges by the port and can connect customers at 100 Mbps, Gigabit or 10G data rates through its Cisco ASR 9000 equipment. Telx expects to incorporate 40G as needed – probably not until 2012/2013 timeframe, though. No equipment is oversubscribed and low latency options are available for premiums.

Telx considers Equinix and CENX its main competitors in the Ethernet exchange market. While it is rather difficult to quantify this market, Ethernet exchanges services are expected to have around a 20-percent CAGR over the next five years starting at 100’s of millions of dollars in 2011. Plenty of revenue to support the few entrants that have decided to focus on it so far.

FiberMedia To Become a Bigger Factor in the New York Market

2011-04-20T10:51:00.000-04:00

By Lisa Huff

I recently had the privilege of sitting down with FiberMedia’s senior VP of sales and head of global operations and get a tour of its new co-location and managed services data center in Secaucus, New Jersey. Luckily for FiberMedia, this property was originally one of TD Waterhouse’s data centers so not much renovation was needed before it could be opened so it was brought on-line quickly. The other new data center is in Westchester, New York. These add to FiberMedia’s four other data centers in Jersey City, NJ, Brooklyn, NY, New York City and Cleveland, OH.

Fiber Media prides itself on customizing solutions for its customers with flexible data center designs that manage their bandwidth. The Secaucus facility is carrier neutral with multiple fiber connections. Carriers include some of the largest telecommunications companies in the world as well as smaller regional providers. Among them are AboveNet, AT&T, Cogent, Fibernet, Global Crossing, Hibernia, Keyspan, Level 3, Qwest, RCN, Sprint, Telia, Verizon and XO Communications.

The Secaucus data center is currently 32,000 square-feet with another 8,000 for expansion. It has two points of entry so customers have less traffic past their areas. The data center is SAS70 certified. FiberMedia has customers that cross several vertical markets including financial, media, content delivery/distribution networking (CDN) and healthcare.

FiberMedia recently received an infusion of cash from a new strategic partner, The Stevens Group, LLC and it seems that with this new partnership has attracted top new talent as well. In the last six months, it has made several new hires – CEO, CFO and VP of Sales all of which have extensive experience in other IT services businesses.

FiberMedia appears to have a very specific plan for its co-location and managed services business. In addition to its two new data centers, it released a new managed cloud service. I have to admit that on the surface, this looked like just a lot of marketing hype to me, but after speaking with John Panzica, VP of Sales, about it, I understand that it’s not just your run-of-the-mill service. What it allows its customers to do is to totally manage their compute and storage demands remotely on the fly. I’m not sure any other company is offering this – at least I haven’t heard this from anyone else, yet.

Before this visit, I had heard of FiberMedia, but didn’t really think they were much of a player in the New York marketplace. Now, based on their willingness to invest capital to build state-of-the-art data centers and to provide differentiated managed services, I believe they may give the other co-los a run for their money.

Infinera and the Dawn of Terabit Networks

2011-04-11T08:54:00.000-04:00

by Lisa Huff

At OFC, I sat in on an Infinera press conference and I have to say I was impressed. Of course, I’ve always been impressed with Infinera’s PIC technology, but they seem to have now taken it to an entirely different level. Its new PICs incorporate 5x100G devices and over 600 functions on two chips and on the horizon are 10x100G PICs with perhaps more than 1,000 functions.

Infinera has long stood out in the telecom industry because while it is an equipment manufacturer, its base technology is routed in optical components research and development. This used to be the case for all telco OEMs including Alcatel, Lucent and Nortel, but all of these companies shed their components development arms in the early 2000s, and of course Alcatel and Lucent are now merged and Nortel is a shell of its former self. Through all of this, Infinera has prospered by successfully leveraging its component expertise to sell its CWDM and DWDM products and innovate to produce new ones.

Infinera had 10x10G, or 100G, long before many of its competitors and now has 5x100G PICs that it expects to have in production before year’s end. In fact, this technology was recently demonstrated in a live network trial with Interoute in Europe. Interoute expects to deploy Infinera’s 500G solution in 2012.

Infinera is focused on $/Gigabit economics and believes in order to maximize this for long haul applications, systems must be multi-channel and monolithic. This is achieved by large scale integration of both active and passive components which has been Infinera’s strength for 10G and below technologies. For 100G, the company has introduced “FlexCoherent®” technology that allows the customer to choose what type of modulation scheme is needed for each of their routes. It is also focused on providing its customers not only ROADMs, but what it calls “flex channels.” Infinera has deemed this technology as “Optical Express,” where intelligence is distributed to every node so each bit can be read.

But Infinera would not have been as successful as it has been if it was just focused on the research and development. Manufacturing of these devices must be reliable and repeatable so, according to its senior management personnel, its engineers “design with manufacturing in mind.”

The next step of development is already underway and will produce a 10x100G product in the near future according to Infinera.

What puzzles me is why other OEMs have not been able to reproduce the results that we’ve seen from Infinera. Is it only the captive components R&D that sets Infinera apart or is it also the fact that its top management has the ability to bridge the business aspects of telecommunications equipment manufacturing with the highly technical world of optical components and networking? I believe it’s both of these along with the fact that Infinera is still a much smaller company than most of its long-haul competitors and can make decisions and move much more quickly. Infinera is a company to watch especially related to long-haul and metro connections of data centers.

Avago’s Interesting Demos at OFC/NFOEC

2011-03-22T19:37:00.002-04:00

By Lisa Huff

As always, the top transceiver manufacturers were represented at OFC, but of the top three datacom transceiver providers, Avago Technologies stood out to me. They had two significant demonstrations:

1. Connecting a 40GBASE-SR4 Ethernet port using its QSFP+ to four standard 10GBASE-SR Ethernet ports with its SFP+ modules. On the surface, this seems pretty easy to do, until you realize that the specifications for the transmitters and receivers in these devices have are very different. The 10G devices could easily overpower the 40G receiver if it’s not designed to handle the higher power. Avago has solved this issue with its parts and hopes to be able to be interoperable with anyone’s transceivers in the near future.

2. A VCSEL-based 25G short-wavelength SFP+ working prototype. At first I was puzzled about this because I couldn’t figure out the application. Well, it turns out there really is none for the 25G part, yet, but showing that it could be done makes you realize that 32G Fibre Channel applications using the SFP+ may not be as far-fetched as we think. And, perhaps we can get a 100GBASE-SR4 (4x25G that isn't in the IEEE standard yet) solution soon.

Stay tuned for more on other developments announced or demonstrated at OFC/NFOEC.

Thoughts on OFC/NFOEC

2011-03-15T21:24:00.000-04:00

By Lisa Huff

I’ve never been enamored with Los Angeles, but when OFC/NFOEC decides to go there, I really have no choice but to follow them. OFC/NFOEC is the premier optical components conference and is starting to move its way up the food chain again. Those of us who have been in the industry since before 2000 know that equipment manufacturers and service providers were regularly a part of OFC. But after 2000, this changed and the optical value chain was split – components relegated to OFC and/or NFOEC (until they combined into one), equipment manufacturers concentrating on Interop and Supercom and service providers opting for Supercomm. Now, Supercomm has closed its doors and Interop has become more and more software-centric. So both OEMs and service providers are looking for a trade show of value and they may have found it in OFC/NFOEC.

Notable communications equipment OFC/NFOEC exhibitors this year were ADVA, Ciena, Cisco, Fujitsu, Hitachi, Huawei, Infinera, Juniper, Mellanox Technolgies, Nokia Siemens Networks and Optelian. Many others gave speeches including Alcatel-Lucent, ADVA, Brocade, Ciena, Cisco, Cray, Force10 Networks, Fujitsu, Hewlett Packard, IBM, Infinera, Juniper, Nokia Siemens Networks and SunLabs/Oracle. Service providers participated by way of technical and business presentations as well – among them were AT&T, Deutsche Telecom, NTT and Verizon.

End users of networking equipment even showed up – NYSE Euronext, USA provided the plenary speaker for the Service Provider Summit and Facebook and Google again told us how much more bandwidth they need – Terabit Ethernet. There was an entire afternoon dedicated to large data center business issues at The Optical Business Forum, which included speakers from Abovenet, Allied Fiber, CENX, Equinix, Juniper, PacketExchange, Verizon, XO Communications Zayo Bandwidth and Zayo Networks.

So this seems to be a transition year for OFC/NFOEC where it has started to include more practical programming to expand its audience into data communications, data centers and up the value chain with equipment manufacturers and service providers. It appears to be working too, because the attendance was up by all accounts.

I’ll review some exciting new developments by systems and components suppliers in future posts.

Ethernet Technology Summit and OFC/NFOEC Events

2011-02-22T20:43:00.001-05:00

By Lisa Huff

The next few weeks I’ll be very busy. First I’ll be chairing Session 105 (Ethernet Chipsets/Components) at the Ethernet Technology Summit. While most of the conference is about R&D projects, I’ve chosen to focus my short presentation on current opportunities for components suppliers.

In March, I’ll be heading to OFC/NFOEC 2011. There I have three different sessions I’m involved in. My short course on “Data Center Cabling – Transitioning from Copper to Fiber” will be held Monday morning. A short excerpt of this short course can be accessed through an archived Webinar I did recently. Monday afternoon I’ll be participating in the Computercom Symposium by presenting “The State of the Short-Reach Optics Market.” On Tuesday, the kick-off of the Optical Business Forum (see previous post for details) will take place and I’ll be moderating the Carrier Ethernet Exchanges session.

Come see us in Santa Clara this week or Los Angeles the week of March 7^th.

The Optical Business Forum

2011-02-17T22:59:00.003-05:00

By Lisa Huff

I've got a number of events coming up, including the short course on data center cabling I'll be teaching at OFC/NFOEC. Also wanted to let you know about The Optical Business Forum I've been working on for OFC, which will incorporate many of the data center technologies I've written about here.

This year's Optical Business Forum will be the first in what we’re hoping will be a yearly affair covering the most important topics in the area of optical transport for business communications. This year’s summit will be held right on the exhibit floor and consists of a keynote address on High-Bandwidth Ethernet Services by Rajiv Datta, Senior Vice President and Chief Technology Officer of AboveNet Inc. Following the keynote are three focused sessions:

Who is Buying Optical Bandwidth Services?
The Economics & Business Case for Connecting Data Centers
Carrier Ethernet Exchanges

The program includes speakers from AboveNet, Allied Fiber, CENX, Equinix, Juniper Networks, Packet Exchange, Telx Ethernet Exchange, Verizon Digital Media Services, XO Communications, Zayo Fiber Solutions and zColo. Moderators include Craig Clausen from NPRG, Michael Howard from Infonetics and myself.

Join us at OFC/NFOEC and hear what you’re customers’ customers are saying.

Optical Interconnection Players Strengthening Their Businesses

2011-01-12T23:34:00.000-05:00

By Lisa Huff

Molex just purchased Luxtera’s AOC business completing the circle that all the other optical interconnect players started. During the telecom bust in the early 2000’s, Amphenol, FCI, Molex and Tyco Electronics all either de-emphasized their optical interconnect businesses or exited them all together. Now, they have all re-entered. Why?

While they are all working on more high-speed copper solutions like the one Tyco showed for 25G and beyond at SC10, I beleive they also see the writing on the wall. While they won’t admit it, I think they know that beyond 100G copper cable interconnects may have FINALLY reached the end of their useful life. At 40G and 100G, for example, there is still no twisted-pair solution and the direct-attach copper can only reach about 7m reliably.

It has been interesting watching the choices these traditional connector companies have made:

Amphenol: It never exited the optical interconnect business, but left the transceiver products to Avago, Finisar, JDSU and others until recently. It has a stronghold on the short-reach copper direct-attach market so has inroads at customers for its AOCs and modules.
FCI: Exited the optics business entirely for a few years but then started again from scratch and subsequently purchased MergeOptics in February 2010. MergeOptics is what was left of Infineon Technologies and still has strong technical abilities in short-reach products. It also has the building blocks to provide all-optical interconnects all the way from the chip (see my previous posts on MergeOptics). They can provide both AOCs and transceiver modules so have the ability to cover all high-speed markets in InfiniBand, Ethernet and Fibre Channel.
Molex: Purchased Luxtera’s AOC business recently. So while FCI and Tyco are stressing short-wavelength technologies, Molex has turned to custom long-wavelength ones. Luxtera’s technology is based on 1490nm devices, which really doesn’t matter if you’re purchasing an AOC, but will matter if you want transceiver modules. According to company representatives, they will eventually get back into supplying transceiver modules, but there has been no evidence of this as of yet. Perhaps the possession of Luxtera AOCs will prompt this.
Tyco Electronics: Tyco exited the transceiver business in the early 2000’s, but still had a very active fiber-optic interconnect business – especially for premise wiring (AMP NETCONNECT). It acquired Zarlink Semiconductor’s optical products group in May 2010. Zarlink is on the forefront of parallel-optics technology and was one of the first to introduce AOCs. It does not appear that Tyco intends to supply optical transceiver modules again.

I would never bet against copper re-inventing itself in order to meet the demands of future high-speed networks, but with optical 10G dominating the market currently and 40/100G optical products starting to emerge, it will be an uphill battle for copper solutions to gain traction. And beyond 100G, all bets are off. I’m thinking that these companies are reaching the same conclusions and that if they don’t add optical capabilities soon, they may render themselves obsolete within the next ten years or so. That's not to say that there won't be a vibrant businesses in both copper structured cabling and interconnects over the next ten years - there will be. But I think that R&D dollars will be better spent on optical interconnect technologies rather than trying to figure out how to run 25G signals using copper interconnects (including backplanes.) Or how to convince end-user customers in the US that a shielded structured cabling solution for 40G is better than a short-reach optical one because it will be cheaper - but at what cost to power, cooling and space?

What do you think? I'd love to hear your thoughts.

Old Data Centers Never Die

2011-01-07T09:26:00.001-05:00

From ZDNet:

>>>Given the nature of JetBlue’s operations there, this datacenter facility had to be fully redundant on all levels, so there had been a considerable investment in the infrastructure of the facility to allow for 24/7 operations with high availability. But what do you do with this kind of facility when you no longer need it (which is not the same question as deciding if the facility has reached its end of life).

Enter Webair, a NY -based hosting provider that was looking to expand their operations. Today, less than 16 months after JetBlue made the decision to move out, Webair announced that they have opened up the facility as their new flagship datacenter and executive headquarters, basing their Network Operations Center in the new (to them) facility which they have dubbed “NY1″.

Returns on Capital Expenditures vs. Capex Reductions

2011-01-04T22:17:00.002-05:00

By David Gross

Just about every IT, networking, power, and cooling vendor serving this industry promises to both "reduce capex and opex". But these goals are often meaningless, especially in the case of capital budgets, which often require board approval, and are set for the year. Moreover, the number one objective of a capital investment is to get the highest possible return, as measured by IRR, not to spend less than you did during the last upgrade cycle. And in the case of opex, it's very easy, and very common, for salespeople to make spreadsheets showing big opex reductions that are not always achievable in practice, especially when most data centers are already very capital-intensive and highly automated.

Far more attention getting than droning on about opex, capex, ROI, and TCO like the herd, is to focus on more specific financial metrics that your product can improve upon. IRR and NPV are good places to start. Because most sales presentations confuse payback period with ROI, have no time value of money, and do a poor job showing tradeoffs, they have limited credibility. IRR, which in my experience is known by some, but not all sales and marketing people, is the most important metric for any capital investment. While it might take some education to explain what it represents to some buyers, if all the community college students taking introductory finance courses can learn it, I'm sure the CIO you're selling to can as well.

CoreSite Hires New CFO, Stock Falls 4.85%

2011-01-04T20:26:00.001-05:00

By David Gross

CoreSite announced this morning that Jeff Finnin, Chief Accounting Officer at industrial real estate firm ProLogis, is taking over as CFO, replacing Deedee Beckman. The stock took a hit today, and its aftermarket performance hasn't been great. It could be perceived as a little strange for the company to be changing CFOs a couple months after the IPO. That said, Finnin has a very similar to background to the woman he's replacing - they're both traditional accountants, not bankers or fund raisers - and Beckman also came to CoreSite from ProLogis.

Beckman will remain on the job another two weeks, with Finnin taking over on the 24th. This seems to be a fairly cordial turnover, and the replacement's prior experience is remarkably similar to his predecessor's. I find little reason here for investors to have had such a sharp reaction.

Data Center Stocks Drop 4.35% in the 4th Quarter

2011-01-03T14:55:00.001-05:00

By David Gross

Data Center Stocks fell just over 4% in the 4th quarter, with our DataCenterStocks.com Services Index falling from 100.0 to 95.35. However, it was all because of the Equinix warning in early October.    The index fell to 88.95 at the opening bell October 6th, and rose 7.53% for the rest of the quarter.

The REITs had a weak quarter, with DuPont Fabros, Digital Realty, and CoreSite all dropping between 15% and 17%.   Some of this is attributable to rising Treasury yields, which reduced the spread between risk-free government bonds, and data center REIT dividend yields. 30 year Treasury yields rose from 3.7% to 4.36% during the quarter, and when this happens, dividend investors often demand higher returns due to the added risk of a REIT over a Treasury Bond.   Interestingly, the leading apartment and office REITs did not take much of a hit during the quarter. However, the big difference between those stocks and the data center REITs is that the data centers were raising rents during the recession, while the apartments and offices were not.   Now the apartment and office owners, including Avalon Bay and Boston Properties, are benefiting from expectations that their pricing power will improve.

Managed services and hybrid managed-colo providers had a good quarter, with Terremark advancing 25%, and leading all stocks in our index.   Rackspace and Savvis were also up over 20%.    Internap also had a strong quarter, rising 24%, while no one else with a CDN presence had a particularly good quarter. Akamai and Limelight were down, and Level 3 bobbed up and down with all the Netflix news, but finished in the delisting zone at 98 cents a share.

		DataCenterStocks.com Services Index
Company	Ticker	Mkt Cap	Dec 31 Close	Oct 1 Open	Quarterly Chg
Equinix	EQIX	$3,704,643,400	81.26	102.35	-20.61%
Digital Realty	DLR	$4,499,442,000	51.54	61.70	-16.47%
DuPont Fabros	DFT	$1,259,822,100	21.27	25.15	-15.43%
Rackspace	RAX	$3,925,307,700	31.41	25.98	20.90%
Savvis	SVVS	$1,409,724,800	25.52	21.08	21.06%
Level 3	LVLT	$1,626,800,000	0.98	0.94	4.59%
Akamai	AKAM	$8,544,750,500	47.05	50.18	-6.24%
Navisite	NAVI	$139,792,800	3.71	3.34	11.08%
Terremark	TMRK	$850,944,500	12.95	10.34	25.24%
Limelight	LLNW	$571,471,600	5.81	5.89	-1.36%
AboveNet	ABVT	$1,471,438,200	58.46	52.09	12.23%
CoreSite	COR	$233,380,400	13.64	16.39	-16.78%
Internap	INAP	$315,612,800	6.08	4.90	24.08%
Total		$28,553,130,800

Index Value October 1		100.00
Index Value December 31		95.65

Zacks Upgrades Equinix to "Outperform"

2010-12-30T15:10:00.001-05:00

By David Gross

I'd rather read the Internal Revenue Code than a typical sell-side research note. At least the I.R.S. is specific, and doesn't create buzzwords and catchphrases like "first mover", "secular growth", and "low hanging fruit".   And even though we've had a series of tax reforms through the years, no one's ever referred to a "next generation" tax code .   Also, when it tells you to do something, the tax collection agency is far better at telling you what to do next than an investment research firm. "You owe us" leaves far less doubt about where to send your money than the analyst note informing you that a stock is a "near-term accumulate".

In the tradition of vague analyst-speak, Zacks recently announced it had upgraded Equinix from neutral to outperform.   Its reasoning - the company beat consensus revenue by 0.4%, issued encouraging guidance, and is still expanding.   No wait, that's not quite right. It was "continuous efforts to expand the current facilities".   Not sure how to interpret this.    I mean, I've been to the Ashburn campus in the last few days and any effort - continuous or not - to expand DC2 will push them through the pine trees and into DFT's ACC4 building.

The note then goes through Equinix's financial ratios, remarks how it's well-positioned or something, but I can't tell you what it said after that because I received an e-mail about a Nigerian prince leaving me the sum of exactly $1,307,465.27, which was a lot more interesting. And specific!

Equinix is up, or in Wall Street language "moving in positive territory" by 57 cents this afternoon, on very light volume of 400,000 shares.

Microsoft Gets Final Approval for West Des Moines Data Center

2010-12-29T12:55:00.000-05:00

By David Gross

This summer, Microsoft announced that it was resuming construction on the Iowa data center it had postponed completing during the recession. Now The Des Moines Register is reporting that Microsoft has received final approval for the West Des Moines data center, and that the company is obligated to complete construction on the facility by December 2012.

The City of West Des Moines is kicking in $8 million worth of roads and water main extensions to serve the facility, which will be financed through bonds secured by the site's property taxes. The project will cost $200 million to complete, which suggests this will only be phase 1, or a scaled down version of the initially proposed 500,000 square foot site.

The data center has been a high profile economic development project for the State of Iowa, which also hosts a Google facility two hours west in Council Bluffs.

PAETEC Opens 5th Data Center in Milwaukee

2010-12-27T11:02:00.000-05:00

By David Gross

With the Cincinnati Bell-Cyrus One and Windstream-Hosted Solutions deals of the past year, we've seen growing interest in the data center market among independent telcos. But many CLECs aren't just providing connectivity into facilities, they're expanding their own regional data center offerings. Paetec, which at $1.5 billion in annual revenue is one of the larger remaining CLECs, recently announced it had opened its 5th data center, a 92,000 square foot project in Milwaukee.

The new facility is Paetec's first in the Midwest, and is targeted at businesses throughout the region, from Chicago to St. Louis to Minneapolis. The company's existing buildings are in Pennsylvania, Massachusetts, and Texas, and is plans to expand to Arizona next year.