Is There Anybody Not In The Data Center Business?
Remember when the entirety of the data center business was made up of a couple “wholesale providers,” Equinix, and a mass of “colocation” companies that were often comprised of a savvy “entrepreneur” who hosted your server in a garage somewhere with cooling provided by all the household fans that they could plug into a power strip? Certainly, things have ebbed and flowed since then, but in terms of the volume of market participants we must be at an all-time high. Not a day seems to go by without my reading an article referencing some new market entrant. Folks, right now you can’t swing a dead cat without hitting some heretofore unknown or new data center provider.
Let me begin by saying that I certainly don’t view this tsunami of new competitors as a bad thing. Like they say, “It’s a free country.” So if you want to make being a data center provider your thing, go ahead, step up to the plate and take your cuts. I’m not sure if this is an entrepreneurial trend, but I’ll bet you could pick-up more than a few McDonald’s franchises on the cheap right now.
The allure of becoming a member of our fraternity (or sorority depending on your preference for characters of the Greek alphabet) is certainly understandable. The opportunity seems boundless. Think about it. The big cloud provider’s appetite for space appears to be insatiable, everything we build, wear, eat, or drink is going to be trackable and pretty soon we’ll be able to “drive” without having to perform the physical tasks of traffic navigation. That all means data, and — its natural by-product — the need to put it somewhere. Of course, there is also the incentive that the average new data center provider is too modest to admit which, of course is, “I could get bought out by some existing behemoth and spend the rest of my days living life like a guest at a Roman bacchanal.” Life can be a beautiful thing.
Some may accuse these potential homunculus versions of Digital Realty of being opportunistic. Well duh. Who gets into a business because its growth trajectory is a graphical representation of Newton’s first law of physics? But from a practical perspective, this plethora of new market entrants does make sense. We are in the process, for example, of “creating” new categories of facilities such as edge and micro, so many new guests are bringing something a little different to the party, and start-up capital appears to be in good supply since every new data center is a potential “cloud” facility.
Naturally, many of these infant entrants will have the same level of mortality as sea turtle hatchlings, but it is likely that a few of the survivors will develop capabilities that will be beneficial to a number of their existing counterparts. It’s like my marketing guy says, “You’re only as good as the last idea you steal.” Personally, I view this “everybody into the pool” frenzy as a clear indicator of the strength of the industry in general. Despite the continued spate of dire data center predictions that are offered up with regularity on industry websites and in market reports, the desire for so many firms to continue to offer up their solutions on the altar of the marketplace should be viewed as a response to a changing environment rather than predictor of demise. Although the current growth in providers isn’t a predictor of the “Starbucksization” of the data center, it does portend a legacy of continued growth.