Changing An Industry of Cottage Industries

If you happen to be following the news around Digital Realty Trust you may have seen the recent announcement of our Pod Architecture Services (PAS) offering.   Although the response has been deafening  there seems to be a lot of questions and confusion around what it is, what it is not, and what this ultimately means for Digital Realty Trust and our place in the industry.

First a simple observation – the Data Center Industry as it stands today is in actuality an industry of cottage industries.   Its an industry dominated by boutique firms in specialized niches all in support of the building out of these large technically complex facilities.  For the initiated its a world full of religious arguments like battery versus rotary, air-side economization versus water-side economization, raised floor versus no raised floor.  To the uninitiated its an industry categorized by mysterious wizards of calculus and fluid dynamics and magical electrical energies.  Its an illusion the wizards of the collective cottage industries are well paid and incented to keep up.   They ply their trade in ensuring that each facility’s creation is a one-off event, and likewise, so is the next one.  Its a world of competing General Contractors, architecture firms, competing electrical and mechanical firms, of specialists in all sizes, shapes and colors.   Ultimately – in my mind there is absolutely nothing wrong with this.  Everyone has the right to earn a buck no matter how inefficient the process. 

After all, there is a real science to most of the technologies and application of design involved in data centers and the magical mysteries they control are real.   They are are all highly trained professionals educated in some very technical areas.   But if we are honest,  each generally looks at the data center world from their own corner of the eco-system and while they solve their own issues and challenges quite handily, they stumble when having to get out of their comfort zone.  When they need to cooperate with other partners in the eco-system and solve more far reaching issues  it almost universally results in those solutions being applied in a one-off or per-job perspective.  I can tell you that leveraging consistency across a large construction program is difficult at best even with multiple projects underway, let alone a single project. 

The challenge of course is that in reality the end-user/owner/purchaser does not view the data center as an assembly of different components but rather as a single data center facility.   The complexity in design and construction are must-have headaches for the business manager who ultimately just wants to sate his need to have capacity for some application or business solution.  

Now into that background enter our POD Architecture Services offering.  In a nutshell it allows those customers who do not necessarily want to lease (or cannot due to regulatory or statutory reasons) a facility to use their own capital in building a facility without all the complexity associated with these buildings.

Our PAS offering is ultimately a way for a company to purchase a data center product.   Leveraging Digital’s Data Center product approach a company can simply select the size and configuration of their facility using the same “SKU’s”  we use internally in building out of our own facilities.   In effect we license the use of our design to these customers so that they enjoy the same benefits as our the customers of our turn-key data center facilities.

This means that customers of our PAS product can leverage our specific designs which are optimized across the four most crucial aspects of the data center lifecycle.   Our facility design is optimized around cost, mission, long term simplicity in operability and efficiency.  This is anchored around a belief that a design is comprised of both upfront first time costs along with the lifetime costs of the facility.    This is an “owners” perspective, which is the only perspective we have.  As the world’s largest data center REIT and wholesaler, we need to take the full picture into account.  We will own these facilities for a very long time. 

Many designs like to optimize around the technology, or around the upfront facility costs, or drive significant complexity in design to ensure that every possible corner case is covered in the facility.  But the fact is if you cut corners up front, you potentially  pay for it over the life of the asset, if you look for the most technologically advanced gear or provide for lots of levers, knobs, and buttons for the ultimate flexibility you open yourself up for more human error or drive more costs in the ongoing operation of the facility.   The owners perspective is incredibly important.    Many times companies allow these decisions to be made by their partner firms (the cottage industries) and this view gets clouded.  Given the complexity of these buildings and the fact that they are not built often by the customers in the first time its hard to maintain that owners perspective without dedicated and vigilant attention.  PAS changes all that as the designs have already been optimized and companies can simply purchase the product they most desire with the guarantee of what they receive on the other end of the process, is what they expected.

Moreover, PAS includes the watchful eye, experience and oversight of our veteran data center construction management.   These are highly qualified program managers who have built tens of data centers and act as highly experienced owners representatives.  The additional benefit being that they have built this product multiples of times and have become very good at the delivery of these types of facilities based upon our standardized product.   In addition, our customers can leverage our significant supply chain of construction partners, parts and equipment which allows for incredible benefits in the speed of delivery of these buildings along with reductions in upfront costs due to our volume purchasing.

This does not mean that Digital is going to become an Architectural or engineering firm and stamp drawings.  This does not mean we will become the general contractor.  This simply means that we will leverage our supply chain to deliver our designs and facilities based upon our best practices on behalf of the customers in a process that is completely managed and delivered by experienced professionals.  We will still have general contractors, and A&E firms, and the like that have experience in building our standardized product.  We are driving towards standardization.   If you believe there is value in having each facility as a one off design, the more power to you. We have a service there too, its call Build to Suit.  PAS is just another step in the formal definition of standard data center product.  Its a key element in modularization of capacity.    It is through standardization by which we can begin to have a larger impact on efficiency, and other key “Green” initiatives.   

I have often referred to my belief that data centers are simply the sub-stations of the Information Utility.   This service allows for commercial companies to start benefitting from the same standardization and efficiency gains that we are making in the wholesale space and enjoy the same cost factors.

Hope that makes things a bit clearer!

 

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3 thoughts on “Changing An Industry of Cottage Industries

  1. Pingback: Cookie cutter data centers? « The Server Room

  2. Pingback: In the New Data Center, It’s Roofs Off and Taxes Down - Bits Blog - NYTimes.com

  3. Pingback: In the New Data Center, It’s Roofs Off and Taxes Down - Bits Blog - NYTimes.com

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