T1R Industry Insight

Internet Data Center

Selection and Supply

Daniel GoldingVice President and Research Director

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

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

What is colocation

Carrier Carrier NeutralQuickTime™ and a

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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

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 equipment…usually• Ability to put in whatever hardware is

desired

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

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

Colocation Quality

• Significant quality differences in colocation facilities• Premium Colocation facilities

• Power at least N+1 in all components• UPS, Generator sets, transformers

• N+1 Cooling • Multiple fiber entrance facilities• Modern fire suppression and detection• 24x7 staffing and security• Tier III/IV, roughly

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 n+1 generators, its not premium

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

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

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: AT&T, Verizon, Akamai, BT

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

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

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

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

Supply/Demand

Global Overview

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1H072H061H062H051H052H041H042H031H032H021H02

Racks Available/Utilized

25%

30%

35%

40%

45%

50%

55%

Utilization %

Availability

Utilization

%Utilization

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%

Colocation Status, Summer 2007

Top Global Colocation Markets

Chicago LondonDallas Northern

VirginiaAmsterdam San FranciscoLos Angeles FrankfurtNew York Atlanta

Supply/Demand

US #1 Market - Northern California

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1H072H061H062H051H052H041H042H031H032H021H02

Racks Available/Utilized

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

Utilization %

Availability

Utilization

%Utilization

Supply/Demand

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

Virginia Greater Chicago New York Silicon Valley

IDC Utilization by IDC Quality - Top US Markets

Standard IDC

Premium IDC

Why is there a shortage?

• If there’s such a demand, why isn’t supply following?• It will eventually• Its too early - capital not willing enough

• What’s hold the money back?• Memories of the bust• Concerns about an overbuild - condos• Cost of construction - $1200 - $1300 sq ft

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

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

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

Major New Facilities

EquinixCity Gross Net Opening

Chicago 250k 88k 3Q2007

New Jersey 340k 51k 3Q2007

Northern VA 85k 50k 1Q2008

LA 110k 51k 3Q2008

Major New Facilities

365 MainCity Gross Net Opening

LA 150k 75k Summer 08

Silicon Valley 136k 80k 4Q2007

Major New Facilities

SavvisCity Gross Net Opening

Atlanta 31k 20k 4Q2007

New Jersey 50k 32k 4Q2007

Silicon Valley 50k 32k 4Q2007

Northern VA 50k 32k 4Q2007

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 haven’t seen the end of

explosive demand growth

Conclusion

• Thanks! Any Questions?• Daniel Golding

Dgolding@t1r.com