TRD$5.1:$The$Build$vs.$Buy$Decision$Erik$Levi:,$CEO,$Open$Data$Centers$

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TRD$5.1:$The$Build$vs.$Buy$Decision$2013$

In$an$industry$dominated$by$REITs$and$capital$sources$interested$in$large$scale$new$construcIon,$there$are$profitKmaking$opportuniIes$available$for$less$tradiIonal$growth$strategies.$$$$$$$$$$$

The$State$of$the$IT$Industry$IT$is$Moving$Toward$the$Data$Center$

!  Cloud$CompuIng$vs.$Local$CompuIng$!  New$regulatory$requirements$!  New$IT$business$opportuniIes$(e.g.$Swaps$market,$analyIcs)$!  Rack$density$increasing$–$but$not$at$the$rate$we$believe$(1)$!  ConInued$decrease$in$telecommunicaIons$costs$!  ConInued$increase$in$power$costs$$

(1)$Source:$Data$Center$Dynamics,$2013$

The$State$of$the$Data$Center$Market$Bigger$is$be:er?$

•  ConInued$increase$in$data$center$demand$$•  9m$new$square$feet$of$space$available$in$2013K2014$(1)$•  ConInued$consolidaIon$in$the$industry$•  Total$DC$investment$increase$beyond$$120$billion$in$2013$(1)$•  REITs$realize$a$relaIvely$low$cap$rate$(7.25K7.75%)$(2)$•  New$builds$cost$in$excess$of$$1500/sq$foot$•  “BIG$Build$Syndrome”$–$Is$bigger$really$be:er?$

(2)$Source:$DRT$Release$1/31/2013$

The$View$From$The$Street$SAS$Models$and$Customer$Ownership$Are$Key$

•  Managed$Service$Providers:$1K2x$$•  Small$Data$Centers$(1K3$locaIons):$3K5x$•  Data$Centers$with$Managed$Services:$5K7x$•  Data$Centers$with$integrated$SAS$Models:$7K15x$•  FaciliIes$based$providers$(e.g.$cable$operators):$5K8x$•  Long$term$expectaIons$for$data$centers:$5K7$year$ROI$

Market$Entrance$Strategies$What$does$it$all$mean?$

•  Build$new$faciliIes?$•  Upgrade$exisIng$faciliIes?$•  Buy$exisIng$faciliIes$(conversion)?$•  Acquire$(purchase$exisIng$revenue$generaIng$faciliIes)?$

Merits$and$Disadvantages$of$a$New$Build$

Pros:&!  Build$to$spec$!  Longer$lifespan$!  Predictable$model$!  Choice$of$geography$

and$locaIon$

Cons:&"  Expect$to$spend$more$than$

$1,000/sq.$h.$"  Lack$of$carriers$in$iniIal$

build$"  High$inerIa$in$customer$

a:racIon$"  Startup$issues$$

Merits$and$Disadvantages$of$Upgrading$

Pros:&!  PreexisIng$customer$

base/no$inerIa$!  No$concerns$about$

carrier$density$!  Low$markeIng$spend$

Cons:&"  PotenIally$high$build$cost$" No$improvement$in$overall$

market$diversity$"  ExisIng$issues$may$persist$"  Resource$constraints$

(power)$$

Merits$and$Disadvantages$of$a$Buying$ExisIng$Facility$

Pros:&!  Very$low$upfront$capx$!  ExisIng$carrier$density$!  Rapid$market$entry$!  ExisIng$spec*$$

Cons:&"  RemediaIon$of$exisIng$

faults$"  Cannot$choose$specific$

geography$or$locaIon$" May$be$moderate$inerIa$"  ExisIng$spec*$$

Merits$and$Disadvantages$of$Acquiring$

Pros:&!  No$inerIa$!  High$carrier$density$!  Probably$high$power$

density$!  Instantaneous$

market$entry$

Cons:$"  Buying$revenue$is$

expensive$"  ExisIng$faults$"  ExisIng$culture$$

Thank$you$Erik%Levi),%CEO,%Open%Data%Centers$

$elevi:@opendatacenters.net$

(212)$796K5502$$$