Latisys Offers ‘Data Center as a Service’

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The Latisys data center in Englewood, Colorado, one of four facilities the company operates

Data center providers continue to focus on electric power as they structure and price deals for data center and colocation space. As customers seek more flexible terms in acquiring current and future power capacity, providers are rolling out new programs to differentiate their offerings.

Among them is Latisys, which recently introduced Data Center as a Service, a program which offers many features of a wholesale data center lease, but is packaged as a service contract. The solution features a data center suite that provides access to space, power and cooling  and includes racks and cabinets, leaving the customer to populate the enclosures with their own servers, storage, and security gear. Customers who already own racks and cabinets can use them if they prefer.

While offering many characteristics of colocation, the offering is designed for customers seeking 250 kilowatts to 2 megawatts of IT load, who typically are ideal tenants for wholesale data center space. Power capacity continues to be a key selling point for customers seeking data center space, who are seeking the best way to pay for the power they need now, and reserve the power they’ll need down the road. Latisys says its approach may appeal to customers planning a gradual ramp-up in their power requirements.

Power Driving Deal Terms

“A centerpiece of our business is power strategy,” said Pete Stevenson, the CEO of Latysis. “Every company I’ve spoken to wants to have some flexibility in how they deploy. They all care about the growth path. Not everyone’s going to be a fit for a lease at a wholesale provider.”

Stevenson said the Data Center as a Service (DCaaS) program allows Latisys to offer more flexible terms than the triple net lease format preferred by real estate investment trusts, a category which includes three of the largest players in the wholesale data center market, Digital Realty Trust, DuPont Fabros Technology and CoreSite Realty. These wholesale providers lease finished data center space to their tenants.

“We let customers to think about their power requirements and scale up to meet them,” said Stevenson. “We’ll also give customers different ramps, letting them reserve space they have taken a certain period of time. We give them flexibility.” Stevenson said customers could have an option to of a graduated approach in which they add additional power capacity after six months or nine months.

Latisys will be offering the new program in its four data centers in Chicago, Denver, northern Virginia and Irvine, Calif.

The Latisys program comes on the heels of a move by QTS (Quality Technology Service) to structure deals that offer tenants flexible power purchasing, allowing tenants to  scale their power usage up and down over time. i/o Data Centers also offers a Data Center as a Service (DCaaS) solution offering a flexible range of colocation, support and modular data center space.

QTS and Latisys each offer both colocation and managed services,which allows them some flexibility in redeploying space and power. But as these providers seek to differentiate their plans, they are also benefiting from the growing customer appetite for wholesale turn-key space, a product type established and popularized by the public data center REITs.

“Leasing data center colocation space from a wholesaler can work for organizations with the financial and personnel resources to build out space themselves,” said Don Goodwin, Chief Revenue Officer, Latisys. “But we strongly believe our expanded Data Center-as-a-Service offering will resonate with businesses seeking to optimize their IT infrastructure management.”

Stevenson said customers are also seeking shorter lease terms, while REITs tend to favor longer leases. “The wholesale guys are looking at seven- and 10-year deals,” said Stevenson. “I love seven-to 10-year deals, but we also see a lot of three-year to five-year deals. Customers are beginning to realize they don’t have to worry about density, and they don’t have to sign a 10 year lease. We can take that and turn it into a monthly payment.”

About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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  1. What am I missing with this announcement? How does it differ from a 1200 square foot cage with metered power in a wholesale provider's footprint with a 3-5 year term? The name? How does this change revenue recognition for Latisys? Are services companies valued differently than real estate? Are they able to justify higher margins with investors who perceive the data center business as real estate and expect lower returns? From a tenant perspective I don't get it - there is power flexibility, most customers ship full cabinets from their vendors of choice, and they can reserve power or go on metered accounting. What's new besides the name?