IMN Outlook: Optimism About the Future, But With Caveats

The conference painted a healthy industry, but not one without its concerns. Recurring concerns that were brought up throughout the conference include:

Efficiency, ASHRAE changes and PUE

The second day keynote panel discussed changes in recommendations for data center operations from ASHRAE, the leading industry group for the cooling industry, including guidelines that allow higher temperatures. Steve Spinazzola, Vice President of RTKL, an architecture and design firm, noted that many colocation providers can’t follow ASHRAE guidelines. Because colocation facilities have a variety of customer-supplied equipment, the guidelines for higher temperatures simply aren’t a possibility, because not all customer-supplied equipment is rated for higher temperatures. This isn’t a problem at a uniform data center like those built by Facebook or Google, two proponents of higher server room temperatures. Those data centers don’t have multiple customers using older equipment.

The conversation extended to Power Usage Effectiveness (PUE), which has emerged as the leading metric for data center energy efficiency. There was talk of PUE envy, (or PUEness envy?), on the part of colocation providers. While Google can achieve an incredible PUE, those numbers simply aren’t feasible for colocation providers because their facilities are populated with a wide variety of equipment from a wide variety of customers.

Nonetheless, colo providers feel pressured to provide PUE numbers in line with the Googles of the world. In reality, multi-tenant data centers should be happier with PUEs in a ranger higher than those making headlines for extreme efficiency. PUE should also be revealed on an annualized basis for it to mean anything; a facility upon completion might be able to achieve a ridiculously low PUE, but knowing the PUE in practice is a much more defining and helpful metric.

There’s a belief among some that there’s starting to be too many players in the market. This industry is an enticing one, so there have been a lot of new entrants in recent years, particularly from the real estate world. Investors cautioned the industry not to overbuild. The panel agreed a lot of folks have been jumping in looking to become operators, particularly from the traditional real estate world. There’s caution that this might create a glut of inventory.

This is a concern that has recurred regularly over the years, and has been of particular interest to Wall Street analysts and investors with memories of the devastating impact of the overbuilding from the “dot-com bust.” Thus far, most oversupply issues have been transient and affected specific geographic markets rather than the industry as a whole.

Availability of financing

“We’re in a huge debt bubble,” says Rob Stevenson, Managing Director – Head of U.S. REIT Research, Macquarie. “If returns aren’t as strong, that spells trouble.” RTKL’s Spinazzola said he’s concerned about the real estate side of the industry, which is dependent upon access to capital. “If the cost of debt capital goes up, then there’s a chance that the math no longer works.”

Earlier this year there were a flurry of new projects financed with debt, as four companies lined up $620 million in debt to support expansion.

Regulatory problems

Simon Tusha, CTO of ELM Energy, noted that no one in the industry has come together in response to a New York Times article that took a negative environmental view of the industry.

“Greenpeace is attacking the industry on a daily basis,” Tusha said. The administration getting reelected might spell big trouble if they start enforcing policy. Tusha urged the crowd to get their permits straight, citing Microsoft’s emissions battles and a recent $3m fine doled out to a major cloud company. “Look at what the EPA is doing to coal fire plants right now,” said Tusha.  Tusha urged everyone to look deeply into regulatory guidelines such as RICE NESHAP and EPA CFR 40 parts 1068 and 1065.

Other debates throughout the event included Wholesale vs. Retail, to get tier certification or not, modular vs container, and whether either is a good idea. We’ll cover some of these discussions in upcoming articles.

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About the Author

Jason Verge is an Editor/Industry Analyst on the Data Center Knowledge team with a strong background in the data center and Web hosting industries. In the past he’s covered all things Internet Infrastructure, including cloud (IaaS, PaaS and SaaS), mass market hosting, managed hosting, enterprise IT spending trends and M&A. He writes about a range of topics at DCK, with an emphasis on cloud hosting.

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