CoreSite: Connectivity Impacts Deal Pricing
CoreSite was among the first wholesale providers to strike interconnectivity deals with European exchanges, and sees network exchange access as a key factor in pricing.
“We believe that the performance requirements of many workloads continue to benefit from the differentiated value of data center platforms offering robust, low-latency network solutions and valuable customer communities,” said Thomas Ray, CEO of CoreSite. “The market opportunity related to performance-sensitive requirements remains attractive. Overall demand in edge markets continues to accelerate, largely driven by mobility growth and cloud adoption.”
Ray says a facility’s level of interconnectivity is being reflected in pricing for data center space.
“We’ve seen pressure on rents, interconnection services and power margins in the undifferentiated colocation segment as wholesalers seek to gain market share,” said Ray. “However, we see market dynamics for undifferentiated colocation as having been poor for some time. We believe those dynamics are distinct from the dynamics associated with the performance-sensitive colocation segment.”
Is Open-IX A Game-Changer?
That’s one reason why the interconnection landscape in the U.S. may soon be changing. One of the 2013′s big stories in interconnection was the emergence of Open-IX, which seeks to create a new network of member-governed Internet exchange points (IXPs) that allow participants to trade traffic. The group is embracing a non-profit model that is widely used in Europe and spreads exchange operations across multiple data centers in a market. In the U.S. these exchanges are typically hosted by commercial providers (most prominently Equinix), with interconnections focused in a single facility or campus operated by that provider.
The Open-IX movement is especially attractive for wholesale data center operators, who would benefit from the more distributed interconnection system. The London Internet Exchange (LINX), Amsterdam’s AMS-IX and Frankfurt-based DE-CIX have all announced plans to enter the U.S. market in either northern Virginia or New York.
“We are now seeing new leasing opportunities with specific network requirements that Open-IX allows us to solve for our customers,” said Digital Realty CEO Michael Foust. “It’s too early to quantify the near-term financial impact from these initiatives, but we believe they will significantly enhance the appeal of our properties to a wider range of tenants.”
DuPont Fabros Technology has already struck deals for LINX to have a presence in its Ashburn, Virginia campus, and AMS-IX to host a node in its NY-area data center in Piscataway, N.J.
“We certainly believe that it’s the right thing for the U.S. market to endorse some form of Open-IX,” said Hossein Fateh, President and CEO of DuPont Fabros. “It makes a lot of sense. Many of the customers are demanding it. If you look at the Board of Open-IX it’s really who’s who of the Internet. We are working to try and get some of the European exchanges and some of our data centers.”
CyrusOne is also embracing Open-IX. “OIX is not competition to CyrusOne, it is actually a tremendous benefit to our Fortune 1000 client base,” said CEO Wojtaszek. “As our data center and exchange points become certified, the OIX will bring in more content, cloud providers and networks for our ecosystem.”
Equinix: We’re Staying Focused
Equinix, for its part, says the emergence of Open-IX doesn’t represent a major threat to its prominence in the interconnection business.
“There’s always been competition,” said Jason Starr, the Director of Analyst Relations at Equinix. “That’s nothing new. There’s been a lot of change in the business in the last 15 years, and we’ve focused on our core business.
“In many markets, we’re the de facto Internet exchange point,” said Starr. “It’s really about the ecosystem. Networks and service providers invest their capital to be in Equinix data centers. These networks also become magnetic, and bring in other customers.”
Those “magnetic” customers are among the reasons Equinix has launched business suites, offering dedicated, fully-demised data rooms instead of cages. Equinix says that this isn’t a wholesale offering, but rather a custom solution for key existing customers that need both connectivity and a significant footprint.
Requirements larger than 250 kW “have never been our sweet spot,” said Starr. “We’ll get them if they’re strategic customers.”
Compass Datacenters’ Crosby, who recently provided an overview of industry providers, products and pricing at the Gartner Data Center conference, said uptime remains the coin of the realm and the most important differentiator.
“We still make glorified power outlets,” said Crosby. “It’s what we do.”
Pages: 1 2