Will 2014 finally be the breakout year for pre-fabricated data centers? The year is young, but the modular market has already seen its first major M&A deal, and may soon have its first IPO.
With marquee customers in the hyperscale market, and slow but steady progress with enterprise customers, modular designs continue to gain traction. New players and new designs are emerging, further advancing the potential for pre-fab deployments.
But barriers remain. The ISO container casts a long shadow over the modular data center market. Executives in the sector say it will take additional education, as well as more public customer success stories, before the new breed of modular designs can overcome customer resistance dating to the early days of the “data center in a box.”
M&A and IPOs
On Friday, Schneider Electric announced that it had acquired AST Modular, a Barcelona-based modular specialist that has built a global business. The deal reflected the growing importance of pre-fabricated designs and Schneider’s ambitions in the modular sector.
The market for modular data centers is also becoming more competitive, with U.K. specialist Bladeroom entering the U.S. market and investment firm Fidelity launching its Centercore design as a product. Late in 2013, IDC Architects announced that it is commercializing a modular design it has deployed for global banking customers, while newcomer NextFort opened a “modular colo” facility near Phoenix..
Meanwhile, IO is hoping to become the first modular specialist to go public. The company has announced plans for an initial public offering, but hasn’t yet indicated the date for its IPO. The Phoenix-based provider counts Goldman Sachs among its roster of clients, and is bullish on the outlook for modules as the delivery model for the “software-defined data center.”
“The data center market has spoken, and the consensus is that modular has won,” said Troy Rutman, the spokesman for IO.
Progress, But Also Resistance
Other executives in the modular sector see pre-fabricated designs making their way into the mainstream more gradually, but say that resistance persists.
“You’re deploying a new technology into a mature market that is questioning its delivery,” said Rich Hering, Technical Director Mission Critical Facilities at M+W Group. “Most folks don’t like change.”
“A lot of people believe modular is just for scale-out and low reliability,” said Dave Rotheroe, Distinguished Technologist and Strategist for HP. “It’s not true. Modular designs can and do apply in the enterprise.”
“Customers are just beginning to understand what modular allows them to do,” said Ty Schmitt, an executive director and fellow at Dell Data Center Solutions. “As the customer base matures and the supply chain matures, we’ll see exponential growth.”
Hyperscale cloud builders Google, Microsoft and eBay were among the first earliest users of modular designs. AOL has deployed “micro-modular” data centers both indoors and outdoors. On the enterprise front, Goldman Sachs and Fidelity have been the marquee names embracing pre-fabricated data centers.
Modular designs aren’t for everyone, but Schmitt says the concept is being proven with a nucleus of forward-thinking customers seeking cheaper and faster ways to deploy their IT infrastructure.
“It’s customers who’ve transformed their business,” said Schmitt. “They’re the early adopters. As more and more customers take advantages of software resiliency, we’ll see more adoption. It’s going to be a series of small hurdles.”
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