Vantage CEO: Model T Approach No Longer Works for Wholesale Market
Vantage Data Centers’ V2 Santa Clara facility. (Source: Vantage)

Vantage CEO: Model T Approach No Longer Works for Wholesale Market

Company's recent deals illustrate that one-size-fits-all approach may not work for wholesale

Henry Ford is famous for saying, "People can have the Model T in any color, so long as it's black." Vantage Data Centers CEO Sureel Choksi says in many ways, the wholesale data center industry has been of the same mindset, but that's changing.

Vantage is offering greater flexibility when it comes to space and configuration, as a recent 3 megawatt lab-style customer win shows. The company is expanding its V2 facility in Santa Clara, California, for that customer, whose name was not disclosed, and announcing an expansion that will ultimately add 9 megawatts to its V1 data center on the same campus. Vantage has signed 5.6 megawatts in Santa Clara over the past 12 months.

Its most recent customer win in Santa Clara is a perfect example of flexibility in action. In a 3 megawatt deal, the customer is building out a pure lab-style R&D data center -- a first for Vantage. The needs call for 12 kilowatts per rack in a non-redundant (‘N’) power configuration. This type of customer would put a traditional wholesale data center provider in a tricky situation.

"If you have one standard design, let's say N+1 on generators (think a common market configuration), and you’re pre-building all capacity, it means you have to price it the same way," Choksi said. "We’ve been focused on pre-building in a way that allows us to configure those building blocks so we can quickly deliver capacity, but not tell them they have to use a certain configuration. The Model-T Ford model is dissapearing.”

The new customer doesn't need all the redundancy typical of an enterprise production deployment. That's how a lot of wholesale space is typically pre-configured.

"The degree of flexibility has widened," said Choksi. "Today we offer the full range of services, from grid-only power to 2N+1, or greater."

Flexibility has been a big Vantage message for some time. Another example was the company's recent announcement that it would build out data center space that would work for Open Compute hardware. The Open Compute Project is a Facebook-led initiative for open source hardware and data center design. Some of the Open Compute designs have unconventional power infrastructure requirements.

“There are not too many wholesale players with the quality and flexibility of Vantage,” Jabez Tan, said senior analyst at Structure Research, said. “They can accommodate efficient high-density deployments without some of the typical caveats, like a set amount of floor space for a set amount of critical power, which leads to wasted floor space.”

Flexibility Also Means Accepting Smaller Deals

Providers' willingness to accept smaller deals is another characteristic of today's wholesale data center market. More and more customers want wholesale space in the 500 kW range -- half the traditional 1 MW minimum.

Choksi said Vantage's sweet spot is 500kW and up. "In Silicon Valley, [these sub-megawatt deals] are often high growth companies that could be the next wholesale or super wholesale deal in the future."

Last year, wholesale provider DuPont Fabros also noted it is accepting sub-megawatt deals, with an emphasis on balancing average deal size.

Sub-megawatt deals has also prompted this operational flexibility, according to Choksi. It is not enough to just provide uniformly configured suites as more customers look to leverage the benefits of wholesale.

Other customer requirements are changing as well. "Not all customers look for the same power density," Choksi said. "They’re looking for metered power, a more attractive total cost of ownership, and room for expansion."

Santa Clara Market Dynamics Healthy

Vantage's Santa Clara campus consists of three data centers. The company recently closed a string of high-profile deals there. Enterprise Hadoop specialist Cloudera signed on in May for an undisclosed but “significant amount of data center space,” an an unnamed e-commerce company expanded its footprint on the campus by 1.5 MW last January. Enterprise NoSQL provider MarkLogic switched from retail colocation to a Vantage wholesale deal in Santa Clara last October.

The campus leased really well out of the gate in 2011. Vantage was able to lease 15 megawatts of space in an 8-month span -- an impressive debut.

But the company was one of many providers that faced a supply-and-demand imbalance in Santa Clara during 2013 and the first half of 2014.

"When a large user, or a couple of large users, vacate a wholesale provider’s facility, it created a sublease dynamic," explained Choksi. "It creates pressure on the market by creating shadow inventory. The dynamic has now improved, with only a small amount of sublease capacity."

No Slowdown in Demand

Wholesale data center leasing performed really well in general in 2014, up 37 percent according to a North American Data Centers report. Vantage's leasing activity during the last 12 months (5.6 megawatts worth of deals) is indicative of good momentum.

The company also has a budding Quincy, Washington, campus. The first data center is fully built, with 6 MW for an enterprise customer, expandable up to 9 MW. The company is in discussions with a few potential customers for a second data center there. Choksi also indicated that Vantage is pursuing additional potential markets but did not disclose what they were.

"The market demand continues to be strong, driven primarily by two trends: Internet growth (internet and cloud) and the second is large enterprise outsourcing of data centers," said Choksi. "We see no slowdown."

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