How TierPoint Quietly Built a Data Center Empire in Secondary Markets
The building at 34 St. Martin Street in Marlborough, Mass., owned by Lincoln Rackhouse, has 130,000 square feet of data center space and 10MW of critical power capacity. TierPoint provides data center services at this location. (Photo: Lincoln Rackhouse)

How TierPoint Quietly Built a Data Center Empire in Secondary Markets

Flying generally under the radar, the private equity-backed data center roll-up has grown from a small local player to a service provider of national scale

While the current cloud data center leasing frenzy involving the six publicly traded data center REITs in the biggest markets tends to command the headlines, it's easy to lose sight of other major trends in the data center industry. One of them is the amount of activity in secondary data center markets.

Example of a company that's been successful at taking advantage of that trend is St. Louis, Missouri-based TierPoint, a private equity-backed colocation, hybrid cloud, and managed services provider that has quickly become a force to be reckoned with in the data center industry. Over the last year or so, it has accelerated pace and scale of acquisitions, while also expanding through new construction and development. Most notably, it recently completed a 70,000-square foot facility on a 15-acre campus in Oklahoma City.

See also: Windstream to Sell Data Center Business for $575M

Strategy and Future Plans

Gartner recently recognized TierPoint in its June 2016 "Magic Quadrant for Disaster Recovery as a Service" report. As Shea Long, TierPoint's senior VP of product, put it in an interview with Data Center Knowledge, the company sees DRaaS as one of the key "mousetraps" in its expansion strategy.

Here are the highlights from our conversation:

  • TierPoint's private equity owners are not looking for an exit. They have a long-term plan for the company, which is still in growth mode.
  • Providing hybrid cloud solutions is the foundation for TierPoint's business moving forward, with a marketing focus geared to mid-size and large enterprise customers with $100 million to $1 billion and higher revenues.
  • Long said TierPoint's advantage compared to larger competitors like Rackspace Hosting and CoreSite, "is a high-touch local presence in larger secondary markets."
  • On the Disaster Recovery side of the ledger, he touted TierPoint's software defined DRaaS solution "as being a better mousetrap, and a key element of TierPoint's expansion strategy."
  • Expect M&A by TierPoint to continue, with a focus on markets like northern and southern California, Phoenix, Denver, and Salt Lake City.
  • When it comes to new market expansions, TierPoint's preference is still to buy a local company and acquire the data center clients and innovative software capabilities.
  • International expansion is also on the radar, with London and Singapore at the top of the list.

Accelerating Growth

Founded in 2010 as Cequel Data Centers, the company almost immediately started to acquire local data center providers in targeted markets. When Cequel acquired TierPoint's Spokane, Washington, facilities in 2012, it chose to rebrand its data center products and services as TierPoint. At the time, those three data centers in Spokane boosted TierPoint's platform from 70,000 to 100,000 square feet.

Subsequently, TierPoint continued to roll up additional local and regional multitenant data center providers, primarily in underserved regional markets.

Read more: TierPoint Management Teams Up With Investors to Buy, Recapitalize the Company

During October 2014, the company logged another significant milestone when Ontario Teachers Pension Fund participated in the acquisition of Xand, which added 1,000 customers and greatly expanded the data center footprint in the Northeast.

Read more: TierPoint Buys Florida Data Center Provider CxP

In December 2015, TierPoint entered the Chicago market to service an existing client with the acquisition of AlteredScale.

In just the past six months, TierPoint has closed on two major acquisitions, paying $575 million for Windstream Hosted Solutions, and an undisclosed sum for Midwest data center provider Cosentry. Cosentry had a staff of 200, which increased the headcount at TierPoint to over 850 employees.

TierPoint - Map June 2016

Source: TierPoint - June 2016

TierPoint now operates 39 data centers, totaling over 600,000 square feet, in 21 US markets located across 18 states.

Thousands of Customers

Perhaps the most impressive result of the roll-up strategy of buying existing businesses is the number of customer logos. According to Long, TierPoint now has 5,000 customers generating annual revenues of about $350 million.

To put that into perspective, interconnection giant Equinix, the world's largest data center provider, currently has about 8,000 customers around the globe. Connectivity-focused CoreSite Realty, the top performing REIT of 2015, operates in eight markets and currently has 900-plus customers.

From Small Player to National Provider

TierPoint has evolved from a small local data center consolidator to a big-fish player in several regional markets to a full-blown national provider of hybrid IT solutions. However, due to the large number of acquisitions and the need to upgrade legacy facilities, the available products and services currently varies by market.

Notably, TierPoint announced in April that it has been selected by GlaxoSmithKline to support its global data consolidation and protection initiatives. This was a concrete example of a DRaaS strategy win and of a deal that would probably look attractive to some of the big data center REITs.

If TierPoint hasn't been on the competition's radar before, by now it certainly should be.

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