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CyrusOne VP Holloway shines at AFCOM Southern California webinar

July 6, 2022

Cloud adjacency, Megaport and procurement – CyrusOne Vice President of Enterprise Sales Fred Holloway addressed these hot topics and more at AFCOM Southern California Chapter second-quarter 2022 educational series webinar in June 2022.

AFCOM brought in several panelists from the top data center providers in the West to discuss U.S. colocation market trends for Southern California-based users. It included Cresa Managing Principal and AFCOM Southern California Chapter Board Member Jason Shepard, who moderated the discussion; Megaport Sales Director Brian Tasker; Flexential Channel Solutions Architect Derek Siler; Switch Senior Account Manager Shannon Bischel; and Aligned Data Centers Chief Innovation and Technology Officer Phill Lawson-Shanks.

Shepard kicked off the conversation asking what buzzwords they hear today in the data center industry, to which Holloway replied cloud adjacency.

“It’s such a dynamic space, and some say ‘Well, they didn’t get it right,’” he said. “Well, no, I don’t think you’re ever going to get it right or it’s never going to be stable. You’re always going to be looking for where do you optimize your workloads? Where do you optimize the performance of what you have running across your platforms?”

CyrusOne’s answer is to “Come join the party,” Holloway continued.

“You can take advantage of whatever platforms are available and they’re just a cross connect away,” he said. “The idea of being adjacent to however your customers want to leverage or they want to run their workloads is really the conversation that we’re having day in and day out.”

Shepard then brought up the elephant in the room – a May 2022 Fortune magazine article that proposed data centers are dinosaurs with a few providers facing declining profitability. It quoted the fact that in 2015, Amazon leased 72% of its facilities, but in 2021 that dropped to 54%. In its own facilities in 2018 it was 28%, but now it’s 46%.

“In my mind, they’re not doing two, three-year leases on these gigantic 30-megawatt type facilities, so the chances are they haven’t moved out of the wholesale colocation facilities that they’re in partnership with,” Shepard suggested. “To me, this is more of a reflection of expansion and growth impacting the colocation of marketplace, versus a reduction of space, if that makes sense.”

Holloway said it’s an issue of unprecedented demand.

“We’ve never seen it like this before, and our business is transforming,” Holloway said. “We’re almost a 50/50 split between enterprise and hyperscale cloud. It’s a little in the cloud favor, about 55%/45%. It’s so difficult to stay ahead of demand. Things like land banking and trying to figure out where to place the next bet, you almost don’t have to worry about that anymore.” But with rising demand, there is also more flexibility on location, he added.

“Companies do seem to have locations where they want to be, but if they can’t find the supply right there, it doesn’t have to be right there,” Holloway said. “They’ll get into the latency conversations, and they’re finding they can withstand a little bit more latency to support the workload. We’ve never seen it like this.”

But one of the biggest challenges today remains access to capital.

“If you’re a publicly held company, the game’s gotten so much bigger that getting access to the kind of capital that you need to support the investments that are required, it’s just difficult,” Holloway said. “You’re either diluting shareholder value or you’re going to the market for debt that the public markets will not be that thrilled about. That’s one of the bigger issues, and maybe that’s where the author was going with the article. It’s just a much bigger game than it’s ever been.”

With data centers in western markets like Phoenix, Salt Lake City, and Reno, Nevada, Shepard wondered what advantages those offer for California clients.

Holloway said CyrusOne’s network evolution in the Phoenix market has been a huge plus.

“It’s also one of the healthiest combinations of very large hyperscale and large enterprise at scale, along with what we’ve been talking about regarding retail colocation,” he added. “It’s been such a healthy mix there, and the cross pollination for our enterprise clients being able to take advantage of some of the cloud opportunities on our campus that happens to be in Chandler, Arizona, just southeast of Phoenix, has just been fantastic.”

In the event a region is down for an availability zone, Shepard asked if a data center has a packet fabric connection because it’s in another colo facility that has Megaport, would the data center stay up in that zone?

“I hear a lot of our customers have got diverse access to Megaport, but then once they’re in, they’re able to manage their virtual cross connects into the various cloud platforms,” Holloway said. “You provide a ton of flexibility, as well as the diverse routes. The flexibility to be able to move across platforms, and if I understand correctly, even manage across the platforms by utilizing Megaport. You provide customers just a tremendous amount of flexibility to operate.”

Shepard also asked the panel what the top emerging trends are. Bischel noted more clients are planning ahead and signing on before a data center is built. They also know they need a certain amount of megawatts or number of cabinets and they want to know it’s there when they need it

“And that ha forced the traditional enterprise customers to have to rethink their procurement practices, because they need to do their due diligence,” Holloway said. “But if they do the due diligence along the traditional timeline, they’re finding that space and power is gone by the time they get partway through the process. That inventory is not there, and it’s not just one provider that doesn’t have the inventory. They find a market could be out, and then they’re months out, at best, from being able to satisfy that demand in that particular market.”

Shepard replied that procurement teams or third-party procurement teams may not necessarily be all that well-versed in the data center industry themselves and the processes they go through. He wondered if that puts a client at a disadvantage if it gets locked in the procurement process for a procurement team that has no experience in the data center side of the business.

“What we’re finding is that many of them are hiring advisors to help them through, and those advisors are in touch with what’s going on,” Holloway said. “If there’s no advisor involved, they’re not just hearing it from one particular player, they’re hearing it from the market. But they’re having to bring the rest of their organization in line, or they find themselves potentially empty-handed.”

At the end of the webinar, a listener chimed in and asked the panel if it noticed more panic buying based upon current lead times.

“I don’t know if it’s panic buying as much as it is future proofing and doing a better job of forecasting out that we’re seeing,” Holloway concluded. “The phrase ‘panic buying’ is certainly thrown around a lot, but I think this world that we’re living in has forced people to take a longer-term view and secure inventory much further out than we’d ever seen before.”