Boston Data Center 360: Are the Hyperscalers Going to Be Broken Up? What’s Pushing the Tempo in Boston?

BOSTON, MA — CapRE’s recent Boston & New England Data Center & Cloud Infrastructure Summit kicked off with a bang – which included opening remarks by Michael Saia, Chief Executive Officer and Founder of XTechnology Global, Platinum Sponsor. Saia’s remarks honed in on the Boston market, and then led directly into the first panel of the day, “Greater Boston Data Center Market 360: What Firms are Actively Developing, Investing, and Why? And What Type of Product (Hyperscale, Colocation, Enterprise, or Edge) is Being Delivered?” which zoomed far out to take in to account the broader data center picture.

Michael Saia, Chief Executive Officer and Founder, XTechnology Global

“The Boston market is home to 16 of the Fortune 500 companies. There’s about a million square feet of commissioned data center space,” began Saia. “It’s got a relatively low vacancy rate of 16%. We have proximity to the largest northeastern cities. We’ve got a diverse economy and an innovative technology hub. The verticals that comprise the data center market are higher education, biotechnology, pharmaceutical, technology and enterprise clients. This is a very, very diverse group of companies that make up the data center market.”

“The one other thing that’s great about Boston is that we have a couple of good sports team, wouldn’t you say?” chuckled Saia, before getting back to business. “We have seen quite a shift in the evolution of the market as it relates to the data center market in Boston. The traditional on-premise data centers have migrated to colocation and not the Cloud.”

“You all might remember when Cloud was called hosted services,” mused Saia, hearkening back to a previous era, and pausing a moment to let that memory sink in with the crowd. “Now we’re talking about hyperscale and the Edge. That wasn’t around five years ago. Or if it was, it was limited in scope. So the clients are now demanding more and more value-add services as they go off-premise.”

“So what are the areas of growth that we’re seeing?” asked Saia, referring specifically to Bean Town and the Bay Stat, before making some bold but sound predictions. “We’re looking at the biggest thing driving growth – data and 5G. That, gaming services, streaming services and the Internet of Things are going to drive the growth for the Boston market. Hyperscale probably isn’t going to work, due to the price of power in the Boston market.”

With that, Saia handed the microphone to Jim Buratti, Account Executive at Schneider Electric, who moderated the opening panel. “Let’s talk about the big guys – the big three, Amazon, Google, and Microsoft,” he suggested, before asking a handful of questions. ”Are those guys going to take over the entire business and leave nothing left for the entire business? Are we only going see the big three and not see any small data center anymore? Look at other industries, like automobiles, or the mobile business – there are always only three or four. And regardless of the answer, are they too big? What’s the impact of their size on the market?”

Rashad Kawmy, Partner at Boundary Street Capital was first to offer an answer from this panel. “Broadly, we’ve already seen somewhat of a transformational shift, even if you just isolate it down to AWS and Microsoft effectively. It’s been pretty transformational with regard to the space,” he shared, before making a prediction of his own. “To some extent it will persist, but we will also see some market maturation there. I don’t believe that the Cloud wins everything and that everything else loses.”

“I think that, just like I’ve seen that other industries mature, you’re going to see probably 75% of a commoditized-like product bought in a commoditized-like way,” he asserted. “And when people need specialized products, high-touch services, high-compute products, high-density type of solutions, I think there will always be boutique service providers who have expertise and special capabilities in those areas. I think that there won’t be a certain market for domination.”

Rashad Kawmy, Founder & Managing Partner, Boundary Street Capital

“I also think there are new, blue oceans, that over the next ten years, as 5G comes, we’ll probably see expand toward the Edge that is probably less attractive to the Amazons and the Googles who are really scales-of-economy players. And that will open up a second wave of transformation to the global network,” continued Kawmy.

The last thing Kawmy touched on was the potential a government-mandated break up of any any of those behemoths Burrati mentioned earlier. “I would not be surprised, in particular because I think that Facebook seems to be a bit tone deaf, and in some ways, might be provoking regulators to come after them,” he shared. “My sense is that any sort of a break up or regulatory implication that we’d see coming from Washington would have more to do with what they’re doing with data and privacy, and a lot less than breaking Amazon’s cloud up because it’s simply too big.”

“The government has no problem letting there be three big players in the market. If anything, if they had to divest their cloud business from the retail business, that’s a possibility,” he concluded. “I don’t think it’s a high probability, but I couldn’t see a scenario where the government says that their cloud business is just too strong or too big and breaks it up. “

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