Cloud Services Becoming More Accessible to a Broader Market
by Josh Anderson
LEESBURG, VA – CapRE’s Sixth Annual Washington, D.C. & Mid-Atlantic Data Center Summit, the largest and most influential of the year, kicked off with a rousing morning panel discussion, REIT Analysts’ Outlook: Hyperscale, Traditional and Edge Data Centers Against the Backdrop of Evolving Services Landscape, which featured the input of Robert Gutman, Director, Communications Infrastructure and Telecom Services Equity Research, at Guggenheim Securities, LLC, on M&A, on the changing face of risk in the data center industry.
“In terms of the more interconnection-driven business and the risk there, there are various aspects of risk that people consider in that business model,” began Gutman. “We like to think that the NAPs are sort of sacred. Those are just irreplaceable assets, dense network connectivity in the right places — the “Beachfront” property of the data center world. And every year, pretty much, someone is trying to poke a hole in the sort of, defensive barriers, to that business.”
“Today, I’d say that where people have been talking about a risk to that model in the longer-term is in the software-defined networking aspect of the world, where maybe there are alternative ways to access network resources, vs being inside,” Gutman continued. “That’s one risk that has popped up over the last year and a half. My view on that is that software defined networking is really a tool for a different job. It doesn’t necessarily pose a risk.”
“As a matter of fact, in the near term, a lot of the capabilities are driving traffic into the hubs,” he explained. “So in the longer term, I just think that it’s a different tool for a different job. There are different economics for using it. It’s different bandwidth capabilities. So I think that at the end of the day, whether it’s physical cross-connects, virtual cross-connects, software-defined networking on-ramps, all of these tools really grow the addressable market by making Cloud resources more accessible to a broader audience.”
According to Gutman, whether it’s the hyperscale perspective or the interconnection model, the risk profile, business-wise, is probably lower now in some ways. “It’s certainly not increasing,” he stressed. “And then when it comes to other aspects, like the Edge and micro data centers, that is I think a conversation we’ve been having for the past two year. And it’s still in its earliest phase of emergence.”
He then ended with some optimism. “I think a lot of people feel confident that it will be a crucial part of the overall topology, but it has yet to really discover the commercial use cases and economics,” Concluded concluded. “And I think that we’re getting there. Companies like EdgeMicro and Vapor IO and other prototypes going into operation, it’s really early on. And we’ll see how that all falls.”
For more from this panel, check out earlier CapRE Insider Reports:
- REIT Analyst Outlook: Defensive Postures, Scarcity of Quality Assets Driving Multiples Higher
- Robert Gutman, Guggenheim Securites: Stocks Have Broadly Recovered, Optimism Has Returned, But Firms Trading in Line with Each Other
- Sami Badri Tells the 2017 Narrative at Leesburg Summit, Brings 2020 Into Focus
- What Do Valuation Trends Portend for M&A?
- Which Data Center Business Model is the Riskiest?