Credit Suisse’s Sami Badri: Software-Defined Network Fabric Making Colocation Adoption Dramatically Easier
by Josh Anderson
CAMBRIDGE, MA — Sami Badri is a senior analyst at Credit Suisse responsible for the firm’s coverage of the Communications Infrastructure sector, including data centers, towers, and Internet fiber/infrastructure. Mr. Badri joined Credit Suisse in 2013 and joined the equity research department in 2014 as a research associate in the technology, media, and telecommunications group. Sami provided the keynote address at CapRE’s New England Data Center Summit on December 12, 2017: The State of the Data Center Industry, Current Demand Levels and the Evolving Types of Supply (Cloud vs Enterprise). The story below covers part of Badri’s presentation, focusing on one of three major enablers that will drive the 2018 data center market – cloud on-ramps.
At CapRE’s recent New England Data Center Summit, Sami Badri posited that there are three “buckets” of enablers that will drive the acceleration of the data center market in 2018. The first is cloud on-ramps, which we covered in a previous Insider Report. The second key theme to watch out for in 2018 is something called scaled software-defined networking fabric.
“The easiest way I can really describe a software-defined networking fabric is that they’re similar to a cloud on-ramp as far as what they’re doing,” began Badri. “They’re entering a data center, they’re setting up shop with one or two different cabinets, they’re interconnecting other enterprise customers into them. But the real key here is that the networking fabrics tend to have a very neutral approach to who they decide to serve and what market they decide to penetrate.”
According to Badri, the sweet spot seems to be between three and four different software-defined networking on-ramps per market. “That’s actually a very healthy level,” Badri said. “You can see the rest of the industry peers are in the same range. That’s done on purpose, because a lot of different enterprises will decide to deploy into one or two different facilities per market. So let’s call it the “four sniper shot approach” – that’s what these guys are doing and it’s a very effective strategy.”
Badri says that if you’ve worked with these companies over time, you’ll notice that one of the thing they market very clearly to their customers is that they have Megaport, Packet Fabric, or Console Connect in their data centers. “What these companies do, is instead of an enterprise like CreditSuisse hiring someone who is very good at network or software engineering, and specifically networking combined, all that they have to do is hire Megaport to just connect all of the networks together,” he said. “They’ve generally done this at scale locally, in multiple locations per market. So they’re making the ease of entry to adopt colocation dramatically easier.”
MegaPort essentially now has 165 data center locations, Badri revealed. “That is a 1.6x multiplier over the prior year,” he explained. “But if you look at the revenue they’re able to generate from this, and the number of actual services, you’re looking at a meaningfully higher 2.5 multiplier. The reason that the multiplier is accelerating is because enterprises realize what these guys can do, how many markets they’re located in. And this essentially helps colocation providers like the Iron Mountains of the world, the Digital Realtys of the world, the Equinixes of the world, to sell more capacity. Because they have MegaPort in their facilities. They have Google Cloud on-ramps in their facilities.”
Badri then said that this is a dynamic that has just recently started to evolve and is accelerating now. “If you look at the fundamentals of MegaPort – a publicly traded company – they’ve been able to triple revenues while doubling capacity across many fronts,” he explained. “That’s actually very difficult to do as a technology company in general, and this is a company that is tailored specifically to the multi-tenant data center market.
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