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Seattle Data Center Summit: IDCA’s Anil Reddy Describes How the Industry is Changing

Nov 30, 2018
by Josh Anderson

SEATTLE, WA – The data center arena is changing before our eyes – in location, business models, technology, and more. So CapRE makes it a priority to understand where we are headed next, and most importantly, how we will get there successfully. So at CapRE’s Fourth Annual Greater Seattle & Pacific Northwest Data Center Summit, we closed the day with a panel of regional insiders titled “CapRE Takeaway: Lessons Learned from Today’s Summit & Industry Forecast for the Next 12 Months.” Below, we cover some comments offered by Anil Reddy, Member – Technical Standards Committee, IDCA.

data center summitLet’s start with your Anil,” suggested Moderator Brian Klebash, Founder & CEO of CapRE. “With your past role at Microsoft, and as an advisor to the data center business, how do you see this industry changing? How is it evolving, both in the U.S. and internationally?”

“From a hyperscaler perspective, if you look at the balance sheets of the top three Cloud providers, Google, Amazon and Microsoft, together, they’ve probably done about 60% of the capacity,” replied Anil. “And probably net-new capacity coming in is also grabbed by them. But if you start to look at the whole nature of the business models, and if you look at where the industry is today, it still needs to evolve.”

“We still build in small projects, in terms of a ten-megawatt building here and a twenty-megawatt building there. And so on and so forth,” he continued. “That’s of no interest to these hyperscalers. Because hyperscalers when they kick it off, they probably start with that quantum, but they want to bet on it long-term. So they are betting on, you know, hundreds of megawatts. Unless you have expandability, it becomes very hard to work with some of these providers.”

According to Reddy, the key takeaway is that the business models have changed, and the industry has still not evolved for that. “We still look at five-year contracts, three-year contracts, two-year contracts. With an escalator in the agreement,” he explained. “But the hyperscalers that are willing to put down 15 years on it, that gives you capital and predictability and you can take that to the bank to get money.  They love those kinds of contracts, to be able to do that. And so those are a few things that we have to look at. And then given this whole model, you have to figure out, working with hyperscalers, yes it gives you the predictability and the dependability, being able to turn the cash in, over and over again, but that’s not going to make you money.”

“You have to look at the business models surrounding it that enable you to make that money,” stressed Reddy. “And so, if I start looking at the data center industry, well I learned earlier about Iceland or we continue to look at Finland, wherever there is cheap power and cheap land. Because there is room for a hub-and-spoke model. It’s just not a big location for us to be able to do it. Edge data centers are here to stay and they are here to grow. Somebody mentioned in the back that they had a gaming solution and HPC, and Edge is what’s going to do it for them .”

Banner Photo (L): Anil Reddy, Member – Technical Standards Committee, IDCA

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