The Colocation Exchange News

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1 Tim Anker From: The Colocation Exchange Sent: 18 September :37 To: Tim Anker Subject: News from The Colocation Exchange September 2013 The Colocation Exchange News Dear Tim, I hope you have had a fantastic summer. It was certainly a treat here in the UK to have a fairly warm and relatively dry one, even an excuse to rediscover my barbecue at home! Back in the office I am pleased to report things feel a lot busier now that everyone is back to more normal working conditions. We have definitely noticed an upturn in enquiries over the past few weeks, mostly existing clients seeking additional capacity and it feels very much like there is more confidence to push ahead with projects. Certainly anyone seeking to be installed by the turn of the year is going to have to start moving quite quickly. In the wider perspective the growing consensus of an economic recovery has to bode well for the colocation industry, as perhaps our tiny piece of evidence mentioned above might indicate. NASDAQ, the American technology bellwether index is now above 3000, a remarkable recovery from the post Lehman Brothers collapse when it was just above the 1000 mark at the end of 2008 and into early Who can recall the European colocation industry back in March 2000 when NASDAQ peaked at 5050?! If this improved confidence does flow through to an increased level of business for the colocation industry I am not sure it will be a simple matter of return to the heady days of 2007/8 or even My recollection of those times is that we were scrambling around to find suppliers. In 2000, it was almost like pioneering into uncharted frontiers; who had anything built, where was it, when would it be ready? In 2007/8, as I predicted several years earlier (see my presentation to the first Data Centres Europe event in 2005) we had a case of growing demand hitting the ceiling of a fixed supply of stock (i.e. data centre space) - as quite simply hardly any new capacity had been built since the dot-com boom. IXEurope's Slough site, now of course Equinix LD4, was the first new data centre in the greater London region for some six years. Contact Tim Anker Virtus, Enfield In this Issue: Welcome Virtus Enfield site visit North Virginia Data Centre Market Overview Colo deals and offers Events 1

2 Today, the supply picture is completely changed and I think this is for the better. We have the huge and publicly announced build programmes from all the established operators. We then have an enthusiastic queue of new entrants, such as Volta in central London or Everest and Datum around London and whilst each of these new sites alone is not large (each of the three mentioned is around 50,000 sq ft of net tech) but in total they add up to a decent amount of new supply. And finally, as mentioned in the article below on our recent site visit to Virtus Enfield, we are seeing a significant new source of really high quality supply into the colocation market from repackaged wholesale space. All in all then an excellent supply picture, leaving the colocation industry really well placed now to offer numerous options, new and innovative products, flexible terms and pricing to suit various types of users. A massive change from where we were five years ago, with just a handful of sites and very few operators which were mostly clustered around London Docklands. Colo-X Research I mentioned this back in our July newsletter but if you are interested in these exciting changes taking place in the UK colocation industry our written research report really is worth a read. Its entitled "The UK Colocation Market 2013, Structural Changes and Trends". With nearly 50 pages covering the development of the colocation market both within central London, around London and finally the UK regions, this is the most comprehensive review I have done in my short 15 years in the industry and indeed has been one of the most interesting to write. If you would like more details, please contact me. Volta's Official Opening Volta has now been open with live customers since the end of July and both the customer and carrier count continue to rise as this week's announcement regarding Venus Business Communications show. Next week on the 25th September sees the official "grand" opening by London's Deputy Mayor, Kit Malthouse. As a 10MW, 90,000 sq ft gross new colocation facility right in the heart of Clerkenwell, Volta is a good example of the new entrant activity in the market and this high quality site sits in the middle of three obvious client sets: financial services firms based in the City, the Shoreditch/Silicon Roundabout area and of course, the content and media industries in nearby Soho - it really is a unique facility and location. Colo-X is the retained agent for Volta, so if you would like to arrange a visit, please contact me to arrange something or indeed just call me to discuss Volta further. Colocation Deals and Offers 2

3 Virtus Enfield site visit North London's Hidden Gem (and yet another wholesale provider offering retail) I recently had cause to go back and visit Virtus's Enfield data centre for the first time since I was last there with a potential customer about a year ago. Things have progressed quite a bit since my previous visit so I thought an update on Colo-X would be worthwhile, especially in light of the fact that the second build out phase is now complete. The entire site of 30,000 sq ft net tech is now almost all fitted out and ready, with just one last fallow area available on the ground floor. Virtus Enfield's location One of the surprising things of the geographic distribution of colocation facilities across London is the lack of facilities in the eastern half of the city! Away from London Docklands there is precious little in the eastern half of a line drawn through the middle of town, with Virtus Enfield lying around 10 miles to the north of the City and Pulsant's new 80,000 sq ft campus 10 miles to the south in Croydon. Wholesale operator Infinity has pretty much the only site to the east in Romford. To the West however, we of course have the Park Royal area, featuring Telecity's huge Powergate campus and Equinix LD3 just around the corner and further afield is Optimum Hayes. Then of course we have the ever growing list of sites on the Slough Trading Estate, various DRT sites in Woking, Chessington or Redhill, the new Datum site in Farnborough, the list goes on! So the main point being is Virtus Enfield is actually in a reasonably unique location. The latest list of interesting offers can be found on the Colo-X website, but selected highlights are below. If you are a vendor and wish to add to this list please contact us: Surrey Top quality Tier3 standard facilities across Surrey with managed Internet or Layer2 access to all major London data centres. 16Amps, 3.5kW, 950 pcm, including 24x7 remote hands and access. Interxion London 1 Self contained 40 rack suite including 200kW, cold aisle containment, racks and PDU's in situ. Available as whole or will split. Contact us for further details including pricing. Geographic Distribution of London Colocation Facility Locations, with Virtus Enfield in Blue. Virtus Enfield's positioning is a bit unusual for a colocation facility being adjacent to a large and very busy out of town shopping centre. Nearby neighbours include a massive Sainsbury's, B&Q, Toys R Us, McDonald's amongst several car dealerships. However, Virtus Telehouse North Whole or part racks available. 3

4 actually sit on their own private trading estate which is fully owned and managed by them (one of the benefits of the wholesale/real estate model) with only one other business on the estate. Thus although it's a busy area, their patch is a reasonably quiet backwater. The estate is modern, having only been built in 2007 and was acquired by Virtus in Furthermore Virtus Enfield in fact is on the opposite side of the road from a Virgin switch site that has been in operation for nearly 20 years, so the area does have some pedigree (and ideally located therefore for any Virgin resellers). Telehouse East 2 x ¼ racks, dedicated and fully lockable, A+B power, 24x7 access and support. 495pcm The Facility Once through security Virtus Enfield really presents well. The facility is clearly well specified and well maintained. All areas throughout are spotless, from the plant rooms to the data halls and common areas and although of course this will have little impact on the technical resilience of the facility I think it shows the overall approach and professionalism of the operator. Even the exterior plant compound is well structured, tidy and organised, with pre-planned slots for extra chillers or generators all ready to go. Inside the green and black coloured plant rooms are used to emphasise the two power strings for both IT load and critical infrastructure. Quite simply, the quality of the investment shows and for a first site by a new operator you can see the investment has been made to create a facility to meet the most demanding of users. In terms of the data halls, the Virtus Enfield now comprises 9 distinct suites, ranging in size from just under 400kW, or about 250sq m up to 1MW of which half are now occupied. The size of the halls very much reflect the original Virtus model, which was to focus on mid-tier wholesale deals, but like all other wholesale operators in the data centre market, the Virtus approach is now increasingly focussing on smaller scale colocation deals, as their recent "CoLo-on-Demand" product clearly demonstrates. The average power density is 1.5kW / sq m and typical rack densities range from 3.5kW, 16Amps as standard up to 10kW in contained cold-aisle pods. The current customer base includes a growing list of managed service providers who will no doubt be attracted to Virtus Enfield by having access to such a high quality site available at half the cost per kw of Docklands based facilities 12 miles to the south. Names such as Serverspace, Coreix, Daisy and C4L are present. Telehouse West ¼ and ½ racks available, 495pcm for ¼, 990 for ½. 24x7 access and support. Reading, Berkshire Brand new facility, 50,000 sq ft of net tech. 16Amps(3.5kW), 750pcm, inc 10Mbs. Wholesale - the new force in retail colocation now leading the way on product innovation! Colo-X has been writing consistently for the past two years about wholesale operators becoming increasingly hard to tell apart from retail colocation providers and the current approach from Virtus wholly reflects this trend. The recently announced "CoLo-on- Demand" product from Virtus amply demonstrates how far this trend is going - how interesting to see a wholesale operator pushing retail product development to a new level. Remember, the "original" wholesale model from all the operators was to sell large amounts of space, eg 10,000 sq ft on a long term Etix Paris, Equinix PA4 Racks and caged areas at 200 per kva per month including power, eg 4kVA colocation footprint for 4

5 LEASE, for example of 10 or 15 years. To be fair Virtus had always tried to set themselves apart by focussing on what they called the "mid tier market", ie private suites using shared infrastructure of around 5,000 sq ft. Today Virtus, like all the other wholesale operators will now offer a single rack footprint on a short term contract such as one or three years but their new "CoLo-on-Demand" product is taking this trend even further and marks a fundamental reassessment of the traditional contract based and fixed commitment model that has underpinned the data centre market for the past years. 800 pcm inc power Virtus's "CoLo-on-Demand" product in effect means that a start up cloud or app provider can take a cabinet and simply pay for power usage on demand, with nothing but a rolling monthly contract where power is paid for on a usage basis and the minimum commitment can also be scaled up and down each month as per the customer's needs. In my mind this flexibility is absolutely perfect for service providers who historically have been tied into fixed contracts - thus meaning they usually end up paying for more capacity than they need. The flexibility from the new Virtus product means for the first time service providers can easily flex up and down, just like the products and services they themselves are offering - think of an app provider who may launch products that from time to time soar to the top of the download charts for only brief periods. I think this is great for end users and a truly seismic shift for a data centre industry that to date has been based upon long term customer contracts with built in annual escalators, e.g. RPI or RPI+ (and how long will RPI plus last)? Another significant slug of yet more colocation capacity It is also worth stressing the impact on the colocation market of this changing focus from the wholesale operators. Its significant as there is a huge quantity of very high quality space available from wholesale operators, because they design and build big sites. And whilst not all of this wholesale capacity will be repackaged as retail, it still represents a significant new source of retail colocation supply. For example in our 2013 research on the UK Colocation Market* we estimate there is some 1m sq ft of either actual or potential wholesale capacity in the M25 London Market (ie outside of central London), compared to some 700,000 sq ft of retail colocation. Of the retail colocation supply, about 400,000 sq ft is offered by two large premium colocation providers, Telecity and Equinix and the balance is coming from the ever growing list of new entrants, for example Pulsant, Datum or Everest. We continue to believe the UK and London colocation market remains well supplied. To have your offers included here please contact us on Buyers choice: prices now range from 800 to 1600 per rack per month. With a completely new tranche of supply coming onto the market from the wholesale sector the range of options for colocation buyers continues to increase. Another statistic from our 2013 research is that we are now tracking 75 colocation facilities across the UK now! From a commercial point of view a 16 or 20Amps rack (3.5/4kW) can cost as little as 800 or over 1600 per month 5

6 (including power used), so it has never been more worthwhile to be aware of the options available in today's market, something we at Colo-X are of course only to pleased to assist with and usually all it takes is a quick phone call or meeting to do so. Virtus's Enfield site is a great example of the ever increasing range of very high quality facilities now available in the UK market for retail colocation users which literally cost half the price of the specialist niche "ecosystem" facilities such as in London Docklands or Slough focussing on carrier interconnects or financial trading. If an end user does not need to connect to one of these ecosystems then, in complete contrast to the situation only a few years ago, there are now credible and numerous options available to choose from. *UK Colocation Market, Structural Changes and Trends, 2013, published by Colo-X. North Virginia Data Centre Market Overview Similar trends to the UK and European Colocation Markets Hear me speak at the following Events: The North Virginia data centre market, based just south of Washington DC, is one of the most important in North America and this recent review from US based specialist data centre brokers WiredRE is worthy of reading (and my thanks to Everett Thompson for his permission to add comment). What I found especially interesting is the similar trends they are seeing that we have oft commented about here in the UK colocation market. Key features: WiredRE reckon 2m sq ft of NEW capacity has been added to the Ashburn data centre market over the past two years - this compares to the Colo-X estimate of the entire UK COLOCATION market of 3.8 million square feet (note: our figure doesn't include wholesale sites though and is "net tech"). To put this expansion into context, WiredRE estimate the entire North Virginia data centre market, including both wholesale, retail, carrier neutral and carrier owned facilities will offer some 8m sq ft of GROSS capacity by the end of 2014, so 2m sq ft is a hefty increase. Still, 2m sq ft is remarkable growth indeed and I think the key point here, is that capacity can be expanded - as the saying goes: where there is a will, there is a way! But this is in contrast to what many established colocation operators would like people to think "new entrants can't find sites with power or planning permission, or don't have access to network" is a typical statement that we hear mentioned; well in North Virginia and indeed the UK and 20th & 21st November 2013 I will be speaking for the first time at the Datacentre Dynamics Converged Event at London's Excel. More details of the event and programme can be found here: 6

7 Europe, given the growth we are seeing, that statement simply doesn't hold true and growth figures such as these reinforce this point. The North Virginia market is in modest oversupply, in WiredRE's view. Wholesale pricing in the range of $125-$145 per kw per month (this is excluding power costs) - this figure seems remarkably similar to "wholo" colocation pricing that we are seeing here in the UK, with pricing for even small scale colocation deals from wholesale operators at the 200 per month INCLUDING power, so about /kW month x power. Retail colocation pricing "under pressure" - WiredRE stress premium ecosystems are able to maintain a price premium over the those retail operators with less proven ecosystems of 20-40% per kw per month, i.e. pricing of $400-$500 per kw month in the premium markets facilities versus $300-$400 per kw per month from the less established operators. I think what's important about this is how closely it resembles the market in the UK - in other words high value ecosystems are indeed able to maintain a significant price premium in the market but that if you don't need to colocate in such a facility, for instance if you don't need to access a trading exchange for low latency reasons, then you are crazy to paying such a high premium when equally good quality capacity is available in the market today at a significantly lower price per kw. 25th March 2014 LawTech Futures Europe's largest Technology Event at QEII Conference Centre, London More details of the event and programme can be found here: LawTech As we keep stressing, its time for data centre users to start thinking more "tactically" about how they deploy their data centre estate; yes, use the ecosystems where you have to, but only deploy those kw that need to be there as the pricing is so high and place the rest of your estate in facilities costing half the price per kw! What is so significant about the market today is that there is indeed viable and credible options in the market, both in the UK and Virginia, a contrast to the situation only four or five years ago when in the UK for instance we only had a cluster of facilities from around 5 operators all in London Docklands. As final note I think one point that surprised me when discussing the North American data centre market with WiredRE is that overall Equinix's market share isn't as high as I thought. Yes, they are easily the dominant carrier neutral colocation provider, but they also compete against a lot of carrier owned colocation, for instance from AT&T, Savvis or Level3. There are also some growing carrier neutral competitors, including names such as Carpathia, Latisys, Peak10 and Ragingwire. And finally, as we are now seeing here in the UK market, there is increasing competition for retail colocation from wholesale operators; Digital Realty is a reasonably familiar name already here in Europe, but in the US there are companies such as CyrusOne, Coresite or DuPont Fabros. 7

8 If you wish to contact WiredRE please do let me know and I will be pleased to put you in touch or alternatively via their website at Our Twitter account is the best way for us to post quick market updates, news and also colo bids and offers. Please do sign up to follow our latest items. Tim Anker The Colocation Exchange +44 (0) Forward This was sent to tim@colo-x.com by tim.anker@colo-x.com Update Profile/ Address Instant removal with SafeUnsubscribe Privacy Policy. The Colocation Exchange Meadow View House Tannery Lane Bramley Surrey GU5 OAB United Kingdom 8