Why the world s data centres are converging on Asia Steve Wallage Managing Director BroadGroup Consulting

Why the world s data centres are converging on Asia Steve Wallage Managing Director BroadGroup Consulting Equinix Customer Advisory Meeting, 15-16 May

AGENDA 1. About BroadGroup 2. Why data centre market is growing 3. Reducing data centre requirements? 4. Development of European and US markets 5. The Asian market now 6. The investor and government support 7. Green issues 8. Future

About BroadGroup BROADGROUP CONSULTING PRACTICES EMERGING MARKETS DATA CENTRES INFRASTRUCTURE CLOUD COMPUTING CONSULTING SERVICES Management Consulting Commercial Due Diligence Demand Analysis Customer Segmentation Marketing Research Business Case & Financial Analysis Competitor Research & Analysis Technical Audits CONTENT SERVICES Report Library - Focused research commissioned by BroadGroup Newsletters researched by BroadGroup and provided free of charge Data Centre News Carrier Wholesale News TMT Finance Emerging Markets Web Portals: broad-group.com datacentres.com tmtfinance.com wholesaletelecoms.com Blogs: Asia Data Centres PoweredbyCloud TMT Emerging Mkts EVENT DIVISION Leading content driven Brands engaging audiences internationally across distinct research sectors TMT Finance Series London, Dubai 2009: Doha, Beijing Finance & Investment Forum Data Centres Series Europe, Asia, Latin America, Power and Cooling, DC Security* Carbon Trading for DCs* Dark Fibre Convention Cloud Computing* Data Centre Bootcamp Specialist Training* *New

ASIA DATA CENTRE MARKETS BROADGROUP RESEARCH Data Centres Asia (2006) 11 markets Business models focused on colocation and shift to managed services not much in evidence other than Systems Integrators Multi-sitebusinesses likely source of growth and perceived as a build opportunity MNCs / Enterprises selecting systems Integrators required customisation possible through managed services Space constraints and need to upgrade evidence already of RFPs excluding Data centres not meeting requirements Growth present data centres interviewed recording average growth 30% pa NEW RESEARCH Data Centres South East Asia [October 2008] Data Centres Germany [December 2008] Data Centres Greater China[January 2009] Data Centres Amsterdam [January 2009] Data Centres Australia and New Zealand [update] [October 2008] Cloud Computing [2008] REPORTS Data Centres Asia (2006) Data Centres Australia and New Zealand (2007) Data Centres Europe & Eastern Europe II [2007] IT Outsourcing to 3rd Party by Financial Services Players in Europe [2007] Tax Efficient Hosting [2007] The Evolution of Green Data Centres [2007] Power and Cooling Survey [2007] Outsourcing Frameworks sourcing the right Data Centre [2007] Dark Fibre Europe II [2008] Dark Fibre Eastern, Central and Southern Europe [2008] Data Centres India [2008] Data Centres Ireland [2008]

Why data centre market is growing

Demand drivers Data growth Disaster recovery and business continuity Compliance and regulation Video and new media Greater usage of broadband and Internet More complex software Blade servers Lack of power, low utilization rates and upgradeability of data centres Storage

Global market for Internet video ($ bn) Source: Yankee Group Cisco: Internet traffic growing 61% a year 2007-2012

State of market data centres owned by global banks 7% 12% 24% Full now Full within a year Full within 2 years Full within 3 years Not an issue 34% 23%

Pushing data centres up agenda corporate users Now a pain point growing costs and lack current facilities Existing facilities ill-equipped for current requirements Expensive, inefficient and environmentally weak Data centres still often stuck between IT and FM Now an issue for CIO/CTO and CSR/marketing! Some US corporates have CTO with power costs as part of bonus scheme

Reducing data centre requirements?

Consolidation/improving data centre efficiency IBM from 155 to 7 Belgacom from 21 to 2 VMWare example (Lycos Germany) before and after 270m2 90m2 >1,500 servers 300 servers CPU load 15% CPU load 65% >120 racks <40 racks >20 vendors <10 vendors

Simple (?) things - ASHRAE/server vendors 28 deg turn up the heat (but check the equipment) - Switching off hardware (but be careful what IT department does!) - Audit - holistic thinking on the data centre - rightsizing equipment - Put data centres up the agenda - Make sure everyone knows power costs (bonus??) - Data centres central to IT strategy - Departmental responsibility

The clear limits of technology innovation and need for business change Most data centre managers interviewed by BroadGroup see virtualization as helpful but not a panacea tend to see more as a short term sticking plaster extra capacity quickly used up and additional challenges in terms of management, I/O and storage Challenge often at least as big on cultural/organizational side bringing data centre thinking into IT strategy auditing data centre and charging by department There is no Moore s Law when it comes to Mechanical and Engineering issues - Data centre manager

Power increasing and its not going away... 2.5 2 1.5 Average user requirement for power per m² (in kw) 1 0.5 0 2007 2008 2009 2010 2011 2012

Development European and US market

Stages of development - Stage 1: Undeveloped market no third party offerings - Stage 2: Some telco data centres but very limited third party - Stage 3: More third party offerings but mainly supporting telco and ISP needs - Stage 4: Growing corporate interest in third party data centres at least one carrier neutral provider - Stage 5: Well developed corporate outsourcing and carrier neutral market Equinix Customer Advisory Meeting, 15-16 May

Pushing data centres up agenda third party operators Strong demand chicken and egg as third party offerings previously ignored as of poor quality new investment grows market opportunity Raft of new schemes on market Telcos suddenly interested basis for hosted services? Utility computing Google, Amazon, Flexiscale, Alchemy, UtilityServe Property developers looking for new markets Investment vehicles looking for alternative asset classes M&A distressed assets consolidation - upselling

Is credit crunch all bad news?? Some operators 30-40% revenues from financial services Some cancellations and postponements But... Capex to opex outsourcing Systems integrators growing as customer base Media growing with social networking, new applications E-commerce growing as retailers cut costs, customers look to save money Some new developments stopped reducing competition Regulation likely to increase

The European and US challenges... Land expensive and difficult to access Slow and difficult planning permission Environmental concerns and taxation Power costs and availability typically 40-60% opex Changing the mindset I am a UK headquartered company and therefore I want my data centre in London

Global challenges... Key points on data centres greenhouse gas emissions Data centre electricity consumptionis almost.5% of world production* Average data centre consumes energy equivalent to 25,000 households Worldwide energy consumption of DC doubled between 2000 and 2006 Incremental US demand for data centre energy between now and 2010 is equivalent of 10 new power plants 90% of companies running large data centres need to build more power and cooling in the next 30 months (Source: McKinsey) Carbon dioxide emissions as percentage of world total industries (%) 0.3 Data centres 0.6 Airlines 0.8 1.0 Shipyards Steel plants Worldwide data centres carbon emissions per annum exceed total generated by Netherlands *Including custom-designed servers (e.g., Google, Yahoo) Source:Financial Times; Gartner report 2007; Stanford University; AMD; Uptime Institute; McKinsey

The Asian market now

Wide variation Japan, Singapore, Hong Kong, Australia, New Zealand India China Vietnam, Thailand, Malaysia, Philippines Has generally been a reluctance from investors with memories of dot com and disliking long payback period of investment Has generally been a view from corporate customers to keep data centres in-house cost, control, security etc

ASIA DATA CENTRE MARKETS AT AN INFLECTION POINT? EUROPE 2 YEARS AGO ASIA - NOW Pan Regional Players Telecity Interxion IX Europe (now Equinix) Presence of Property REITs/Investors Digital Realty Internet Villages Investa (Germany) Strong Market Drivers Telcos BT FT (80 DCs Consolidating to 20) New Entrants Investors (banks and venture firms - 3i, Oakhill, Baker Capital etc) Pan Regional Players SingTel (Expan) Pacnet (Asia Netcom + Pacific Internet) Webvisions Equinix Presence Property/Investors Sun Hung Kai Ascendas Megawisra I-Bhd, Thakral (Australia) Strong Market Drivers Multi site IP-Converge Reliance AT&T Tata Communications Telstra Global Switch NTT KDDI PCCW Alliance TCC [Thailand] AIMS [Malaysia] 1-Net (Singapore] CMC [Vietnam] Eg Banks shifting to 3 rd Party outsourcing - legislation Broader Corporates and Government today Eg Banks shifting to 3 rd Party outsourcing - legislation MNCs entering Asia (nb CSR requirements) Drive for efficiency (power costs) New Entrants Galileo Connect GDS/Acer (China 19 Data centres)

Investor and government support

New build plans Technical Real Estate Acer/GDC Property developers Telcos Carrier neutral Business parks European and US groups

The Digital Realty Trust model Average lease = 13.6 years Seven year break clause annual price review Blue chip clients Directly pass on power costs Wholesale rent = $180-240 per ft2 per year Build cost = $1,200-2,000 per ft2

Government support Data centres retain jobs and investment Data centres attract IT and media companies Clustering effect Cloud/utility computing Part of business park/zone developments Planning Tax and other financial Direct support

The green issues

Green issues the inconvenient truths green and efficiency Green Efficiency - A car getting 5 mpg running on biomass is 100% green - But the two are clearly interlinked even the Carbon Trust looks at efficiency first

Green issues the inconvenient truths the spending realities I hear a lot about green issues. Our board likes the improved efficiency linked to green issues. But lets be honest, we ain t going to spend any real money on green issues unless we are forced to by legislation - Data centre manager at a bank

Green issues are here and varied BroadGroup user event feedback 1. Ill-conceived regulations and standards 2. Lack of clarity 3. Lack of independent verification and benchmarks 4. Lack of holistic view 5. Lack of education and awareness 6. Recycling concerns 7. Different regulations in differing markets 8. Competing industry groupings and initiatives

The green realities Green involves: 1.Design/engineering building 2.Location considerations 3.Engineering to optimal use 4.Deployment efficient equipment and systems 5.Efficient operations 6.Low carbon and renewable technologies and energy sources Real focus is rightsizing, efficiency and expertise New legislation will make this ever more important Data centre industry needs to stand up for itself

Future

Final thought for users not just technology So much of data centre focus is about technology and the wonders of new technology but... There are many simple things to do from data centre audits to increasing temperature to improving management systems The key is to integrate data centres teams, issues and thinking into broader IT/business goals It is frightening: how few IT departments even know their power bills how many IT departments are happily deploying blades How few data centre managers really know which applications for which departments are running in their data centres

Final thought on Asian market Nasscom 30% of US banking transactions will be processed in Indian data centres by 2012?? Need for data centres will continue to grow strongly Much new investment in market Strong competitive to attract inward investment Growing focus on less developed markets

Thank you! Why the world s data centres are converging on Asia Steve Wallage Managing Director BroadGroup Consulting steve.wallage@broad-group.com www.broad-group.com www.datacentres.com Equinix Customer Advisory Meeting, 15-16 May