Issue 11, Aug/Sept
FOCUS INVESTMENT
CENTER ENTREPRENEURS Data center engineers and operators have an opportunity to become entrepreneurs of the new era, says Unni Narayanan
D
riving through Palo Alto, California, recently I recalled the days when storied Silicon Valley venture capital firms
helped launch companies such as Intel, Apple and Google. That era ended abruptly about 10 years ago with dotcom crashes, Wall Street scandals and the advent of global outsourcing. The situation has since changed.
A new era of development and investment is unfolding, with a potential to outdo the 90s. No longer about potential markets, this era will be largely driven by incremental advances in solving defined problems in existing markets.
TODAY’S PROBLEMS
Incremental technology development is centered on the here and now and, going forward, this kind of development will find investment more easily.
In data centers, technology development is about one thing: reliably and cost-effectively meeting elastic service demand. Explosive growth of digital devices and applications drive changes in design and operation. This is the “one trillion endpoints” paradigm I call 1E12. (Read my previous article explaining the 1E12 phenomenon at DatacenterDynamics. com, Turning shortcomings in today’s data center into new opportunities for investors).
1E12 has not rendered today’s data center obsolete, only inefficient. Re-architecting it from a rigid, enterprise-centric services profile to one that reliably and cost-effectively meets the elastic demand that 1E12 has created will result from incremental changes.
NEW ENTREPRENEURS
The opportunity is to improve design, architecture, operations and business models. Experienced data center managers and engineers are well equipped to accomplish such improvements. Many of the solutions may also prove worthy of investment.
A typical example of incremental development is when a service provider focuses on a customer issue and ends up developing a solution that improves the facility’s operation. The solution is likely to be applicable to any data center, which can make it marketable, potentially patentable (particularly in light of a recent US Supreme Court ruling) and capable of attracting investment.
The said court case – Bilski – was decided in June. It holds that a process is patent-eligible if related to a particular apparatus or transforms something into a different state. The definition nicely suits the incremental technology solutions discussed here. Enforceable IP improves the likelihood that a marketable incremental
technology advance will attract investment.
SHORTER SIGHTLINES A resurgent technology industry relies on a resurgent investment sector for growth. This includes an early-stage investment community, oriented on new businesses with key advances.
Once focused on longer-development high- impact startups, today’s VCs look harder at early-stage opportunities that have less risk and quick pay-off (3-5 years). Federal tax code changes, expected to increase rates on early-stage investment returns, are apt to shorten timeframes further, making plays in companies that exploit marketable, potentially
patentable, incremental advances more attractive. The time is right for experienced data center engineers and operators with innovative solutions and entrepreneurial drive to make plans, engage investors and dare to become the new front line of companies that enable efficiency and generate new wealth.
Author Unni Narayanan heads Primary Global Research, an industry data and analysis provider to buy-side investment firms.
PITCHING A DATA CENTER BUSINESS IDEA TO INVESTORS
SCALE YOUR STORY Early stage investors focus on dependable, short-term returns. You must demonstrate the business’s scalability. Linear revenue growth is OK if you show that operational efficiencies and technology innovation scale profit faster.
DON’T BE A 7-11 A common concern is that entrepreneurs fixate on running the business (being a 7-11) rather than growing the business. Emphasize the need for elastic data centers with cutting-edge technology. The capital you raise is going to asset acquisition and technology development intended to gain market share.
EXIT STRATEGY Data centers are typically ongoing concerns. Seek out capital sources equipped to handle profit-sharing or dividend payments rather than those oriented toward liquidity events such as IPOs or acquisitions.
DIFFERENT ON THE INSIDE Busy solving real problems and often with an inferiority complex about their own innovations, hosting companies typically don’t give much thought to IP. Revisit this outlook. You may be able to protect your technology and operating innovations, and retain a competitive advantage that will be attractive to potential investors.
TODAY’S PROBLEM IS YOUR BEST FRIEND Data centers are racing to consolidate IT and manage shifting workloads. Most startups anticipate a market by solving anticipated problems. You are proposing solutions for an existing market whose problems are only getting worse.
Unni Narayanan
www.datacenterdynamics.com 15
NEW ERA FOR DATA
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64