Mapping Out Your Data Center Strategy with CoreSite’s Steve Smith

On this episode of Good Morning Work From Home, Mike chats with Steve Smith, Chief Revenue Officer for CoreSite to talk about the importance of data centers in the changing global landscape, and how to map out your data center strategy.

In today’s new work-from-home environment, it mandates a need for increased bandwidth and greater data access. What are some of the things CoreSite is doing to address the potential state of new normal? How do you feel CoreSite fits into the new world?

There’s no question that this has disrupted everyone’s lives and business. I think the new normal is where things have been headed for quite some time, but the pandemic has really accelerated the importance of leveraging technology.

As we’ve seen over the past five to ten years, technology, even for brick-and-mortar companies, is becoming more and more critical, especially in this unique environment where we have major changes happening every week. Having speed, flexibility, security, and access to new services is so critical to adapt quickly to the new environment.

The past decade has seen more and more people migrating to cloud and SAS solutions, and what has happened in the past few months is pushing up their timelines. How does your team see hyperscale, cloud, and growth from a CoreSite perspective?

At CoreSite, we view ourselves as really the foundation that brings those various service providers together with those enterprises that are looking to leverage those services. Both of them are our customers — the hyperscalers that are providing these cloud services, as well as the enterprises that may be selling in the traditional way.

Think about some of the service companies. Many of them were born in the cloud. Even some startup companies were born in the cloud, where they just started off accessing subscription-based services, or their software platform as a service. There’s no question that that is a key role in today’s world, but in today’s environment, sometimes those costs and services have just exploded to the point where it’s unmanageable. The cost has gotten really out of hand and now they’re having to figure out how they can repatriate some of those workloads and bring those back in-house to better manage what the new normal might look like.

Some of those are coming from legacy data centers where maybe they have applications and infrastructure that is getting taxed very heavily today. Or they may not even have the connectivity to serve all those customers and employees today. So now we’re looking for different ways to burst capacity, get access to new platforms, as well as provide network connectivity so that everyone can communicate. We provide the glue and the ecosystem to bring all that together in our data center, where they can work seamlessly together and provide a full solution to have it all work for their customers.

When you consider the key characteristics of data centers, what are the things you think customers are looking for when they come to CoreSite? 

For us, it all starts with connectivity. If you look at where we’re deployed in our data centers, every campus that we deploy starts with interconnectivity and lots of robust networks that we have native access to within our facility. Then we build out from there with multiple services and multiple campus buildings within that architecture. For example, in our overall platform, we have over 450 networks so customers have direct access to a lot of networks, but also native access to on-ramps to the biggest cloud providers in the world.

Today it’s not just about access, but it’s about speed and performance for our customers, and having that foundation of connectivity to both cloud providers and network providers is foundational for everything. Then it goes to scalability, which can mean different things for different people, but in some cases, a customer may need even half a cabinet or a cabinet in one of our data centers. We can absolutely accommodate that and give them access to all of those connectivity solutions in order to enable their business. Or, we may be servicing a hyperscaler that needs an entire floor or in terms of megawatts — 20 or 30 megawatts in some cases.

That ability to scale both up and down does a couple of things. It gives our customers the ability to grow as they need to grow, but it also brings the ecosystem together, where you have hyperscalers, cloud service providers, software service providers, and enterprises that can reside actually on the same campus. When you interconnect that with what we call our open cloud exchange, it gives them real-time, low latency connectivity to those services, to where they can have their hybrid environment work seamlessly in a low latency environment.

Last year, we actually ended the year on eight nines of uptime. In today’s environment that requires your services to be always available, eight nines are unheard of in the industry. And then there’s compliance around the key compliance areas, whether it’s miss compliance, HIPAA PCI, SOC 1, SOC 2. All of those compliance requirements are there to make sure that we operationally are at the peak performance that the customers expect and that they can feel confident that we can perform.

What I’ve always found interesting about CoreSite is that you really do address both markets. There are some data center companies that just purely focus on wholesale environments and they lack things like interconnectivity and carrier density. On the flip side, there are some data centers that focus on the retail environment, but they don’t scale. CoreSite has always served both markets, so I’m wondering if that was always the plan from a financial perspective. How does CoreSite serve both equally well?

It’s something that has definitely evolved over time, but it started with that network foundation of getting connectivity as the baseline for any market that we entered. Whether it was LA, the Bay area, Denver, Chicago, Boston, New York, Virginia, or Miami, all of those markets started with a heavy interconnection platform and then we built it out. The core of our business and where we really tried to serve first is the enterprise, but the cloud companies are clearly network-based, so much of their infrastructure in many cases are located within our campus. That provided a natural progression for those cloud companies to then build that out into on-ramps, which we’ve seen over the past five or 10 years now with the recommended express route and those kinds of things as a resident on our platform.

Then, as you’ve seen over the last couple of years, there’s been this move to the edge. These key metros are the big edge. There are a lot of high balls, a lot of consumption and low latency requirements that are there. So the cloud companies have just naturally moved some of their computers closer to that edge, in many cases within our campus in our various markets. It’s been an evolution over time, but I think it started at that foundation of connectivity and has really kind of brought all that together. We’re always looking to serve our customers more effectively, and enterprises are looking to get those services more efficiently. We happen to be in the middle where we’re facilitating that entire ecosystem.

CoreSite is a real estate investment trust (REIT). How does a REIT look at revenue or opportunities differently? Does being a REIT help you win more business because you look at it long-term or more as a real estate investment instead of just a business investment?

That’s also something that’s evolved over time. Our investor base has shifted as well. As REIT investors have become more aware of what data center REITs really are (not necessarily traditional brick-and-mortar real estate, but the technology that goes into it and the inherent value that comes along with it) it’s clearly not inexpensive to invest, not only in the buildings and the infrastructure but the technology that enables all of that. So I wouldn’t necessarily say the REIT structure per se drives anything different as far as our strategy is concerned. There are obviously some financial considerations as far as distribution of earnings and that sort of thing, and some tax advantages that come along with that. But overall our main mission is to provide the infrastructure and the ecosystem, as I mentioned earlier, for customers to deploy their IT and have a flexible environment where they can meet not only today’s environment but tomorrow’s environment.

I think hybrid multi-cloud is going to be here for quite some time. The economics of how customers can manage their own environment has evolved. A lot of the economics and technology that cloud providers had traditionally cornered the market with for the last few years is now available for enterprises. Enterprises are getting smarter about how they manage some of their workloads themselves and connect for either specific workloads or peak workloads that they need to spin up into the cloud or that use VR or follow those workloads around the world in their network and their various cloud environments.

We had a mutual customer with Bridgepointe in Seagate, who was published in the March 26th issue of CIO magazine. The article really talks about that evolution and how some applications are better repatriated out versus in. It’s becoming more and more important than that low latency and we feel like CoreSite is in a unique place to help customers in that regard.

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