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Gone are the days when service providers built networks hoping customers would follow. Today network operators build based only on immediate demand.
"We're very focused on financial prudence, not only in E|Solutions, but in our wireless and wireline facilities," says Keith Paglusch, president of Sprint's Internet and managed services unit, E|Solutions. "The goal is to build as customers come, based on just-in-time capacity."
Sprint Corp. spent $1.5 billion during the past 18 months to build 11 Internet data centers to fill its IP backbone network with managed hosting services, and such aggressiveness in managed service infrastructure is typical of its competitors, says David Cooperstein, research director, telecom, for Forrester Research Inc. But those buildouts are being very carefully planned. While Sprint built a 100,000-square-foot Internet data center in Silicon Valley, it built out only 15,000 square feet before offering service and then filled the entire center with one large customer win, Yahoo! Inc., in December (see "XFACTOR"), before acting on further build out, notes Paglusch. "That's a lot safer than waiting till they come."
WorldCom Inc., which manages a whopping 77 server collocation Internet data centers and half a dozen Digex managed hosting operations worldwide, is taking a similarly methodical approach to meet new demand requirements, says Ron McMurtrie, vice president of Global e-Services.
McMurtrie says outside of a handful of must-be-there markets, WorldCom Global e-Services assesses a number of factors before deciding to buy or build data center and metro access capacity in a given location: density of businesses, density of certain vertical industries that tend to outsource more, number of competitors and the costs of maintaining a sufficient sales and distribution presence.
When all those factors are considered, the answer can prove counterintuitive. For example, McMurtrie says, a major industrial city like Ottawa, Ontario, Canada, initially may appear a ripe target, but on closer examination, the economy there comprises too few large customers and too many providers chasing them; in comparison, less industrial Toronto holds more promise, with "a balance of corporate, global and mid-size businesses." On the other hand, "you have to be in the U.K. if you want to serve Western Europe, and in Germany, if you want to serve a German multi-national."
Other factors include the cost of land, diverse-route network availability and power availability. To offer server collocation services that require easy customer access to the Internet data center, a 100-mile radius is the rule of thumb, while managed services can be delivered from "lights out" facilities a continent away.
In sizing a data center, McMurtrie notes, "At over 1,000 square feet, you hit a point where it's cheaper to build more space, and 100,000 to 150,000, you begin to need a power substation, which alters the economics."
