What is a Data Center? – Data Center Fundamentals

[00:00:00] Speaker 1: Welcome to Hawk Podcast 28. Today is the first in a series of Data Center Fundamentals podcasts, which goes along with our blog series, which you can see on datacenterhawk.com slash blog. But today we're going to answer the fundamental question, what is a data center? Okay, so what we're talking about today is a video slash audio presentation of a blog series we've done called Data Center Fundamentals, which the intent of the raison d'etre, I don't know how to pronounce that word, d'apostrophe, e-t-r-e, reason for existence. That's how you pronounce it. We are, our reason for existence is to help people make decisions, good decisions, quickly. [00:00:55] Speaker 2: Yeah. [00:00:56] Speaker 1: And so that's the reason we put together that blog series. That's the reason we're doing this podcast series. So, again, it's intended to give people a very solid foundation in the industry. Yes. And, again, help them to make good decisions quickly. So that's what we're talking about today. Part one is, what is a data center? So you've heard that story about Vince Lombardi. You know, the team had been winning and then they lost. And so the next year when they kicked off training camp, he said he opened training camp with, gentlemen, this is a football. [00:01:27] Speaker 2: Yes. [00:01:27] Speaker 1: And it was like guys who had, some had been playing for a while, some had been playing for a while. And the point being, you know, we need to master the fundamentals. Yeah. So hopefully what we're doing here is helping you, whether you've been in the industry for a while or not, or you're new, you know, to really make sure that we've got a strong foundation of knowledge on the data center market. [00:01:46] Speaker 2: Yeah, and it goes back to when I started in the space. I mean, it took several years to get up to speed on what was happening in the data center industry and to get my mindset built around, okay, just a basic framework around, you know, what is the data center industry? How does it operate, et cetera? So we want to create content that helps people do that faster. And there are people getting into the space still today. So, you know, while we have people that listen to our content that, you know, you brought up earlier, they're talking, thinking about absorption levels and, you know, some much, I would say, more granular topics that are very specific and in the weeds of our space. You know, we wanted to simplify this to give people a very clear picture of this industry and what it is. So that is the purpose or whatever it is you said in French. I'm not going to try again. That's a tough one. Of what we're talking about. [00:02:41] Speaker 1: Yeah, so as you said, this is the companion feature to our blog series that's already out there. If you go to datacenterhawk.com slash blog, there's a little drop down, you can click fundamentals, and they'll give you all those quickly. [00:02:54] Speaker 2: Yeah. [00:02:54] Speaker 1: So check that out. We'll put that in the show notes. And they're awesome. And they're really well done. Yeah, thank you. [00:02:58] Speaker 2: Like, you know, we've done some – our content, you know, goes from market updates to, you know, what's happening with different data center operators to investors. I mean, there's just all different things that we do. So when we did that, it was a very, like, simplified version. But I'm actually really, like, proud of that. And I had very little to do with this. We have a team, a marketing team, and a blog writing team that was focused on this, and they did a really good job. So if you are looking to get into the space after listening to Dr. Netzer, Dr. Liggett, you can go figure – you can go read those blogs, and they will be – [00:03:34] Speaker 1: I'm going to go one step further. If you listen to this podcast and you do not want to get in the space, well, something's wrong. Because I don't know a better salesman for the industry than Mr. David Liggett. [00:03:43] Speaker 2: Oh, gosh, Mike. And I'm just his sidecar operator here. [00:03:47] Speaker 1: Please. Before we do that, I wanted to spice up the podcast set here with some color. We're sponsored by LaCroix. I sure wish we were. We spent so much money on it. This is the hibiscus LaCroix. I think it's delicious. It's one of my favorite flavors. So I want you, before we get started, to power rank your top five sparkling waters. Different brands, different flavors. Oh, this is good. Brand slash flavor. [00:04:11] Speaker 2: Okay. I'm going to go with – so I actually drink the Kirkland's brand a lot, which I think is maybe the cheaper version than LaCroix. [00:04:21] Speaker 1: Which your frugal, frugality, bona fides are well-established. [00:04:27] Speaker 2: Very good. So I will typically – that's like – so I don't know if that's like the best, but I'd say that. We will drink the Topo Chico's. That's a big – and I don't know if that's – [00:04:36] Speaker 1: What flavor Topo? [00:04:37] Speaker 2: I typically just like the regular to the lime. I'm a big lemon-lime type guy, so I'm pretty basic. So probably those two would be at the top of my list. As it gets beyond that, I don't really venture into the sparkling water world much more than that. [00:04:57] Speaker 1: So Kirkland, one. Yeah, which is like LaCroix. And that's price-motivated. [00:05:00] Speaker 2: Yes. So then LaCroix, I would say – And Topo is not price-motivated. No, because it's like bottles and – Topo is like – Yeah. And actually, when I drink those, I kind of feel a little – Bougie. Yes. Like, in fact, we – this is a funny story. During this quarantine time, we've had – there's been times where we've gone out and meet our neighbors in the front yard and just hang out and talk, socially distant, of course. And the other night, I was talking about – you know, I was like, I think I just want to drink a Topo Chico, but I was like, I do not want to take this out there in the bottle. So I poured into a cup and just took it that way versus – because I'm just carrying that bottle around, you just look kind of – I'm not a fan of that. Yeah. No, it would be even worse if I was in a tank top than that, but that's a weird story. No, no. It would have been better. [00:05:46] Speaker 1: It would have been better. So, I don't know. [00:05:49] Speaker 2: What are your – what are your – [00:05:50] Speaker 1: I'm a Spindrift guy, which, again, Spindrift is kind of bougie in and of itself. It's more expensive because it's got the real fruit juice in it. [00:05:57] Speaker 2: Yeah. [00:05:58] Speaker 1: The raspberry lime is really good. That's the flavor of Spindrift that you like? Okay. Yeah. I go Grapefruit Topo. Yes. Also very good. Yes. And I got to be honest with you, this is Hibiscus. It's pretty good. I had not had it until a week ago. Yes. But the Costco that we get our business supplies from – Yes. – business was out of the Kirkland. [00:06:16] Speaker 2: Yeah. [00:06:17] Speaker 1: Their supply chain management baffles me sometimes, but whatever. Well, it's a challenging time, Mike. Well, sure. How hard is it, but CO2 and water. But they only had the – and they only had LaCroix. They didn't even have the regular LaCroix, like lime, lemon, blue, plain. They only had the fancy LaCroix, which, again, there's some method to their madness. I know there is, but it madness is special. [00:06:40] Speaker 2: I can't figure out – and we can move on from sparkling water talk, but I can't figure out the – you know, they put the, like, 24-pack or 36-pack, and the way they split up, you know, hey, we'll put 10 limes in there, 12 lemons in there, and whatever. And I'm just – I just wish they would do, you know, bulk in one flavor because I – like, we have a ton of lemon drinks right now in our fridge at home that we just never will drink. [00:07:07] Speaker 1: Yeah, and I was forced, coerced, and strong-armed in my LaCroix pack to get six watermelons, which, if you like those, stop listening. We can't be friends. Though watermelon LaCroix is so – So divisive today. Gosh. The limoncello one, interestingly enough, multiple people have remarked that it tastes like vanilla Coke. Interesting. Remember when vanilla Coke came out, how mind-blowing that was? Yeah, it was big. I was like, you can put other flavors in Coke. And they got carried away, as they always do, but the initial – there was several months of ideological purity when it came to Coke flavor. That's right. And it was a fun time. It was a really sweet time. [00:07:46] Speaker 2: Then it went downhill. [00:07:47] Speaker 1: All right. Hey, I want to talk quickly about, you know, one of the things we've been keeping an eye on or seeing is just the sheer amount of cashola, greenbacks, clams, washington, singles. You know what I mean? Bullion. That has been flowing into the space. Yeah. You know, and four notable in descending value order. KKR, investment firm. [00:08:14] Speaker 2: Yeah. [00:08:15] Speaker 1: Dropping $1 billion with a B to basically form a new company, Global Technical Realty, to, you know, pursue that hyperscale business in Europe. Sebi pulled down, like, another $800 million in, like, new debt. Aligned, extended their credit line by $575 million. Tier point, another $320 million in funds from three different investment groups. So, like, taken holistically or collectively, like, what does that tell you? I mean, especially given all – that everything else is going on in the space. [00:08:46] Speaker 2: Yeah. I mean, if – I mean, those are all data center operators or developers that are specialized in this industry. And so, I think it, you know, tells me that, number one, there's definitely capital and investors that are looking to get into the space. So, some of those groups that you mentioned are, you know, capital partners that have been invested in this industry for a while. I'm not sure if all – you know, maybe some of those are new to the space. But I think we are seeing people look at this industry differently for a number of reasons. Number one, even before the pandemic, you know, this industry was growing and has significantly grown over the last, you know, three to five years. But number two, in the midst of a very turbulent economic period, this data center industry has stayed pretty consistent, if not grown. So – and I think people really believe that the fundamentals of the business are strong and will be strong moving forward, despite what the, you know, gyrations of the market will be. So, you know, that's what it tells me. I mean, and I think we'll see other capital sources, you know, in the future coming into the market. It's not an easy market to get into because it's so expensive. I mean, which is probably a good thing. But we are seeing more and more capital entering the space. [00:10:07] Speaker 1: Yeah, it says one of my favorite poker commentators, Vince Van Patten, used to say the price of poker is going up. That is true. When they raise the blinds. And you see that, you know, if – you can't just – you can't just bring 10 million bucks to the table anymore. [00:10:18] Speaker 2: Right. Right. [00:10:19] Speaker 1: You've got to bring a billion. Or you've got to, you know, have a plan. Sure. And, you know, you look at the size of deployments and the size of new builds continues to grow. Yeah. And so, as you said, continues to up the ante, as it were. All right, David, let's get started. So, fundamental question we are trying to answer today is, what is a data center? [00:10:39] Speaker 2: Read it off of that thing. So, Mike and I met earlier, actually, and we had some – [00:10:44] Speaker 1: Well, I mean, it just kind of depends on – no. [00:10:46] Speaker 2: Yeah. No, I mean, we had some – People want straight talk. We wanted to very, like – we wanted to simplify this answer. And – because this – for those that are in the industry, this thing could be – it could be a paragraph. Oh, yeah. So, we're really trying to simplify it. Could be a whole podcast. [00:11:00] Speaker 1: Go figure. So, what was our – All right. So, David, let's get started. The question we are going to answer today is, what is a data center? [00:11:07] Speaker 2: Yep. A facility that houses digital infrastructure. Now, so that's, like, the most basic definition that we could build of what is a data center. Because, you know, you have some companies that have their – what I'll say – data center in a closet in an office building that they – that their office is in. And then you have – that's one side of the scale. And then on the complete opposite, you have companies that have purpose-built buildings that are highly secure, highly redundant. And, you know, they're hundreds of millions of dollars. And that was what they would consider their data center. And then you have everything in between. And so, I think what – at its simplest, you know, basic definition, I mean, this is – it is the engine that allows, you know, companies' digital infrastructure to run. And so, that is really what we have focused on here at Data Center Hawk and, you know, in my career for the last, I don't know, 15 years or so, on what those facilities are, how they operate, how they've changed, where they're located, you know, why they're growing the way they are. And so, all those things are what, you know, all those things are what, you know, we're doing to focus on the industry. [00:12:20] Speaker 1: Yeah, again, if you're coming – you know, a lot of folks who come into the data center industry are coming from office real estate market. Yes, sure. Interjectural real estate market. Yep. Or technology side. So, you know, I think what we want to do is talk about what are some things that are defining or distinguishing characteristics of the data center as a real estate class. And we'll talk about some of the building and the technical side of it as well, but, you know, again, assuming some people have – most people have at least a working understanding of an office. Sure. Or even consider a residential real estate transaction. Yeah. You know, and there's jumps you can make that will kind of pull someone to, you know, the data center market. [00:13:00] Speaker 2: Yeah, so this is a good time for me to talk about just briefly how I got into the space. And, you know, I originally started in real estate with CBRE, so a global real estate company, and I got into the real estate business to focus on the office market. About a year in, I ended up joining a team that was self-declared focusing on data centers. And so this was still back when the data – [00:13:29] Speaker 1: So this is 2007, 2008? Yeah, 2008, yep. Yep. [00:13:32] Speaker 2: Right before, actually, the capital markets collapsed and we had the Great Recession. But I was focused on, you know, how the data center industry – how to show clients, our clients, what options they had in the data center markets when I started. So the very first thing I got was, like, this table, sheet of paper table with four different data center facilities, and we were working on a four-megawatt requirement. So people in this space – no, that's a big – a lot of capital goes into – I mean, this is probably a $100 to $150 million decision. And I was tasked with figuring out, hey, where should this thing go based off of different criteria related to each data center. And at the time, I did not know anything. I did not know the difference between a megawatt, a kilowatt, a watt. I didn't know the difference between, you know, what power costs, how – those implications on data center location decisions. I didn't understand anything with redundancy. I, like, saw N and N plus 1 and 2N, and I was really confused. And so, you know, so that was my entrance into the market. A lot of people get into the data center space by accident. And what they – you mentioned the technology side of things, the real estate side of things, the investor side of things. Whatever, you know, road you've come from, you get in and you realize this is a market that's not going anywhere, and it only seems like it's going to grow. And so part of what you have to do very quickly is build a framework around what is this industry that we're in, what makes it go. And so today what we want to talk about is, like, the most basic thing we can to boil it down so that you understand just the asset class alone of a data center industry. Mike mentioned, you know, other types of commercial real estate, the office market, the industrial market, the retail market, the multifamily market, the data center industry class is a commercial real estate market that is smaller but highly capital intensive. And that makes it a big – that makes it a big difference between the office market and the industrial market, whatever. It might be – that might be a bigger market, but it typically costs 10 times more in the data center world to build a facility than it does to build an office building. So those are some of the initial characteristics about the data center space and a data center alone that I think will make – that should make people's ears perk up if they're wanting to get in this space and recognize some of the differences. [00:15:57] Speaker 1: All right. So when you're buying a home, what is the very most important thing? [00:16:03] Speaker 2: Pool. No, I'm just kidding. [00:16:06] Speaker 1: Location, location, location. That's right. Location. That's right. And the same is true with the data center. So talk to us a little bit about, you know, what makes – what goes into selecting location for a data center if you're going to build one or co-locate it. Sure. For example. So – and, you know, what are some of the different characteristics that would impact that? [00:16:21] Speaker 2: Yeah. So people on the – is it periphera? Peripheral? Periphery. Of the space? Periphery. [00:16:28] Speaker ?: Periphery. [00:16:28] Speaker 2: Thank you. [00:16:29] Speaker 1: Of the space – Raison d'etre. [00:16:32] Speaker 2: Of the space will ask questions like, well, can't you just build a data center anywhere? That's one of the, you know, questions. [00:16:38] Speaker 1: Short answer is yes. [00:16:39] Speaker 2: Sure. And that's what I always tell them. [00:16:41] Speaker 1: You could also build a, you know, like a pool anywhere. Yeah. Or an airport. [00:16:45] Speaker 2: It just – it costs time and money. And so – and what we've seen, you know, organizations really try to understand is how the location impacts the business applications that are – the digital infrastructure that is stored within these facilities. And so that has dictated a lot of location decisions. And every company is different. Every company has different risk profiles. Every company has different things they're trying to accomplish with their data center location. And so that is just, you know, you can build data centers anywhere, but you've got to get power there. You've got to get infrastructure there, connectivity. You know, you have to get labor there. People have to work there. It's different than an office building, so you're not going to have tons and tons of people, hundreds and hundreds of people that are running these facilities. But you will have 20 to 30 to 40, and they need to be skilled. They need to be people that understand the mechanicals and the electricity side of things. And so all of that is – that's a labor challenge you have to fix. So location matters. You know, one of the other things that we talk about a lot is, you know, just how they need to be in areas that are free from natural hazard risk. And, you know, there's certain – every company has a different risk profile, as I said earlier. But there are some typical things that define where data centers are located. And if you're in the space, you know what they are. But if you're not, it's things like, hey, it wants to be free from, you know, proximity to an airport. [00:18:21] Speaker 1: Yeah, you may hear things like, it's outside the 100-year floodplain. Sure. Or it's outside the 500-year floodplain. Sure. [00:18:26] Speaker 2: And if you're somebody that's in the space, just think, I'm going to go invest 10, 20, 50, 100, 150 million dollars, whatever the number is. [00:18:33] Speaker 1: Or a billion dollars. [00:18:34] Speaker 2: Yes. Into somewhere, a location. So I need to do due diligence around that location to make sure that it's as risk-free as possible. You know, areas outside of hurricane zones, you know, areas that could be risk to tornadoes. I mean, there's all those things that go into that decision-making process. And as I mentioned before, there have been some, you know, there have, I would say, some lightening of what companies will feel comfortable about being close to. But for the most part, if a company is going to go invest that money, they want to know that they're outside of those risk areas. [00:19:09] Speaker 1: Yeah. And I think that's, you know, some of the fundamental pieces. And I was talking about data center fundamentals. And if that's an intro level understanding, you know, layered on top of that, if you're a data center company who is looking to sell, build and sell the space, you know, you want to also understand, you know, where your potential customers want slash need to be. And that's really the question everybody's trying to answer. Yeah, always. Is where are the customers, especially the largest customers, where do they want to be? And we're going to go build there. You bet. And so it's a real, it's not a guessing game. It's a very highly scrutinized science with some, you know, intuition slash relational underpinnings. Yeah. To figure out where to go. [00:19:51] Speaker 2: Yeah. And you got it like, and that's exactly why, you know, our company exists to help with those decisions and understanding market characteristics and pricing and all the things that it takes to make that decision faster and easier. So, totally agree. [00:20:05] Speaker 1: So, location is a huge factor with all the things you mentioned. You know, secondly, is kind of understanding how these things are powered. Because it's different than, like I said, we're going to contrast with an office building, which needs power and, you know, maybe a backup generator for a tenth of the capacity or less. You know, talk to how that's different in a data center facility. [00:20:28] Speaker 2: Yeah. I mean, one of the reasons that, you know, data centers cost so much money is the equipment that it takes to manage them or run them specifically related to the power. So, you know, these are facilities where servers are, that produce, you know, that need power to run efficiently and need a lot of power to run efficiently. You know, I think the last stat I saw was that data centers globally use 3% of the world's power. And that's a pretty staggering stat, if you think about it. But all that is boiled down to facility power use. So, you know, these facilities obviously are, you know, connected to, they have transformers, they're connected to UPS systems, they have backup generators that will support the facility should the power go out. You know, these are fed by, you know, large substations, you know, in both suburban and rural areas. So, you know, power is the name of the game when it comes to the data center space. And actually, one of the things I would also add is we have seen certainly an increase in renewable power serving this, you know, industry, this asset class. And I wouldn't say that was the case, you know, seven to 10 years ago. So, even though the market is using significant amount of power, not just in the U.S., but across the world, I think there's companies that are making some, you know, a lot better decisions when they think about, hey, how are we powering these data centers? But the facility itself is heavily tied to how much power can come into the facility and then how much sellable power is there, certainly in the co-location space. [00:22:15] Speaker 1: You have to talk a little bit more about how they get the power there, how that's different than, again, the building we're in today, and then the backup pieces on the generator side or the battery side as well. [00:22:23] Speaker 2: Yeah. I mean, so basically, you know, you're going to connect to, you know, every one of those buildings will have power fed to it by a substation. And as that power is coming in from the substation to the facility, you know, that power is just broken down from, you know, higher levels of voltage to lower levels. And then basically, these facilities are fed by, you know, UPS systems that are, you know, allowing for the continual running of these servers to take place. And as we mentioned, you know, what happens if the power goes out? Sometimes power, you know, goes out. And so they will have, you know, companies will invest in generators to typically like diesel power generators to support the facilities in the instances where that takes place. And so, you know, I would say that does not happen. That happens very little in our space. You know, now, like just with the way that the companies themselves that own facilities or the data center operators are building these facilities now, you know, there's power typically like never goes out. And there's testing like weekly, monthly, annually that allows to make sure that these systems work correctly. [00:23:41] Speaker 1: Yeah. And you make a good point about, you know, these buildings are designed in some of the other stuff we'll talk about to literally never, ever lose power or lose connectivity. And so, and one of the reasons that is, again, you know, because I want to look at Instagram whenever I want it. And I don't want that access to Instagram to ever be interrupted. I say that half joking, but that is true. And it's not a, that's not a life or death situation. And, but there are some extremely critical and you'll hear data centers often referred to as critical infrastructure. And there are plenty of applications that run on data centers that are legitimately critical, legitimately life and death. It could be, you know, whether that's self-driving cars or some type of, you know, system that manages something that people's lives depend on. [00:24:24] Speaker 2: Yeah. [00:24:24] Speaker 1: Run out of data center. And so, you know, it's important to understand that these buildings are designed to be able to go win that business. [00:24:31] Speaker 2: Yep. Agree. [00:24:32] Speaker 1: You know, and again, when we talk about this, we joke about this, like, hey, what is the cloud? Because you see that a lot. You see that little cloud icon, like IBM commercials during the golf tournament. Yeah. The cloud is what's driving the data center out of business. And I take a picture and it just, it's literally, people look up when they say it. Like it's actually physically vertically above us. Yes. But we, we know, or we're trying to educate in the way that, that all of that information, the vast majority of it is in an actual data center somewhere. Yeah. You know, you take a picture, you upload it to, like I said, Instagram, that's on a data center server somewhere, probably multiple locations, and then able to be loaded back up to a separate device, you know, on demand, basically. Yeah. [00:25:13] Speaker 2: Just, I mean, if you're new to the industry, you know, this would be a good thing to write down. I don't say that very often. [00:25:20] Speaker 1: Oh my gosh. Peasy alert. [00:25:21] Speaker 2: As the cloud grows, the data center industry grows. Yes. I mean, so you will hear like, well, hey, you know, if it's in the cloud, I mean, won't that make the data center industry like less important or go away? Certainly. I mean, if you, if you look at the numbers that we have over the last several years, that certainly has not been the case. [00:25:40] Speaker 1: And I would say the cloud is growing. Yes. Those cloud service providers are not building all their own space. Sure. [00:25:46] Speaker 2: So I, I guess, you know, this is a very unique market in the fact that, you know, you have some changes in technology and the way people are using things, but it's continuing to grow. Even as though I was at lunch, a socially distanced, you know, lunch yesterday. And one of the, I saw someone at the, at the lunch, we were talking and about the data center industry and said, yeah, but everything's getting smaller in the space. Right. Uh, it kind of like made a joking, you know, comment. And I was like, not really. I mean, technology gets smaller over time, but as you use more of it, uh, you know, the, the industry has actually grown. So it's a, those are some misconceptions that can take place on the periphery periphery. [00:26:35] Speaker 1: I mean, again, I just, that are easy to, you know, the mathematics of it are just never ceased to blow my mind of like, you can literally record a 4k video on your phone. That's a minute long. Right. And say it's, you know, whatever that is, two megabytes, 10 megabytes of information that's got to go somewhere. And, and the fact that you can do that so easily is just, I think the iPhone probably is driving the exponential growth. Yes. The data center growth probably owes more to the iPhone than any other device that people could just take and then expect to access information that other people would take. Sure. So if, and again, we're on record consistently on record being extremely bullish on the industry, but you don't have to look any farther, honestly, than your pocket to understand why this is going to keep going. [00:27:24] Speaker 2: I mean, there's some very like easy to understand, uh, like use cases that are happening. It's not like I have to explain some unique business case. No, it's like, watch your kid, watch your kid on your iPad, get on your iPad. There we go. Write that down. Just kidding. No, write that down. [00:27:39] Speaker 1: Rhett, tweet that later. I just waved my hand and tweets that happened. That's right. David sits on his throne. That's right. All right. So let's talk about the connectivity piece. And so how this information, all the information that's stored in the data centers, how does it get to other places more specifically? I'm going to keep coming back to this because it's the most tangible use case to your phone. [00:27:57] Speaker 2: Yeah. So, um, you know, data center, data centers are built with, um, like connectivity in mind as it relates to fiber providers, um, like different networks, the things that it takes to, um, you know, connect business applications from one facility to another. And, and these are, you know, Metro fiber routes, these are dark fiber routes. So, um, you know, at its core, a data center has to be a connected facility. It has to be something that allows businesses or, you know, consumers, whoever it is to do the things they want to do in an easy fashion. So the more fiber providers at a facility, the better, the more network providers located at a facility, the better. And that just speaks to, um, you know, how our, how businesses communicate with each other and with themselves. And so, you know, all of these data center facilities will have a connectivity component to it. Um, and you are able to do things like, um, you know, from your physical space, if you're in a co-location environment, which we'll talk about, but you're able to actually like utilize multiple fiber providers. So just depending on, you know, uh, your level of expertise in the space, but if you're, if you're basic, uh, you know, this is a, a data center is a building that just has a lot of connectivity fiber network, you know, in that facility itself. [00:29:30] Speaker 1: Yeah. And just not wanting to take anything for granted here. When you say fiber, you mean fiber optic cables. Yes. And so, you know, for since electricity was invented or whatever to say, just bear with me, you know, power was, or information was transmitted through like copper, uh, lines. And it still is because it's an electronic impulse that pops up and it communicates information and fiber is just the next generation thereof. And instead of being an electrical impulse, it's a light impulse that travels on these literally glass, tiny little tubes, tiny little tubes, uh, that transmits the information. And again, there's, you can read, you can go down rabbit hole about copper versus fiber, but when you say fiber, it's not, uh, you know, people don't need more brand in their diet. It's fiber optic cables, which are by and large, uh, you know, certainly connecting data centers with other non data center sources, but also within the data center, you know, connecting those servers together. [00:30:26] Speaker 2: Yeah. And then it gets very complex from there on how you can, um, connect to other services and things like that. But, you know, and the fact is like, if you're a data center user, you have to make decisions to like go into a facility, uh, and you don't know what the next three to five, 10 years are going to be like. So, so going into a facility that gives you connectivity options, I mean, this would make sense to kind of anything, you know, is better because it gives you flexibility because the unknown market will change and you've got to adapt with it. [00:30:58] Speaker 1: All right. Let's talk about AC. That's air conditioning. That is a big component of data centers to talk about why that is, you know, what are some of the different components that go into that? [00:31:06] Speaker 2: Yes. So, uh, any type of, uh, with all this power that is needed to, uh, operate servers effectively, it produces heat. And in order to allow those servers to function properly, you have to cool them at a certain temperature. And so HVAC and the cooling side of things on data center, uh, facilities are. Uh, you know, critical. I mean, you have to have that so that the facilities will work efficiently and there's different ways to do that. You can do that from water cooled side. You can do that from an air cooled side of things. But, you know, the fact is that these buildings have a lot of equipment tied to the cooling of the actual space itself so that the servers can operate efficiently. [00:31:55] Speaker 1: And that really is one of the ways that you see big differences in, in data center design. You know, you're talking about like hot aisle containment or cold aisle containment and, and the different ways that people have tackled that specific problem. If you come from an engineering background, it's really pretty fast. Yeah. And the, the way that, you know, you want 70 degree air or 50 degree air to come in and it comes out at 80. Anyways, it's very, very interesting. Um, but again, just to, to, to, to kind of make the leap from someone who this is maybe new territory. I mean, you think about your computer, if you're running a bunch of applications or maybe you like open up a huge Excel file and you hear that fan kick on. Cause your processor's ramped up and it's doing a bunch of calculations, generating heat and you're, and it needs to get rid of that heat because at some point a server will shut off, you know, or a computer or processing unit will shut off. And so they've got to keep them below a certain range. And typically there's a, an optimal range. It's smaller. So that's again, why there is a need for cooling. Yeah. [00:32:51] Speaker 2: And it's one of the reasons these are expensive facilities, you know, and the more like over time companies have done this much more efficiently. So it's driven the cost down. So like the data center facility that's being delivered today is very different than it was five, 10 years ago because of advances in cooling technology and things like that, that are helping, uh, you know, drive the cost down, but also, you know, not waste things like extra water or whatever it might be. So the cooling infrastructure, I mean, when you think about the infrastructure, it's the, the electrical infrastructure and the mechanical infrastructure that supports the cooling side of things. It's a, you know, it's critical part of the data center facility. [00:33:30] Speaker 1: You know, we mentioned like these, again, these facilities, you will hear facilities that say we are a hundred percent uptime or, or five nines, 99.9999% uptime. Like we have less than 18 minutes of downtime a year or whatever that number may be. So talk a little bit about, Hey, how do you get there? How do you achieve that from, you know, literally the power substation all the way to the server rack? Just quickly talk about what are the different components that get to that point where they can say, Hey, we're, we're never going to go down, you know, literally a, I wouldn't say a meteor, but you know, lightning can strike. There could be an earthquake, there could be an earthquake, there could be a tornado. And this building is, will continue to provide the digital infrastructure. [00:34:11] Speaker 2: Yeah. I mean, I think that's, I mean, it goes into the redundancy side of things, which I think is one of the things. [00:34:16] Speaker 1: When someone says redundancy, that may not, you know, mean something to a lot of people. [00:34:20] Speaker 2: Yeah, you bet. So this is basically just systems standing behind other systems to support the ones that are there currently. So if system A goes down, there's a system B that's sitting there ready to go. So to Mike's point, so that, you know, the data center does not lose power, connectivity, continues to function like normal. And that, at the end of the day, that's what the, the consumer cares about, right? You just want your picture on Facebook. You don't care to know necessarily what is, you know, happening in the background. You know, business is going, hey, I need my banking system to run so my customers can get to it. So they, they might look at areas where it might take two UPS systems to run the space, but it's really important. There's another two standing behind those two. So they know if there's any type of issue with that, that there's two more sitting there ready to go that are tested regularly that can, that are redundant to the original two. And there's different levels of redundancy. We don't need to get into that. But basically. Yeah, it's an algebra lesson at the end of the day. Yes, yes. And I was great at algebra. So, you know, the, at, at, at its basic level, it is just, you know, you have additional equipment there to support the equipment that is currently running so that you can, you know, run the space if something happens to the additional, to the equipment. [00:35:38] Speaker 1: Yeah. And again, what you'll typically see on like a brochure is, you know, what the level of generator redundancy is. Yep. Cooling redundancy. And then, you know, there's some battery component to that as well, but you'll hear things like, you know, we've got 60 hours of fuel to run our generators and we've got contracts with two different fuel providers to bring, bring fuel. Yep. Something along those lines is if you're hearing those things, that's what it informs. Yeah. It's their redundant capabilities. [00:36:05] Speaker 2: Yeah. And these companies have done a really good job of thinking through as many challenges as they can to make sure that their facilities will run properly, you know, over a long period of time. [00:36:16] Speaker 1: Yep. And that's, that will tie into the next one is about compliance and, and there's different ratings or certifications you can get as a data center. And we just touched on this quickly, but you hear things like tier three or tier four are very common ratings by what's called the Uptime Institute. Yep. And, and it's a, you know, recognized kind of certification organization or body that, that issues these. So talk a little bit about that, how that plays into data center design and what that's looked like historically. [00:36:45] Speaker 2: Yeah. For, you know, for a long period of time, and this is probably, you know, five or 10 years ago, tier four data centers were like the big thing to talk about. [00:36:53] Speaker 1: And what does tier four mean? [00:36:54] Speaker 2: Tier four would be the most redundant, most expensive data center you could build. So it costs the most and it's, it's the Lamborghini of data centers. And what happened was over time, companies realized, you know, the extra money that it costs to achieve that tier four certification for what it gets us, we think the tier three would, would serve us better and we can save all that money. [00:37:19] Speaker 1: And that's like what the Honda Odyssey? [00:37:21] Speaker 2: No, that would be like a, hmm, like a, like a Range Rover still. Is that, yeah, there's, that's probably a, Range Rover's like 90K. That's good, true. Yeah, that's true. Lamborghini's probably in the 150s, 200s. So anyway, I deal with luxury cars a lot, as you can tell. So, so anyway, I mean, that is where the industry is today, like that tier three or tier three plus. Now, one of the things you mentioned in the Uptime Institute, and I know what people in the industry, if you're listening to this, are thinking right now, which is there's different certifications that the Uptime Institute offers. The Uptime Institute, it's a qualification, certification that you pay for to have them come in and evaluate, you know, your data center, kind of give it the stamp of approval. You can get the stamp of approval for the data center design, and you can get the stamp of approval for the data center construction, two separate things. And, you know, there's some companies that will invest in that. And then there's others that will just market what they're doing as tier three plus or tier three. So it's really important for someone in this, if you're trying to understand that, to really go out and do your due diligence, to really understand what that means. Because I think there are some people that have gotten, you know, burned by that marketing versus what's really been built. But at the end of the day, that's one certification that will show someone what components have been built, you know, in the data center. Additionally to that, there's, you know, every type of acronym you could ever want that describes the compliance. [00:38:54] Speaker 1: ISO, SOC1, SOC2, FedRAMP. Yeah, no need to get into them, but they're out there, and you can just Google it, and you can figure out what's up. [00:39:01] Speaker 2: If you're a financial company, you're going to have certain certifications that you have to meet with your data center infrastructure. If you are a government entity, you're going to have certain certifications you have to meet. So that just depends on, you know, the IT group that's running that business to understand that. [00:39:17] Speaker 1: We'll talk about it in a second, like the security of the building, the physical security of the building, the electronic security, the software security, the procedures you have in place to manage who can get in and out of the building, which techs can get into which cages, et cetera, et cetera. That's all, you know, part of it. And that's true. That is also very similar. Those exist, you know, in my prior life as a benefits administrator. Like, we had to go through SOC1. So, like, do we have a peer review process in place for our calculations? Anyways. Yeah. All right. So last, you know, talk about, so building security, big part. Like, you can't, obviously, data security in general is an extremely hot topic, you know, and identity theft is a big concern these days. So, you know, your information, right, your health information, your social security number, et cetera, that's all stored electronically somewhere. So how do these data center companies keep it secure? How do they make sure that that information is secure, you know, from an electronic standpoint, from a physical standpoint? [00:40:08] Speaker 2: Yeah. I mean, the physical thing is probably the easiest to answer out of that. You know, typically, these buildings will have significant, like, perimeter fencing. So, you know, no one's going to be able to drive your car directly up next to these facilities in today's world. Now, some of them were built 10, 15 years ago. And where they were built maybe might not allow for a perimeter fence to be built. But, you know, I think it's safe to say that most of these facilities, from a physical security standpoint, are going to have some type of K-rated fencing that allows, like, for no one to be able to drive through it, et cetera. But, you know, two, there's, you know, you're not going to get in one of these buildings without needing to be there. So, you know, you're going to have to bring some sort of ID. There's typically guards that are, you know, letting you in. And then, you know, then to just get into the area where the actual raised floor space is. There's biometric, you know, scanning. Sometimes there's man traps that will actually lay you. You're going to have to explain that one. What's that? [00:41:11] Speaker 1: You're going to have to explain that phrase, man trap. Yeah, so basically a bunch of different things. [00:41:15] Speaker 2: Yeah, this is an area where, you know, there's an entrance and an exit. And one door does not open while the other door is open. So, you know, you can't just kind of free flow into the, you know, from one space to another. So first door opens, you step in, that door closes, then that next door can open. So that's one. [00:41:33] Speaker 1: Quick question, have you ever known anybody who set off an alarm in one of those things? What happens if you try and open one door before the next one goes? [00:41:39] Speaker 2: Gosh, man, there are some, you know, I've, you know, I don't know how many data. Centers I've been in, but it's a lot. And there's probably been two or three times that I've set off, unintentionally set off like door alarms. You know, when someone has told me, hey, you're clear to go. And so I'm like, okay. And I push, and I mean, there are some piercing like alarms that I'm like, come on, you have to turn up that loud. Like shake me to my core. [00:42:02] Speaker 1: Do you remember when the Bank of America site went down back in 2016? That was David. Crashed the whole site because he opened the door too quickly. So true. [00:42:10] Speaker 2: So anyway, it's, you know, but, but that's the type of security that companies have. And then when you actually get in the physical space of, you know, like, let's say it's a shared environment. So this means, you know, you might have one company that has a cage and then you have another company that's close by to that cage. It also does. Each one of those cages will have locks. They might have internal cameras. They might have actual cage down to like below the raised floor and up above the ceiling. You see that. So it depends on the organization, you know, financial and healthcare companies might have different security parameters than a technology company or an insurance company. Just depends on the industry and the company sensitivity level. And then as you get into the cybersecurity, you know, discussion, that's a whole other, you know, trail to go down. [00:43:00] Speaker 1: Slightly above our pay grade. Sure. But suffice to say it exists and it exists at a very high level. [00:43:05] Speaker 2: Yeah. And there's services around, you know, how do you protect yourselves from DDoS attacks, from, you know, people getting your data. I mean, all the things that can hit you from a, you know, cyber standpoint, companies are certainly aware of. And, you know, most of the time, mature organizations have people that are positioned to focus just on that. [00:43:27] Speaker 1: Yeah. One of the things we didn't talk about is these facilities are always called like a NOC center, which stands for Network Operations Command or Network Operations Center. There you go. There we go. There we go. Anyways. And it's a dedicated staff there 24-7 and they're monitoring both the physical, and virtual, I guess that's the security of the facility. Sure. So they're, you know, it's, it's a, it's a very highly complex and highly skilled activity. Yeah. [00:43:53] Speaker 2: A lot of times those network centers will be across different, you know, their, their data center portfolios. So you might have one in Dallas that looks exactly the same as the one in, you know, Santa Clara that looks exactly the same as the one in Chicago. And so they can, they can actually help each other in certain situations where they, where they need it. [00:44:12] Speaker 1: Sure. All right. The last thing is how these facilities are, facilities are leased, which is a very, which is very different than an office or an industrial complex. Talk a little bit about how they're leased, how that differs from, you know, your, your typical price per square foot on the office side. [00:44:28] Speaker 2: Yeah. Like 15 years ago, this was not a very competitive market. I mean, there just weren't a lot of people that were focused on this space and a mature product offering. Uh, over the last 15 years, uh, over the last 15 years, like it has changed dramatically. So now we have competitors for companies that have really big requirements, competitors for companies that have smaller requirements. And, you know, with that comes the leasing of facilities companies have decided like, Hey, I don't want to own and operate this in this servers myself. I'd rather have somebody else do it. And you can do that through co-location, which we'll talk about on the road. You can do that through cloud. But basically if you're coming from the traditional real estate side, all of the leasing that is done in the real estate business traditionally is done on square footage. How much space am I taking? And I'm going to pay an amount per month, per year for that space. When you get in the data centers, uh, industry, the focus is on power, how much power you are using, because you can, you can put a lot of power in a small amount of space as long as you can cool it. The cooling becomes the challenge. So, you know, the focus, so one of the, one of the biggest, one of the hardest things for people getting into the space to understand is that the leasing structure is different. It is not on square feet. It is on, you know, either your price per kid, every per month. There are some deal structures that could be on square footage, but is based on a, you know, a certain amount of power or companies bringing their own capital to use the power infrastructure. So, you know, I think the biggest takeaway, if you're just getting in, is just know that a data center is not going to, uh, be leased the same way as a, an office building, an industrial building, a retail space, et cetera. It's a different asset class. [00:46:13] Speaker 1: Some of the things are similar though. It's, it's, it is a bi-month basis, typically a, you know, 60 plus month commitment. So there are some things that are similar. Sure. But you're right. The power is the main driver. [00:46:23] Speaker 2: Yeah. And you got to understand that. You got to understand the components around, uh, you know, what it means to, to lease a megawatt of power, uh, you know, it doesn't mean you're using that whole megawatt, but it means you have the, you're reserving the right and the equipment to do that. Uh, and so there's just some, you know, that's different than the space aspect of that. And that's one of the, like I said, it's one of the biggest challenges that there's some really smart people that have a hard time getting their arms around, you know, well, Hey, I want to invest a hundred million dollars in the, you know, data center market. So, you know, how many square feet is the Dallas data center market? Well, it's, we don't, it's 350 megawatts. [00:47:03] Speaker 1: And if you, and if you've been in the industry a while, if somebody asks that question first, you kind of understand quickly where they're, where they're coming from, knowledge level is. Sure. Which is great. Yeah. It helps. So, all right. That's very helpful. Uh, David, I've said this in the past, if I cut you, you bleed data center industry knowledge. So appreciate that. Uh, again, we hope this is helpful. Uh, again, if there's, we're going to cover, if you look at the next, you know, six, seven weeks or six, seven, you know, podcasts, we'll, we'll cover some of the things you touched on today and more detail, uh, from the redundancy side, from the leasing side, from the connectivity side. [00:47:39] Speaker 2: And I, yeah, and I would just encourage people that if you are getting into this space, I mean, our desire is that this would be helpful in, you know, as you establish the basics of this space, that these would always be things you could go back to, to really build your initial framework. And that's really what we're trying to help people do. I mean, we want people to get into this industry. We think the industry is going to keep growing. I think the numbers that, you know, we have that show how the industry is growing, we'll support that. I think what's happening in this time period will support that. But, you know, it's our hope that this content would be valuable in a way that helps you build your, you know, data center industry expertise. [00:48:17] Speaker 1: So take a look at, again, we'll have the link to the blog series and the show notes and just stay tuned for the next, uh, several pods to come out where we talk, tackle some of those topics in a little bit more detail. See you soon. We'll see you soon. [00:48:36] Speaker ?: We'll see you soon.