Friday, December 17, 2010

Google Moving Out, Small Businesses Moving In

By David Gross

David Chernicoff over at ZDNet has a good article out on data center planning, where he notes that many of the small to mid-size businesses he's spoken to are planning to outsource some of their operations.   This is similar to the experience Lisa and I have had talking to data center managers who run internal centers, and are hitting capacity limits.   It also is an important point for investors to consider, many of whom are still fretting about the data center services industry with Google, Facebook, and other brand name tenants investing so heavily in their own buildings.

One of the factors to consider with this developing market segment is that these small businesses are not going to be buying a powered base building sort of service, nor are they likely to hit up Equinix for a few cabinets.  More realistically, they'll go to IBM, Horizon Data Centers, a hosting provider, or even someone like Rackspace, and start handing over applications slowly.   Additionally, connectivity is a major concern once these small businesses move beyond simple e-mail outsourcing, and a data center that has dedicated links to other facilities closer to the customer will allow that customer to cross-connect closer to the office, and avoid high dedicated circuit costs from a telco.

Economically, an internal data center for Google, Apple, or Facebook produces a financial return by turning an operating cost for a building lease into a capital cost, while an outsourcing arrangement for a small business turns a capital cost for servers into an operating cost.   As a result, the heaviest users are hitting a point where outsourcing makes less sense, while the lightest users are hitting a point where outsourcing makes more sense.   The result is that the public data center of the future will have a tenant roster that looks less like what you might find in an office building in Santa Clara, and more like what you'd see in a typical suburban office park.


  1. I don’t think it's a matter of Google moving out as much as small businesses trying to get a piece of the pie. With a huge global market, competition is bound to heat up.

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  2. A monopoly is always bad, no matter what the industry. Without competition, there is very little growth. It's good to see small businesses stand up to the search engine giant.

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  3. Small to mid-sized businesses thinks that it's best for them to outsource some of their operations. You won't be able to compete against the others if you won't move in.

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  4. I'm glad that Google is moving out and small businesses are moving in to outsource the work.

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  5. This is good news for small businesses who want new patents. I think they will thrive because of this.
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  6. It is definitely difficult to compete with a well-established business. It's nice to know that these small businesses are gaining their potentials.

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  7. Not quite so Stanley. Appropriating your expenses and slowly expanding your reach and services to hand-picked target communities will render all those well-established competitors ineffectual to your businesses' sale. I've seen many who, while might not have grown as fortune 500 companies, managed to be successful even with mega-companies as competitors.

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