VMware makes the smart move, Wholesale Lease vs. Build and Own

One of my good friends introduced me to a SW company that was going to build its first data center.  I told them why build, it is your first one.  Just lease three 2MW wholesale data center spaces.  You'll get a great price given your brand name recognition and you'll have three places to start your consolidation for the dozens of co-lo facilities around the world.  No, we've spent a lot of time with Gartner and we know what we are doing we are going to build our own. One year later I run into the consulting firm that brags they are building a 7.5 MW data center.  yeh, yeh.  you're building a small one when they have over 27 MW of space now.  One year later they finally pick a site.  One year later the IT exec leaves the SW company, and the data center is still not built.

I tell this story, because it is amazing what people will do to convince themselves that their move into data centers is to build their own data center and they don't seriously consider wholesale in multiple markets.  There will be plenty of consultants, site selection experts, analyst that will tell you why it is good to build a data center.  But, some of the smartest guys I know have figured out it is lower cost and faster time to market to lease wholesale than build their own data center.  

Case in point, VMware's announced 4 city cloud environment in Santa Clara, LV, Dallas, and Sterling will be in wholesale space. 

VMware is also in a poor position to compete by building ultra-modern data centers, as Facebook did in Prineville, Ore., and Forest City, N.C., and then offering low-cost compute cycles out of such infrastructure. On the contrary, VMware won't build anything. It will lease space from wholesale data center builders. It will then wheel in racks of servers, most likely from its Virtual Computing Environment (VCE) subsidiary, based on partner Cisco's converged compute and networking infrastructure, and throw on the switch.

With VMware going with a wholesale strategy, there may be more who understand that leasing wholesale can be more cost effective than building.  Maybe the folks at VMware after being in dozens and dozens of data centers for their VMware users have figured out their own data center market survey of what is cost effective.  The VMware guys are able to get 4 sites up and running in a fraction of time and cost compared to the executive I mentioned at the beginning who thought building a data center was the right answer.

One simple way to think about why this works is if you are brand name company with a pretty good footprint you can become an anchor tenant in a wholesale space.  Even though there are agreements that the client list is kept confidential, almost everyone knows who is connected to the inner circles find out who is in the space.  It's no different when famous people move into a high end apartment in NY.  With a stamp of endorsement that is good enough for the big brand name, the lesser known companies can be charged more to be in a space that was good enough for the rich and famous.  This is no different than the cachet that Apple has opening a retail store in a mall.  You know Apple is paying the lowest cost per sq ft, given they drive shopper traffic to the mall.

There is staff that VMware will be adding to run the data centers and here are some of the job posts.

Data Center Supervisor Job Las Vegas, NV, US May 4, 2013
Data Center Supervisor Job Reston, VA, US May 9, 2013
Data Center Engineer (Night Shift) Job Las Vegas, NV, US May 4, 2013
Data Center Engineer Job Las Vegas, NV, US May 7, 2013
Data Center Engineer Job Reston, VA, US May 9, 2013
Data Center Engineer Job Reston, VA, US May 9, 2013
Data Center Engineer Job Reston, VA, US May 9, 2013
Data Center Engineer Job Reston, VA, US May 4, 2013
Data Center Engineer Job Reston, VA, US May 4, 2013
Data Center Engineer Job Reston, VA, US May 4, 2013

VMware's first Wholesale space was in Sabey.

VMWare POD 3 - Sabey Data Center

Wenatchee, Washington


Hermanson completed Full Mechanical construction for this fast-tracked installation of a new data center in shelled out space. The total project area is approximately 21,000 SF and consists of 15,000 SF of “data hall” space for IT/Lab equipment, plus electrical rooms and a grey water equipment room. The scope of work includes the installation of new self-contained package units that will include outside air economizer capability and evaporative cooling, a new grey water system, construction of hot aisle containment, with new diesel powered standby generators with exhaust pipe risers on the exterior of the building and a new diesel fuel tank. The generator room requires additional fresh air intake louvers in the wall of an existing penthouse and additional radiator discharge louvers in the existing tilt-up concrete exterior walls.