You Want Money for a Data Center Buildout?

Yield to Cloud A couple years ago I attended several “fast pitch” competitions and events for entrepreneurs in Southern California, all designed to give startups a chance to “pitch” their ideas in about 60 seconds to a panel of representatives from the local investment community.  Similar to television’s “Shark Tank,” most of the ideas pitches were harshly critiqued, with the real intent of assisting participating entrepreneurs in developing a better story for approaching investors and markets.

While very few of the pitches received a strong, positive response, I recall one young guy who really set the panel back a step in awe.  The product was related to biotech, and the panel provided a very strong, positive response to the pitch.

Wishing to dig a bit deeper, one of the panel members asked the guy how much money he was looking for in an investment, and how he’d use the money.

“$5 million he responded,” with a resounding wave of nods from the panel.  “I’d use around $3 million for staffing, getting the office started, and product development.”  Another round of positive expressions.  “And then we’d spend around $2 million setting up in a data center with servers, telecoms, and storage systems.”

This time the panel looked as if they’d just taken a crisp slap to the face.  After a moment of collection, the panel spokesman launched into a dress down of the entrepreneur stating “I really like the product, and think you vision is solid.  However, with a greater then 95% chance of your company going bust within the first year, I have no desire to be stuck with $2 million worth of obsolete computer hardware, and potentially contract liabilities once you shut down your data center.  You’ve got to use your head and look at going to Amazon for your data center capacity and forget this data center idea.”

Now it was the entire audience’s turn to take a pause.

In the past IT managers really placed buying and controlling their own hardware, in their own facility, as a high priority – with no room for compromise.  For perceptions of security, a desire for personal control, or simply a concern that outsourcing would limit their own career potential, sever closets and small data centers were a common characteristic of most small offices.

At some point a need to have proximity to Internet or communication exchange points, or simple limitations on local facility capacity started forcing a migration of enterprise data centers into commercial colocation.  For the most part, IT managers still owned and controlled any hardware outsourced into the colocation facility, and most agreed that in general colocation facilities offered higher uptime, fewer service disruptions, and good performance, in particular for eCommerce sites.

Now we are at a new IT architecture crossroads.  Is there really any good reason for a startup, medium, or even large enterprise to continue operating their own data center, or even their own hardware within a colocation facility?  Certainly if the average CFO or business unit manager had their choice, the local data center would be decommissioned and shut down as quickly as possible.  The CAPEX investment, carrying hardware on the books for years of depreciation, lack of business agility, and dangers of business continuity and disaster recovery costs force the question of “why don’t we just rent IT capacity from a cloud service provider?”

Many still question the security of public clouds, many still question the compliance issues related to outsourcing, and many still simply do not want to give up their “soon-to-be-redundant” data center jobs.

Of course it is clear most large cloud computing companies have much better resources available to manage security than a small company, and have made great advances in compliance certifications (mostly due to the US government acknowledging the role of cloud computing and changing regulations to accommodate those changes).  If we look at the US Government’s FedRAMP certification program as an example, security, compliance, and management controls are now a standard – open for all organizations to study and adopt as appropriate.

So we get back to the original question, what would justify a company in continuing to develop data centers, when a virtual data center (as the first small step in adopting a cloud computing architecture) will provide better flexibility, agility, security, performance, and lower cost than operating a local of colocated IT physical infrastructure?  Sure, exceptions exist, including some specialized interfaces on hardware to support mining, health care, or other very specialized activities.  However if you re not in the computer or switch manufacturing business – can you really continue justifying CAPEX expenditures on IT?

IT is quickly becoming a utility.  As a business we do not plan to build roads, build water distribution, or build our own power generation plants.  Compute, telecom, and storage resources are becoming a utility, and IT managers (and data center / colocation companies) need to do a comprehensive review of their business and strategy, and find a way to exploit this technology reality, rather than allow it to pass us by.

Counterintuity – Creative Internet Marketing in Burbank

Pacific-Tier Communications and Burbank N Beyond’s Innovators and Entrepreneurs had an opportunity to visit with Amy Kramer, President and Marketing Whiz, and Lee Wochner, CEO and Counterintuity Offices in Burbank CaliforniaCreative Strategist, at Counterintuity LLC, a Burbank-based agency focusing on Internet marketing.  Amy and Lee discussed a variety of topics ranging from taking the risk with a start up company, to their visions and ideas on Internet marketing and social media, as well as why Burbank is a great place to run a business.

Counterintuity is a full-service marketing agency that has designed, launched and maintained hundreds of custom-built websites, digital marketing strategies, public relations, search engine optimization, social media campaigns, as well as identity and print pieces.

PT-BNB:  It is kind of scary doing a start up when you have worked in a corporate environment your entire life – how did you get started?

Amy:  Back in the late 90s I was working in direct response, in infomercials.  And I was helping a very large product break into the web.  So we were launching eCommerce sites doing email marketing when it was only text, and Lyrist was the only provider.  And so right there at the very cusp of Internet marketing I was there with a budget.

It was a tremendous opportunity.  So after launching that product, then we’re into 2000 and it was really starting to grow, and the opportunities were really awesome.

So I left the cushy direct response gig and decided to break out and do it myself.

The there was an opportunity for Lee and I together to bring this Internet marketing product and series of products to small businesses and organizations.  Because previously it was only available because the cost was so prohibitive.  So we were able to bring it to a wider range of businesses and organizations.

Lee:  Amy and I already had a working relationship and I already knew she was a really smart digital marketer, we work well together, and I think it is a great time to be in business, it is an important time for entrepreneurship, and I think a lot of the problem in the country and in the world will increasingly be solved by entrepreneurial solutions.

And so what we were looking to do was find a way to leverage those sorts of opportunities for smaller businesses rather than lock them out because they don’t have big budget.

PT-BNB:  Are smaller business a focus of the Counterintuity, does it make any difference what size a business is?

Lee:  It really depends on how you define small business.  I think small business as defined by the federal government is 500 employees or fewer.   So people, even in the Small Business Administration think they need to redefine that.

We have clients who do a million dollars a year in revenue, sometimes a little bit less.  And we have clients who do 200 million dollars a year in revenue or more.  About a third of our clients are non-profit or public sector.  So I don’t know if they really fit that profile.

But the commonality among all of our clients is that they are looking to succeed in entrepreneurial ways in response to all of the changes in consumer patterns driven by the Internet.

PT-BNB:  On your website you show three majors areas which include social media, website design, and digital marketing.  You wouldn’t have seen that 10 years ago, with social media being a focal point.  What is the impact of social media?  Why is that important for us to understand?

Lee and Amy at Counterintuity Burbank CaliforniaLee:  So next week we’re doing a presentation for the city as part of “Team Business.”  We’re going to be doing our “Get Connected Social Media Seminar.”

Let me give you the shortest, best answer I can.  Social media is word of mouth marketing done big.  Amy and I both have a background in the theater.  That’s how we met in 1999.  What you find out in the theater is that it doesn’t matter what your ads are, what your reviews are, the primary way to drive business is through “word of mouth.”

Social media presents a suite of tools that allows you to capture word of mouth from all of the people you are connected to and spread it.

Obviously there’s a potential upside and a potential downside to that.  The potential upside is “hey this is really great we really like this,” and the potential downside is “we were really disappointed, we don’t really like this, and forget them.”

There has always been a conversation about you, your product, and your service.  Now you have more opportunity than ever to manage that, and to spread the word, and to turn other people into advocates for you online.

PT-BNB:  What does social media mean for the generation that is just graduating from high school and college, and what role do you play in being able to fulfill their need for having access to social media?

Lee:  What need does the typewriter fill? Or the quill pen?

It’s not a marketing tool, it is a tool.  A basic tool.  It is a communications platform.  It’s a way to connect everybody up, with all of their content.  Some of the content might be “here is a picture of my kid.” And “here is the dinner we had.”  I took a picture of my dinner in San Francisco the other night because it was so interesting, and I built a blog post around it.

And then all these people on Facebook “liked” the picture of my dinner, and said they wished they’d had it.  If that had been my client in San Francisco I would have linked to it.

But see it was my life, and then I could turn it into marketing, but really it’s about the tool.

When people talk about social media marketing, then I say we’re talking about communications.  When you think about it, when you are born the very first thing you do is communicate.  You cry, and then you start to breath.  You are crying to communicate.

Communication is at the heart of who we are.  There is (traditional) scientific research that says we developed more than other primates because we have language, and because we have bigger brains.

The new thinking is we have bigger brains because we developed language, developed synaptic connections, and grew our brain muscles.

So language and communication are at the core of who we are.

I try to talk to people and say “don’t focus on the tool.”  If I give you the three basic ways to think about all the social media tools then you can do anything you want with them.  Don’t get hung up on how seemingly complex there are, and how to use them.

It’s like your car.  I have no idea how the cylinders work.  I just drive it.  That’s how social media should work for you.

Amy:  And when you talk about the next generation, they are just using it (social media) in different ways.  They don’t like talking on the phone as much.  They like texting more.  It’s a small, quick conversation.

Turns out a lot of the kids are not into Facebook.  Some prefer Twitter.  Others right now are really into Instagram.  It is a great way for them to share what they are doing, and what they are involved in.  Visual storytelling.

Again it is sharing information, it all comes down to what’s sharing what is going on in your life and telling that story.  Whether it is for you personally, or whether it is for a brand.

Kids today – email.  Not as big with kids.  They are doing Facebook messaging. They are doing DMs on Twitter.  Just a text.  It is a different way to communicate.  But as Lee was saying, it is just a communication tool, it is just how new social media and new Internet platforms are helping them (young people) communicate.

PT-BNB:  What is the role of blogging?

Amy:  Blogging at its core is journaling.

As marketers, we recommend it for our clients.  And the reason we recommend blogging for clients is it is a way to build credibility and to expand your authority in your industry.

When journalists are looking for folks to interview, where do you go?  You go to LinkedIn to look them up, and generally the next place is their website.  Then if you get to their website and want to look at what they have to say you go to their blog.

Because that gives you a bit of insight into their voice and into their POV (point of view).

The you go “oh, they might be good for this entrepreneurial article that I’m writing.”

So blogging is an entrée into PR.  It is an entrée into getting more coverage, as well as if a client is looking for someone like you it can actually help your search engine optimization, significantly.  Because it can give you opportunities to talk about what you do.

So blogging is good for authority, it is good for search rankings, because the more content, and the more regularly you update your content on your website and your blog, the more highly Google thinks of you.

PT-BNB:  How about video?

Lee:  Massive, huge.  We’ve been doing more and more video for clients and for ourselves, and have been winning awards for it. It (video) has got to be brief, it has got to be interesting, it has got to make a point, and you need to share it.

Put it on Youtube, Tweet out a link, put it on your Facebook, put it on your website, stick it in your blog, repurpose your content, because then people will see it more often.

Amy:  And it has got to be short.  Attention spans are now teeny.  It must play quickly.

Lee:  So if you go to our Youtube page you will see some of the videos we have done.  We’ve been doing client videos and internal videos, and the great thing is you no longer need a massive budget.

Now there are projects we’ve done for very large clients who have a budget, and we can go do what would be called a corporate-looking video.

Then there are ways to do more guerrilla type video.  We did a video recently for Center Theater Group, the Taper, Ahmanson, Kirk Douglass Theater.  I and our video editor went down there and we did 13 setups and shot the whole video in about 4 hours.  Because now the technology is such that you can go do that, be really mobile, really fast.  We wrote the script in advance, went down and shot it, and then it took about a half a day to do the first cut on a laptop.

We sent it to the client, the client asked for a few tweaks, and in just two days we had a complete corporate video for them.

PT-BNB:  Why did you decide to setup shop in Burbank?

Lee:  Burbank is a great place to do business.  Burbank is a tight knit community, it is easy to do business here, and it is easy to become part of the community.

The city has been terrific.  We have personal relationships with all the city council members, the mayor, the city staff…  Whenever we have had an issue or an opportunity they have resolved it very fast.  They have worked with us, and we have nothing but positive things to say about the city.

With regard to the Chamber of Commerce, the Chamber has been a key driver in our business.  They have been so terrific at connecting us up, offering valuable services, and anything we can do with or for the Chamber we will do it.

It is a great place to be, Burbank.

You can learn more about Counterintuity at their website www.counterintuity.com

Burbank Innovators and Entrepreneurs

Burbank is the home of the global entertainment industry, prominent in aviation, and a burgeoning Internet development community.  Burbank Innovators and Entrepreneurs will look at companies and persons based in Burbank making an impact in their industry, with an emphasis on entrepreneurs, and those on the cutting edge of technology, services, and thought leadership.

Innovators and Entrepreneurs will bring personal interviews digging into the motivations, challenges, successes, personalities, with visions of companies and people driving our business community into the future.

If you have a Burbank-based company or recommendation of a company, that is at the cutting edge of your industry, are an innovator, or an entrepreneur, and would like either Pacific-Tier Communications or BurbankNBeyond to highlight the activity, send a note to jsavageau@burbanknbeyond.com.

Evaluating Public Cloud Computing Performance with CloudHarmony

With dozens of public cloud service providers on the market, offering a wide variety of services, standards, SLAs, and options, how does an IT manager make an informed decision on which provider to use?  Is it time in business? Location? Cost? Performance?

Pacific-Tier Communications met up with Jason Read, owner of CloudHarmony, a company specializing in benchmarking the cloud, at Studio City, California, on 25 October.  Read understands how confusing and difficult it is to evaluate different service providers without an industry-standard benchmark.  In fact, Read started CloudHarmony based on his own frustrations as a consultant helping a client choose a public cloud service provider, while attempting to sort through vague cloud resource and service terms used by industry vendors.

“Cloud is so different. Vendors describe resources using vague terminology like 1 virtual CPU, 50 GB storage. I think cloud makes it much easier for providers to mislead. Not all virtual CPUs and 50 GB storage volumes are equal, not by a long shot, but providers often talk and compare as if they are. It was this frustration that led me to create CloudHarmony” explained Read.

So, Read went to work creating a platform for not only his client, but also other consultants and IT managers that would give a single point of testing public cloud services not only within the US, but around the world.    Input to the testing platform came from aggregating more than 100 testing benchmarks and methodologies available to the public.  However CloudHarmony standardized on CentOS/RHEL Linux as an operating system  which all cloud vendors support, “to provide as close to an apples to apples comparison as possible” said Read.

Customizing a CloudHarmony Benchmark Test

Cloud harmony Configuration

Setting up a test is simple.  You go to the CloudHarmony Benchmarks page, select the benchmarks you would like to run, the service providers you would like to test, configurations of virtual options within those service providers, geographic location, and the format of your report.

Figure 1.  Benchmark Configuration shows a sample report setup.

“CloudHarmony is a starting point for narrowing the search for a public cloud provider” advised Read.  “We provide data that can facilitate and narrow the selection process. We don’t have all of the data necessary to make a decision related to vendor selection, but I think it is a really good starting point.

Read continued “for example, if a company is considering cloud for a very CPU intensive application, using the CPU performance metrics we provide, they’d quickly be able to eliminate vendors that utilize homogenous infrastructure with very little CPU scaling capabilities from small to larger sized instance.”

Cloud vendors listed in the benchmark directory are surprisingly open to CoudHarmony testing.  “We don’t require or accept payment from vendors to be listed on the site and included in the performance analysis” mentioned Read.  “We do, however, ask that vendors provide resources to allow us to conduct periodic compute benchmarking, continual uptime monitoring, and network testing.”

When asked if cloud service providers contest or object to CloudHarmony’s methodology or reports, Read replied “not frequently. We try to be open and fair about the performance analysis. We don’t recommend one vendor over another. I’d like CloudHarmony to simply be a source of reliable, objective data. The CloudHarmony performance analysis is just a piece of the puzzle, users should also consider other factors such as pricing, support, scalability, etc.”

Cloud Harmony Benchmark Report

During an independent trial of CloudHarmony’s testing tool, Pacific-Tier Communications selected the following parameters to complete a sample CPU benchmark:

  • CPU Benchmark (Single Threaded CPU)
  • GMPbench math library
  • Cloud Vendor – AirVM (MO/USA)
  • Cloud Vendor – Amazon EC2 (CA/USA)
  • Cloud Vendor – Bit Refinery Cloud Hosting (CO/USA)
  • 1/2/4 CPUs
  • Small/Medium/Large configs
  • Bar Chart and Sortable Table report

The result, shown above in Figure 2., shows a test result including performance measured against each of the above parameters.  Individual tests for each parameter are available, allowing a deeper look into the resources used and test results based on those resources.

In addition, as shown in Figure 3., CloudHarmony provides a view providing uptime statistics of dozens of cloud service providers over a period of one year.  Uptime statistics showed a range (at the time of this article) between 98.678% availability to 100% availability, with 100% current uptime (27 October).

Cloud Service Provider Status

Who Uses CloudHarmony Benchmark Testing?

While the average user today may be in the cloud computing industry, likely vendors eager to see how their product compares against competitors, Read targets CloudHarmony’s product to “persons responsible for making decisions related to cloud adoption.”  Although he admits that today most users of the site lean towards the technical side of the cloud service provider industry.

Running test reports on cloud harmony is based on a system of purchasing credits.  Read explained “we have a system in place now where the data we provide is accessible via the website or web services – both of which rely on web service credits to provide the data. Currently, the system is set up to allow 5 free requests daily. For additional requests, we sell web service credits where we provide a token that authorizes you to access the data in addition to the 5 free daily requests.”

The Bottom Line

“Cloud is in many ways a black box” noted Read.  “Vendors describe the resources they sell using sometimes similar and sometimes very different terminology. It is very difficult to compare providers and to determine performance expectations. Virtualization and multi-tenancy further complicates this issue by introducing performance variability. I decided to build CloudHarmony to provide greater transparency to the cloud.”

And to both vendors and potential cloud service customers, provide an objective, honest, transparent analysis of commercially available public cloud services.

Check out CloudHarmony and their directory of services at cloudharmony.com.

—————-

Hunter Newby on Communications in America – Are We Competitive?

This is Part 1 in a series highlighting Hunter Newby’s thoughts and visions of communications in America.  Part 1 will highlight Newby’s impressions of America’s competitiveness in the global telecom-enabled community.  Additional articles will touch on net neutrality, the “ying and yang” of the telecom industry, as well as  the dilemma of supporting telecom “end points.”

HunterNewbyMembers and guests of the Internet Society gathered at Sentry Center in New York on 14 June for the regional INET Conference.  The topic, “It’s your call, What kind of Internet do you want?” attracted Internet legends including Vint Cerf and Sir Timothy John “Tim” Berners-Lee, as well as a number of distinguished speakers and panelists representing a wide range of industry sectors.

Hunter Newby, Founder and CEO of Allied Fiber, joined the panel “Pushing Technology Boundaries” to discuss the future of Internet-enabled innovation.  The panel had robust discussions on many topics including net neutrality, infrastructure, telecom law, regulation, and the role of service providers.

Pacific-Tier Communications caught up with Newby on 22 June to learn more about his views on communications in America.

Are We Competitive?

Newby believes America lags behind other nations in developing the infrastructure needed to compete in a rapidly developing global community.  Much of the shortfall is related to physical telecommunications infrastructure needed to connect networks, people, content, and machines at the same level as other countries in Asia and Europe.

“The US lacks an appreciation for the need to understand physical (telecom) infrastructure” said Newby.  He went on to describe the lack of standard terms in the US, such as “Broadband Communications.” Newby continued “In some locations, such as North Carolina, broadband communications are considered anything over 128Kbps (Kilobits per second).”

Newby note there is considerable disinformation in the media related to the US communications infrastructure.  Although the US does have a national broadband plan, in reality the infrastructure is being built by companies with a priority to meet the needs of shareholders. Those priorities do not necessarily reflect the overall needs the American people.

While some companies have made great progress bringing high performance telecom and Internet access to individual cities and towns, Newby is quick to remind us that “we cannot solve telecom problems in a single  city or location, and (use that success) to declare victory as a country.”  Without having a national high performance broadband and network infrastructure, the US will find it difficult to continue attracting the best talent to our research labs and companies, eroding our competitiveness not only in communications, but also as a country and economy.

Newby returns to a recurring theme in his discussions on communications.  There are no connectivity “clouds” as commonly shown in presentations and documents related to the space between end points in the Internet (an end point being users, servers, applications, etc.).  The connectivity between end points happens on physical “patch panels,” telecom switches, and routers.  This happens in the street, at the data center, carrier hotel, central office, or exchange point.

Bringing it All Down to Layer 1 – Optical Fiber

Newby believes the basis of all discussions related to communications infrastructure starts at the right of way.  When access to a ground or aerial right of way (or easement) is secured, then install fiber optic cable.  Lots of fiber optic cable.  Long haul fiber, metro fiber, and transoceanic submarine fiber.  Fiber optic cable allows tremendous amounts of information to travel from end points to other end points, whether in a local area, or across wide geographies.

Long distance and submarine fiber optic cable are essential in providing the infrastructure needed to move massive amounts of information and data throughout the US and the world.  While there is still a large amount of communications provided via satellite and microwave, only fiber optic cable has the resources and capacity needed to move data supporting communications within the network or Internet-enabled community.

Newby makes a point that in the US, very few companies operate long haul fiber networks, and those companies control access to their communications infrastructure with tariffs based on location, distance, traffic volumes (bandwidth/ports), and types of traffic.  Much of the existing fiber optic infrastructure crossing the US is old, and cannot support emerging communication transmission rates and technologies, limiting choices and competitiveness to a handful of companies – none of which provide fiber as a utility or as a neutral tariffed product.

As the cost of long distance or long haul fiber is extremely high, most carriers do not want to carry the expense of building their own new fiber optic infrastructure, and prefer to lease capacity from other carriers.  However, the carriers owning long haul fiber do not want to lease or sell their capacity to potentially competitive communications carriers.

Most US communications carriers operating their own long haul fiber optic networks also provide additional value-added services to their markets.  This might include voice services, cable or IP television, virtual private networks, and Internet access.  Thus the carrier is reluctant to lease their capacity to other competitive or virtual carriers who may compete with them in individual or global  markets.

Thus a dilemma – how do we build the American fiber backbone infrastructure to a level needed to provide a competitive, high capacity national infrastructure without aggressive investment in new fiber routes?

Newby has responded to the dilemma and challenge with his company Allied Fiber, and advises “the only way to properly build the physical infrastructure required to support all of this (infrastructure need) is to have a unique model at the fiber layer similar to what Allied (Allied Fiber) has, but not solely look at fiber as the only source of revenue.”

For example, Newby advises revenue can be supplemented by offering interconnecting carriers and other network or content providers space in facilities adjacent to the backbone fiber traditionally used for only in-line-amplifiers (ILAs) and fiber optic signal regeneration.  The ILA facility itself “could be an additional source of recurring revenue,” while allowing the fiber provider to remain a neutral utility.

Or in short, Newby explains “we need to put a 60 Hudson or One Wilshire every 60 miles” to allow unrestricted interconnection between carriers, networks, and content providers at a location closest to the infrastructure supporting end points.

The Backbone

America can compete, and break the long distance dilemma.  Newby is certain this is possible, and has a plan to bring the US infrastructure up to his highest standards.  The idea is really pretty simple.

  1. Build a high capacity fiber optic backbone passing through all major markets within the US.
  2. Connect the backbone to local metro fiber networks (reference the Dark Fiber Community)
  3. Connect the backbone to wireless networks and towers (and provide the access location)
  4. Connect the backbone to all major physical interconnection points, carrier hotels, and Internet Exchange Points (IXPs)
  5. Make access to the backbone available to all as a neutral, infrastructure utility

Newby strongly advises “If you do not understand the root of the issue, you are not solving the real problems.”

And the root of the issue is to ensure everybody in America has unrestricted access to unrestricted communications resources.


Hunter Newby, a 15-year veteran of the telecom networking industry, is the Founder and CEO of Allied Fiber.

Read other articles in this series, including:

Data Centers Hitting a Wall of Cloud Computing

Equinix lowers guidance due to higher than expected churn in its data centers and price erosion on higher end customers.  Microsoft continues to promote hosted solutions and cloud computing.  Companies from Lee Technologies, CirraScale, Dell, HP, and SGI are producing containerized data centers to improve efficiency, cost, and manageability of high density server deployments.

The data center is facing a challenge.  The idea of a raised floor, cabinet-based data center is rapidly giving way to virtualization and highly expandable, easy to maintain, container farms.

The impact of cloud computing will be felt across every part of life, not least the data center which faces a degree of automation not yet seen.”

Microsoft CEO Steve Ballmer believes “the transition to the cloud <is> fundamentally changing the nature of data center deployment.” (Data Center Dynamics)

As companies such as Allied Fiber continue to develop visions of high density utility fiber ringing North America, with the added potential of dropping containerized cloud computing infrastructure along fiber routes and power distribution centers, AND the final interconnection of 4G/LTE/XYZ towers and metro cable along the main routes,the potential of creating a true 4th public utility of broadband with processing/storage capacity becomes clear.

Clouds Come of Age

Data center operators such as Equinix have traditionally provided a great product and service for companies wishing to either outsource their web-facing products into a facility with a variety of internet Service Providers or internet Exchange Points providing high performance network access, or eliminate the need for internal data center deployments through outsourcing IT infrastructure into a well-managed, secure, and reliable site.

However the industry is changing.  Companies, in particular startup companies. are finding there is no technical or business reason to manage their own servers or infrastructure, and that nearly all applications are becoming available on cloud-based SaaS (Software as a Service) hosted applications.

Whether you are developing your own virtual data center within a PaaS environment, or simply using Google Apps, Microsoft Hosted Office Applications, or other SaaS, the need to own and operate servers is beginning to make little sense.  Cloud service providers offer higher performance, flexible on-demand capacity, security, user management, and all the other features we have come to appreciate in the rapidly maturing cloud environment.

With containers providing a flexible physical apparatus to easily expand and distribute cloud infrastructure, as a combined broadband/compute utility, even cloud service providers are finding this a strong alternative to placing their systems within a traditional data center.

With the model of “flowing” cloud infrastructure along the fiber route to meet proximity, disaster recovery, or archival requirements, the container model will become a major threat to the data center industry.

What is the Data Center to Do?

Ballmer:

“A data center should be like a container – that you can put under a roof or a cover to stop it getting wet. Put in a slab of concrete, plumb in a little garden hose to keep it cool, yes a garden hose – it is environmentally friendly, connect to the network and power it up. Think of all the time that takes out of the installation.”

Data center operators need to rethink their concept of the computer room.  Building a 150 Megawatt, 2 million square foot facility may not be the best way to approach computing in the future.

Green, low powered, efficient, highly virtualized utility compute capacity makes sense, and will continue to make more sense as cloud computing and dedicated containers continue to evolve.  Containers supporting virtualization and cloud computing can certainly be secured, hardened, moved, replaced, and refreshed with much less effort than the “uber-data center.”

It makes sense, will continue to make even more sense, and if I were to make a prediction, will dominate the data delivery industry within 5~10 years.  If I were the CEO of a large data center company, I would be doing a lot of homework, with a very high sense of urgency, to get a complete understanding of cloud computing and industry dynamics.

Focus less on selling individual cabinets and electricity, and direct my attention to better understanding cloud computing and the 4th Utility of broadband/compute capacity.  I wouldn’t turn out the lights in my carrier hotel or data center quite yet, but this industry will be different in 5 years than it is today.

Given the recent stock volatility in the data center industry, it appears investors are also becoming concerned.

The Utility and Pain of Internet Peering

In the early 1990s TWICS, a commercial bulletin board service provider in Tokyo, jumped on the Internet. Access was very poor based on modern Internet speeds, however at the time 128kbps over frame relay (provided by Sprint international) was unique, and in fact represented the first truly commercial Internet access point in Japan.

The good old boys of the Japanese academic community were appalled, and did everything in their power to intimidate TWICS into disconnecting their connection, to the point of sending envelopes filled with razor blades to TWICS staff and the late Roger Boisvert (*), who through Intercon International KK acted as their project manager. The traditional academic community did not believe anybody outside of the academic community should ever have the right to access the Internet, and were determined to never let that happen in Japan.

Since the beginning, the Internet has been a dichotomy of those who wish to control or profit from the Internet, and those who envision potential and future of the Internet. Internet “peering” originally came about when academic networks needed to interconnect their own “Internets” to allow interchange of traffic and information between separately operated and managed networks. In the Internet academic “stone age” of the NSFNet, peering was a normal and required method of participating in the community. But,… if you were planning to send any level of public or commercial traffic through the network you would violate the NSFNET’s “acceptable use policy/AUP” preventing use of publically-funded networks for non-academic or government use.

Commercial internet Exchange Points such as the CIX, and eventually the NSF supported network access points/NAPs popped up to accommodate the growing interest in public access and commercial Internet. Face it, if you went through university or the military with access to the Internet or Milnet, and then jumped into the commercial world, it would be pretty difficult to give up the obvious power of interconnected networks bringing you close to nearly every point on the globe.

The Tier 1 Subsidy

To help privatize the untenable growth of the NSFNet (due to “utility” academic network access), the US Government helped pump up American telecom carriers such as Sprint, AT&T, and MCI by handing out contracts to take over control and management of the world’s largest Internet networks, which included the NSFNet and the NSF’s international Connection Managers bringing the international community into the NSFNet backbone.

This allowed Sprint, AT&T, and MCI to gain visibility into the entire Internet community of the day, as well as take advantage of their own national fiber/transmission networks to continue building up the NSFNet community on long term contracts. With that infrastructure in place, those networks were clear leaders in the development of large commercial internet networks. The Tier 1 Internet provider community is born.

Interconnection and Peering in the Rest of the World

In the Internet world Tier1 networks are required (today…), as they “see” and connect with all other available routes to individual networks and content providers scattered around the world. Millions and millions of them. The Tier 1 networks are also generally facility-based network providers (they own and operate metro and long distance fiber optic infrastructure) which in addition to offering a global directory for users and content to find each other, but also allows traffic to transit their network on a global or continental scale.

Thus a web hosting company based in San Diego can eventually provide content to a user located in Jakarta, with a larger network maintaining the Internet “directory” and long distance transmission capacity to make the connection either directly or with another interconnected network located in the “distant end” country.

Of course, if you are a content provider, local internet access provider, regional network, or global second tier network, this makes you somewhat dependant on one or more “Tier 1s” to make the connection. That, as in all supply/demand relationships, may get expensive depending on the nature of your business relationship with the “transit” network provider.

Thus, content providers and smaller networks (something less than a Tier 1 network) try to find places to interconnect that will allow them to “peer” with other networks and content providers, and wherever possible avoid the expense of relying on a larger network to make the connection. Internet “Peering.”

Peering Defined (Wikipedia)

Peering is a voluntary interconnection of administratively separate Internet
networks for the purpose of exchanging traffic between the customers of each network. The pure definition of peering is settlement-free or “sender keeps all,” meaning that neither party pays the other for the exchanged traffic; instead, each derives revenue from its own customers. Marketing and commercial pressures have led to the word peering routinely being used when there is some settlement involved, even though that is not the accurate technical use of the word. The phrase “settlement-free peering” is sometimes used to reflect this reality and unambiguously describe the pure cost-free peering situation.

That is a very “friendly” definition of peering. In reality, peering has become a very complicated process, with a constant struggle between the need to increase efficiency and performance on networks, to gaining business advantage over competition.

Bill Norton, long time Internet personality and evangelist has a new web site called “DR Peering,” which is dedicated to helping Internet engineers and managers sift through the maze of relationships and complications surrounding Internet peering. Not only the business of peering, but also in many cases the psychology of peering.

Peering Realities

In a perfect world peering allows networks to interconnect, reducing the number of transit “hops” along the route from points “A” to “B,” where either side may represent users, networks, applications, content, telephony, or anything else that can be chopped up into packets, 1s and 0s, and sent over a network, giving those end points the best possible performance.

Dr Peering provides an “Intro to Peering 101~204,” reference materials, blogs, and even advice columns on the topic of peering. Bill helps “newbies” understand the best ways to peer, the finances and business of peering, and the difficulties newbies will encounter on the route to a better environment for their customers.

And once you have navigated the peering scene, you realize we are back to the world of who wants to control, and who wants to provide vision. While on one level peering is determined by which vendor provides the best booze and most exciting party at a NANOG “Beer and Gear” or after party, there is another level you have to deal with as the Tier 1s, Tier 1 “wanna-be networks,” and global content providers jockey for dominance in their defined environment.

At that point it becomes a game, where personalities often take precedence over business requirements, and the ultimate loser will be the end user.

Another reality. Large networks would like to eliminate smaller networks wherever possible, as well as control content within their networks. Understandable, it is a natural business objective to gain advantage in your market and increase profits by rubbing out your competition. In the Internet world that means a small access network, or content provider, will budget their cost of global “eyeball or content” access based on the availability of peering within their community.

The greater the peering opportunity, the greater the potential of reducing operational expenses. Less peering, more power to the larger Tier 1 or regional networks, and eventually the law of supply and demand will result in the big networks increasing their pricing, diluting the supply of peers, and increasing operational expenses. Today transit pricing for small networks and content providers is on a downswing, but only because competition is fierce in the network and peering community supported by exchanges such as PAIX, LINX, AMS-IX, Equinix, DE-CIX, and Any2.

At the most basic level, eyeballs (users) need content, and content has no value without users. As the Internet becomes an essential component of everybody on the planet’s life, and in fact becomes (as the US Government has stated) a “basic right of every citizen,” then the existing struggle for internet control and dominance among individual players becomes a hindrance or roadblock in the development of network access and compute/storage capacity as a utility.

The large networks want to act as a value-added service, rather than a basic utility, forcing network-enabled content into a tiered, premium, or controlled commodity. Thus the network neutrality debates and controversy surrounding freedom of access to applications and content.

This Does Not Help the Right to Broadband and Content

There are analogies provided for just about everything. Carr builds a great analogy between cloud computing and the electrical grid in his book the “Big Switch.” The Internet itself is often referred to as the “Information Highway.” The marriage of cloud computing and broadband access can be referred to as the “4th Utility.”

Internet protocols and technologies have become, and will continue to be reinforced as a part of the future every person on our planet will engage over the next generations. This is the time we should be laying serious infrastructure pipe, and not worrying about whose content should be preferred, settlements between networks, and who gives the best beer head at a NANOG party.

At this point in the global development of Internet infrastructure, much of the debate surrounding peering – paid or unpaid, amounts to noise. It is simply retarding the development of global Internet infrastructure, and may eventually prevent the velocity of innovation in all things Internet the world craves to bring us into a new generation of many-to-many and individual communications.

The Road Ahead

All is not lost. There are visionaries such as Hunter Newby aggressively pushing development of infrastructure to “address America’s need to eliminate obstacles for broadband access, wireless backhaul and lower latency through new, next generation long haul dark fiber construction with sound principles and an open access philosophy.”

Oddly, as a lifelong “anti-establishment” evangelist, I tend to think we need better controls by government over the future of Internet and Internet vision. Not by the extreme right wing nuts who want to ensure the Internet is monitored, regulated, and restricted to those who meet their niche religions or political cults, but rather on the level of pushing an agenda to build infrastructure as a utility with sufficient capacity to meet all future needs.

The government should subsidize research and development, and push deployment of infrastructure much as the Interstate Highway System and electrical and water utilities. You will have to pay for the utility, but you will – as a user – not be held hostage to the utility. And have competition on utility access.

In the Internet world, we will only meet our objectives if peering is made a necessary requirement, and is a planned utility at each potential geographic or logical interconnection point. In some countries such as Mongolia, an ISP must connect to the Mongolia Internet Exchange as a requirement of receiving an ISP license. Why? Mongolia needs both high performance access to the global Internet – as well as high performance access to national resources. It makes a lot of sense. Why give an American, Chinese, or Singaporean money to send an email from one Mongolian user to another Mongolian user (while in the same country)? Peering is an essential component of a healthy Internet.

The same applies to Los Angeles, Chicago, Omaha, or any other location where there is proximity between the content and user, or user and user. And peering as close to the end users as technically possible supports all the performance and economic benefits needed to support a schoolhouse in Baudette (Minn), without placing an undue financial burden on the local access provider based on predatory network or peering policies mandated by regional or Tier 1 networks.

We’ve come a long way, but are still taking baby steps in the evolution of the Internet. Let’s move ahead with a passion and vision.

(*)  Roger Boisvert was a friend for many years, both during my tensure as  US Air Force officer and telecom manager with Sprint based in Tokyo (I met him while he was still with McKinsey and a leader in the Tokyo PC User’s Group), and afterwards through different companies, groups, functions, and conferences in Japan and the US.  Roger was murdered in Los Angeles nine years ago, and is a true loss to the internet community, not only in Japan but throughout the world.

3tera and AppLogic SWAG Moves to the Cloud Computing Retro Collection

CA and 3tera have announced CA’s acquisition of the innovative cloud computing Infrastructure as a Service vendor. This is a great thing for Computer Associates, and perhaps a bit sad for the cloud community in general. Why? It is hard to fit the energy and enthusiasm felt when walking into 3Tera’s Aliso Veijo office into words. A tight group of committed entrepreneurs and innovators, with a bit of cockiness due to the unique stature they held in the cloud computing community.

Not that Computer Associates is a bad company. In fact, they have always been one of the best kept secrets in business and enterprise software. Rock solid systems, professional sales and engineering – just not as well known to the broader community as other large enterprise systems vendors.

AppLogic brought the cloud community many firsts. The first to integrate IPv6 into their provisioning system. The first to really simplify the drag and drop provisioning process. Perhaps the first to really test and prove the concept of globally distributed processing and disaster recovery models. And they are really great guys.

Bert, Peter, Sean, and the rest of 3tera’s public face spent a tremendous amount of time supporting the community through participation in training events, community organizations such as the Convergence Technology Council of California, the Any2 Exchange Community – all with not only good community spirit, but also providing strong thought leadership to motivate the community into learning more about cloud computing and the future of information technology.

We will deeply miss 3tera, and hope the team will eventually regroup with a new set of ideas, and lead us into another generation of technology that will further enhance the industry’s ability to deliver a true, global, massively distributed cloud computing reality.

Computer Associates will bring value to the cloud community as well. With the power of CA’s organization behind recent acquisitions such as 3tera, Oblicore, NetQoS, Orchestria, Platinum Technology, Netreon, and others related to process, database and large data set management, the stage is set for increased competition in the cloud service industry. CA has the ability to provide a broad understanding of all aspects of enterprise and Internet-facing tools equal or better than IBM, Microsoft, or any other full-service integrator.

We will look forward to seeing the product of 3tera integration into the CA family, and hope the innovation and enthusiasm 3tera’s team brought to the cloud community is not swallowed up into a large company bureaucracy.

Traveling the Telecom Highway with GTT’s Scott Charter

A very cold and icy evening in Denver. One of my new data center customers, WBS Connect, was based in Denver under the technical leadership of Scott Charter. Scott gave me a call, and asked if I had the time to get together and meet, since I was in town for some business meetings and he had some ideas I might be interested in.

Several hours later, with staff at the Rialto Café getting annoyed, and my head hitting the data absorption and comprehension threshold all of us experience when talking with people a whole lot smarter than us, I knew I’d met a true visionary.

Ideas. Ideas about technology, about business, about people, and about the world we live in. Beyond the technology, Scott is a guy who genuinely cares about people – an excellent role model for young entrepreneurs.

Pacific-Tier: Today we are talking with Scott Charter, who is with GTT.   Scott, how do you like Hawaii?

Scott Charter from GTT at PTC 2010Scott Charter: Love it. I’ve been here a few times (Hawaii) before, but this is my first time on Oahu.

Pacific-Tier: We’re at the Pacific Telecommunications Council annual meeting. Scott agreed to sit down and talk with us a little bit. Scott, you’ve had some changes professionally – what’s going on?

Scott Charter: December 16th, WBS Connect, my company that I co-founded in 2002 was acquired by GTT. The deal had been brewing a couple months prior (to December), but we announced it December 16th and we’ll call it the end of January when the integration will be complete.

Pacific-Tier: So what does that bring to the business? Aside from obviously the acquisition and things, does that bring any benefits to WBS, your customers, or to the business that didn’t exist before?

Scott Charter: That’s two pointed questions. I’ll start with my customers at WBS Connect. They will continue to receive the same level of service they did from WBS Connect, and now from GTT, with an augmented NOC (Network Operations Center), we are a much larger entity as a publicly traded company. So from a financial perspective it is a much healthier organization that is continuing to grow.

We feel that what we brought to GTT was something they didn’t have, and that was a network. GTT was a switchless, global network integrator, and it was an easy add-on to give them a global Ethernet backbone.

Pacific-Tier: So how about the services WBS Connect was offering? Video services, and different types of value-added services to your network, where do they exist today?

Scott Charter: The growth on where we are on a commodity-based, circuit-based, will only continue to grow as we layer on. We have to be careful though, not to layer too much in at once. We don’t want to have too much culture shock.

So for example, I don’t really see us striking out immediately and driving more video. Conferencing services as a primary add-on for our business customers, as a business product, give till the second or third quarter and we’ll roll back into that.

Immediately we’re talking about going back to all of the GTT customers with more Ethernet. Going into the WBS customer with more off-net circuits that GTT had already done as well.

Slowly, when we get out of that, we’ll go more into managed services. I see us actually going more with other managed services in addition to video, such as managed security. Probably by Q2.

Pacific-Tier: How about WBS Connect, and I hate going back to that, but I will… You were a very open network. You would peer with other networks, you would peer with CDNs (Content Delivery Networks), do you feel that your ability to integrate or work with other companies would be changed by your acquisition (or merger) by GTT?

Global Telecom and TechnologyScott Charter: I’m learning as we’re going, because I am now working with a publicly-traded company. Things are a little bit different than when you are with a privately held, entrepreneurial small organization that is quite dynamic.

We want to bring the dynamic nature of WBS Connect to GTT, however we also have to remember that we have certain parameters that go with a publicly-traded company.

On top of that you also have an organization that really focuses on ensuring they maintain good margin. Now what we’ve done in the past with WBS Connect was that at times we’d take a lower margin deal in order to expand our network, and ultimately grow our value in another way that was not standard “Hey I need to have this much margin.”

I don’t know how much of that we’ll continue to do, but if it doesn’t make sense financially we probably won’t do it moving forward.

Pacific-Tier: So you’ve always been a leader, a thought leader in the industry. There are things changing now such as carrier Ethernet exchanges, Internet exchange points, cloud computing and the integration of CDNs into the network itself. Tell me your visions. What’s happening now? Where will we go into the future that will either support, or change, or direct the future of our business?

Scott Charter: There are so many great things that I see on the horizon right now that all seem to layer back into one another. So when we talk about additional transport services that are required to talk about enhanced cloud. Machine-machine activity, and the way they are going to interact is the future of where hosting goes – for sure.

I mean just standard dedicated servers and things like that are… I don’t want to call them a typewriter of the future, but things are definitely going to evolve. I think that as a WAN operator as part of our business we definitely see the need to connect more and more data centers that have this idea of being able to understand the need for this cloud infrastructure.

And I think you are going to find that you are going to have a global consolidation in certain points around the world that are going to mirror this cloud that is going to happen in let’s call it 10 mega data centers, at least, for computing. And we want to be a part of that.

One of the things I’m really excited about though, is the game-changing effect that I believe that 4G will have on incumbent connectivity in our existing infrastructure. If you’re a LEC (Local Exchange Carrier) with DS3s, OC3s, out to an enterprise base, that’s going to compete in a way with 4G. Call it 18~24 months from now.

I see us steering GTT towards embracing 4G as a part of our WAN business.

Pacific-Tier: Are you going to get into the tower business yourself, or are you going to connect towers?

Scott Charter: Connect towers for sure. You know, continuing to talk about any type of carrier extensions or servicing that wholesale side. But in addition to that I see from a large enterprise side, really seeing us drive more and more into that (4G and connecting via the wholesale business).

Pacific-Tier: With 4G, and LTE – ultimately 4G, does GTT get into the wireless business yourself or are you going to stay in the terrestrial business?

Scott Charter: That’s to be seen. I’m cautious on what I say now on where we’ll be, depending on where we need to be then. When I look forward now – I’m only talking about LTE. No offense to WiMAX, but I feel the real play there is with LTE.

It’s not just North American LTE, it’s global LTE. So seeing the Vodafones, the China wirelesses, and how they’re going to drive global saturation of LTE, let’s call it over the next four years, five years possibly, we’ll want to play there one way or another. I’m not sure how we’ll do it.

Pacific-Tier: So in 18 months what is the difference between terrestrial cable, terrestrial services, and wireless? Is there a difference?

Scott Charter: I’m afraid that spectrum is going to be a too little, people are going to be so excited that we might almost have another iPhone paradox that we see now with AT&T – that their own success with their partnership with Apple has caused some people to believe that the AT&T 3G is completely saturated.

Now there are some people who have some data on it which says that’s not truly the case. But there is enough of a customer backlash that it’s a customer perception that the AT&T network, due to its own success, has lead to its current situation that people are accepting it.

Now, fast forward a couple years and say what happens if we actually eat through all that LTE spectrum that’s out there now that that Verizon and AT&T – let’s just talk that North America’s acquired, wouldn’t that be interesting if that too becomes so saturated that we’re now reverting back to just terrestrial, as we’ve eaten up all the wireless.

Pacific-Tier: Tell me something, domestic or international, where’s your focus?

Scott Charter: 50-50. Let me take that back. (the) Opportunity for growth, 80-20 international. Consistent with where we are today, 50-50. New growth, international.

Pacific-Tier: Why?

Scott Charter: Under-served markets with a much higher profitability margin. It’s much easier to go in and saturate MENA, or LATAM, or parts of Asia than it is to continue to try and compete against incumbents in major markets, Tier 1, Tier 2s, or for that matter try and compete against a Time Warner in a Tier 3.

Pacific-Tier: WBS Connect helped shake up the American Internet industry by bringing affordable bandwidth and high-performance services to people. How do you continue to disrupt Verizon and AT&T and people who would possibly like to hold back development of competitive services in the United States. How do you go about continuing to hit that “borg?”

Scott Charter: By coming to shows like this (PTC) and ITW. You continue to partner up with aggressive companies that are willing to shake up the status quo. If you are working within a fleet of speed boats, if you are not there you are probably in a super-tanker that is probably going to run aground at one point.

That’s a little too much of an analogy…

Pacific-Tier: Let’s talk about your effect on the social or the people part of this business. Do you feel that your new company (GTT) or your old company (WBS Connect), or yourself as an entrepreneur – do you feel you have a responsibility to contribute to the good of the community? Is there any inherent responsibility you have to the community?

Scott Charter: I believe we all do if we want to be good global citizens and good global businessmen. It’s in our best interest to make sure we are doing things more and more efficient.

Power (electricity) is probably a great analogy because we are all working towards a more efficient data center. It’s in our best interest to try and find a means to use off-peak power. We’re involved in something right now that I think is going to shake up data centers worldwide.

And when I talk to people about it I don’t want them to think I’m getting too…, what I really want to say is that I think I have a real opportunity to change what we’re doing in global computing with some colleagues that we’re involved with on power.

Pacific-Tier: Well we hope so, and whether it’s alternative energy using solar or wind, or whether it’s using innovative ideas like fuel cells or co-generation… All of those things are good for the environment and hopefully in the future we’ll be able to reduce our reliance on very energy-inefficient hardware.

Hopefully people like you will put in SSDs using 1% of the power draw as a spindle… But tell us, as we wind down the discussion to a close, again you’ve been a visionary ever since I’ve known you. For several years I’ve looked to you for ideas and thoughts on what’s going to happen to our industry in the future.

Shoot for the stars. Tell us something we don’t know that is going to excite us.

Scott Charter: Well let me follow up on this through energy consumption. To drive the existing grid to use it more efficiently so we don’t have to build new. If we can avoid building new coal-fired power plants in order to generate all this new data, because data centers are gobbling up more power per capita than any other sector in the world right now. I mean it’s amazing.

We’re not getting that many new aluminum smelters out there, but new data centers are coming up and just eating and eating more power.

What if? And we believe we’re on to something that will allow us to not have to go and just massively overbuild our electrical infrastructure in order to accommodate this data center growth. I can’t wait to see where we are in two years with this.

Pacific-Tier: I think it’s exciting too, as a former data center operator I saw the sins of inefficiency time and time again, and I applaud your efforts in trying to correct that problem in our industry.

Any final words for the readers?

Scott Charter: I’m excited where I am going with GTT. I’ve never been a chief marketing officer in a publicly-traded company before. Colleagues of mine have come up joked with me and said “Mr. CMO! What are you going to do?” I laugh. It’s so exciting. Coming here and just trying to drive brand.

Go meet 40 new companies out of Eastern Europe, or go meet Western Africa. Wow!

Pacific-Tier: The industry needs competent evangelists and we warmly welcome your entry into the marketing business. Thank you very much for the time!

You can download the audio/recording of Scott’s interview HERE

Scott Charter has more than 16 years of data telecommunications experience, specializing in data networking. Prior to launching WBS Connect, Scott held management positions with Qwest Communications, Rhythms Netconnections, and Echostar Communications.GTT is Global telecom and Technology http://www.gt-t.net/ 

Future Visions of Global Telecoms with Bjarni Thorvardarson and Hibernia Atlantic

Bjarni Thorvardarson is a rare telecom visionary. He thinks on a level of telecoms at an intercontinental level, rather than a national or local level. Hibernia Atlantic is his current project, and with recent news the submarine and terrestrial cable system is now in the global media distribution business, he is shaking up the telecom community. An Icelandic native, he has brought his knowledge and skills to the United States, basing Hibernia Atlantic in Summit, New Jersey.

Pacific-Tier Communications series on Entrepreneurs and Thought Leaders continues with Bjarni Thorvardarson, CEO of Hibernia Atlantic (www.hiberniaatlantic.com)

Pacific-Tier: Bjarni, what’s been happening with Hibernia Atlantic in the past few years, since I had my last opportunity to visit with you in Summit?

Bjarni Thorvardarson CEO Hibernia AtlanticBjarni Thorvardarson:
We’ve actually had a busy couple years – a very busy couple of years.

As you may recall, we started this business by buying a submarine asset that was formerly owned by 360 Networks. We’ve been busy trying to build our terrestrial network to try and connect this submarine cable to anywhere. We no longer refer to ourselves as simply a submarine cable, but rather a capacity provider in the eastern North America region and in Europe. Less than half of our business is now in trans-Atlantic capacity.

Even though that remains our core competence, and the core of our business, in terms of our business it is less than half of our revenue.

So that is part of the transformation that has happened over the past few years.

In terms of revenue, in 2005 we generated about $2 million in revenue, then $7 million, the $18 million the following year, then $28 million, and last year we generated about $38 million dollars.

And now the target for 2010, with our addition of MediaXstream, is about $75 million dollars in revenue. So, we’ve been growing about 40~50&, up to 80 or 90% a year. So you see it’s a very rapid growth. We are riding on a couple things. One is that we are operating in the biggest capacity market in the world, which is the Northeastern part of North America and Europe. And we are focused on a niche sector, which is the big bandwidth market – which is by itself growing about 40% in volume terms a year

And now, since we still have a relatively small market share, we are growing even faster than the other (traditional) markets (players). That’s how we’ve been successfully growing our revenues.

Last year, in 2009, we were confident for the first time, and we were profitable. We are very happy with the way things are going.

Pacific-Tier: That’s excellent! Can you tell me a little about yourself, and how you got into the business of both submarine and terrestrial bandwidth and capacity?

Bjarni Thorvardarson:
Sure. I’ve been in the IT and telco business for about 17 years since I finished my business studies. By education I have a degree in engineering from the University of Wisconsin (At Madison). Later on I added a science degree from the London Business School.

I went into the telecommunications business, and from there into investment banking (around 1998). Then shortly thereafter I started a fund that was investing in telecommunications and IT. That was 1999 into 2001. From there Ken Peterson actually got interested, Ken Peterson was the owner of Columbia Ventures (CVC), got into an investment in telecommunications. He brought a co-investor in with me, and bought the fund eventually. That’s how it came about that I started working for CVC.

And I’ve been investing on their behalf in telecommunications since 2002.

Now one of the investments that we had made was indeed Hibernia Atlantic. That was 2003. Then in 2004 we sold an investment that I was responsible for here in Ireland. Then I took over the responsibility of Hibernia Atlantic. Since 2005 I have been with Hibernia Atlantic, running it for CVC.

That’s how it came about that I’ve been investing and spending my time in telecommunications.

When it came that I was to take on the Hibernia Atlantic project, it was meant to be a 6 month project. We’d see what we could do, fix a couple things, and recruit the right people. It’s one of those things that a 6 month window turned into a sliding 6 month window. And during the next 6 months we ended doing something exciting. That’s what happens when you get interested in what you are doing.

You see the potentiality, you see what can be done, and you kind of stick around – and so its 5 years now. I no longer refer to it as my 6 month project, I now refer to it as my passion. It’s what I do. I’ve been commuting between Ireland and the US now for the better part of 5 years, and relocated to New Jersey where we have the Summit headquarters, or US headquarters a few years ago. So I am pretty heavily enrolled in the Hibernia project.

Pacific-Tier: That’s good. You mentioned earlier the topic of moving from telephony to broadband. Where does Hibernia and your plans fit into what I would call the “globalization of communications,” or the “flattening of the communications architecture…” How do you fit into that model?

Bjarni Thorvardarson:
Hibernia is very much a long-haul provider. We started in the long-haul wholesale capacity business, so provided the infrastructure provider to other service providers – the likes of BT and France Telecom, Cogent and the like… We did a very good business connecting the biggest consumer markets to places like New York, London, Amsterdam, Chicago, connecting those markets and enabling service providers in those markets to connect to different parts of the world.

Our business is really predicated, it is built on the globalization of business, or the globalization and international movement of information. That was the core part of our business model.

Now since then we have moved on to going up the value chain (if you like) to become the service provider to enterprises ourselves, and begin focusing on the finance vertical, which is a very demanding market. They (financial markets) are demanding and expecting low latency circuits between different trading markets and centers. That was a big first step into the enterprise world.

The next step we took was to the media sector, which we did first when we were acquainted with or partnered up with MediaXtreme, investing in MediaXstream a couple years ago. Then finally culminated in the acquisition of MediaXstream last month. So that’s our big step into the media market.

So now Hibernia’s approach to the market is threefold:

  1. We are still very much the legacy we started, which is the wholesale provider to other service providers and telcos around the world
  2. Second is the finance sector
  3. Third is the media sector

But they all are very much relying on the globalization of business and people’s general view of the world. So we have to look and depend on it.

Pacific-Tier: So in a traditional sense submarine and terrestrial long-haul networks relied on SONET or SDH technologies as the basic (communications) protocol. Is Ethernet playing a stronger role in anything Hibernia is doing now?

Bjarni Thorvardarson:
We started providing waves (2.5 or 10 Gigabit) via SDH and SONET as a product to the wholesale sector. For technical reasons including that was the technology Hibernia was built on. And also that was the product the wholesale providers relied on. They need to connect their different POPs (Point of Presence) equipment. A POP in New York, to a POP in London, that equipment relied on and called for SDH/SONET to connect the POPs.

Now as we grow into the enterprise sector, then the guys, the traders, or whoever we are doing business with – they don’t have SONET or SDH equipment. They have Ethernet equipment or equipment that calls for Ethernet protocols. So it is incumbent on us to be able to provide that without cumbersome translation from one protocol to another.

So we have since built Ethernet at the core of our protocols. Now we can offer Ethernet over SONET, which is dedicated Ether net point-to-point. And we also built, using H3C equipment, a product that we can connect customer to and point-to-point to multipoint capacity.

So moving from the SONET/SDH world to the Ethernet world, or switched Ethernet is very much what we are doing. I am right with you there that we are phasing out one world and moving to another one. Even the telco providers are increasingly moving into the Ethernet world. Especially when it comes to building out their ISP or Internet networks.

Pacific-Tier: When you see organizations like the Carrier Ethernet Neutral Exchange (www.cenx.com) and things like that popping up that are basically designing their product on the old bilateral telecommunication company design,… Do you believe that bilateral Ethernet, or that bilateral carrier relationships still have a role, or will companies like Hibernia make many of those old relationships irrelevant?

Bjarni Thorvardarson:
Hibernia, in its traditional sense, is not going to replace bilateral agreements. But bilateral agreements are going to be phased out when it comes to the exchange of Internet traffic, because exchanges are going to replace them. It is like the minutes (telephone settlement) business extremely cumbersome. If you want to build a bilateral relationship with other telecommunications providers you want to exchange traffic with through some of the voice exchanges you can do business in a matter of days.

And that is the same with the exchange of Internet traffic. If you want to do peering on a bilateral basis with companies it takes you years to build up. If you want to do it through an intermediary (such as a public internet exchange Point), clearly it is moving from the bilateral agreements to the exchanges.

Now how does that related to the price a carrier has to pay when going through the exchanges? To transit pricing? Or what have you?

And we can see where these intermediaries are actually charging less and less for the service of being in-between the delivery of the data and the content origination. You can see that in transit pricing, and how transit pricing is continuing to plummet. So I think that we are becoming less reliant on the bilateral agreement. And I firmly believe the opportunity and the necessity of getting more exchanges up and running is important.

And I think the same transition, you can see the same transition when it comes to not only Internet peering, Internet traffic is also the interconnection of Ethernet circuits, the same transition occurred that we saw 50, 60, 70 years ago when it came to voice traffic. If you wanted to make a call from London to New York you had to call an operator in London, and he made a physical cross connect to a long-distance line that terminated in New York.

The operator in New York then made the physical transition to the local tail line to the customer in New York.

That’s very much the same as when you are setting up an Ethernet circuit today. You have to build up a physical cross-connect in New York between the local tail provider and the Hibernia facility, and then in London to the tail provider over there.

With INNs and with proper Ethernet virtual cross-connects which are relying on a virtual exchange, or like exchanges that you are referring to, it’s going to revolutionize the provisioning and setup time of these Ethernet circuits. We can see a leap in that direction over the next couple years.

Pacific-Tier: One other thing I’d like to ask about Hibernia’s role in the Internet and international community in particular. I’ve been spending a lot of time in developing countries myself over the past year or so. So does Hibernia play a larger role, more than just an economic role,.. Do you also have a larger role in supporting the global community to provide a product that will bring global communications, education, entertainment, media, – can you bring that type of thing to another level?

Bjarni Thorvardarson:
I think that when you have a major company, a large company on the global economic scale, then you have to sit back an think about what your global social responsibility is to the world, and what you can contribute to the world. Hibernia is light years away from being at that size, and we can best fulfill our role now by looking for what is our economical role in this world.

Today that role is to provide large scale, high interconnectivity in all the market we operate in at a very attractive price. And by doing that we can contribute to the successful globalization commerce that will facilitate the business which will break down barriers that might prevent doing business, or from offering access to multinational companies.

That’s really what I think is our role in the world, to enable companies and people around the world be operating seamlessly as if they were sitting at two desks right next to each other (companies), and thus taking away the physical barriers of being located thousands of miles apart.

Pacific-Tier: If you look at the ideas, of say Carr’s concept of the “Big Switch” (Nicholas Carr), where telecom companies, and computing companies, and storage companies actually become nothing more than a huge, ubiquitous utility that people expect. Do you agree with that idea, or do you believe companies like Hibernia should be able to offer much higher value than the idea of a utility “big fat pipe?”

Bjarni Thorvardarson:
Well I think everyone has to know which business they are in, and that people can be in more than one business at a time. I say that from experience, because CVC (his prior venture capital company) was in the manufacturing of aluminum, and the manufacture of advanced products that were made from aluminum.

Making or smelting aluminum is very much a commodity business. The success of the business is predicated, or based on you operating a business efficiently. It’s about cost, cost, and cost. If the price per pound of aluminum that you smelt is higher than your competitors, you are out of the market. So that’s how we operated in the aluminum market.

But we also had exclusion companies. That is changing the aluminum ingot to bars that can be used by manufacturers, and be converted to door frames, and window frames, and converted into materials that could be sold to the end users or consumers.

So we were very much aware of the different needs of the value-added service market and the commodity market.

And I think the telecom business is very much the same. You have to know whether you are in the commodity market, the utility market, and there is a fair amount of utility market in the telecommunications world. I think the core of what Hibernia does is just that. It is a utility capacity between the POPs. It is providing 10G (Gigabit) capacity between London and New York, or London and Amsterdam, connecting all these high capacity markets, and it is a utility market.

You have to be very efficient in terms of how you operate your market.

Then, when you go up to the media market, or to the finance market, it is no longer a commodity market. The trader that is trading between London and New York, he does care about the price he is paying, but even more concerned with no having a second-rate service.

So you have to know which market you are operating in, and telecommunications will remain within the two markets.

Now Nicholas Carr’s concept or theory of the “Big Switch” where the world is going to cloud computing as a utility, where you plug into a socket in the wall and you are connected to a network of computing power is a noble one, and a very interesting one, and I think it certainly is going in that direction, but the difference between the bits and bytes, and the electrons that flow on the wires of the utility companies or the electric companies – it is bits and bytes of sensitive information that you do not want leaving the company or be flowing on the wires outside of the company.

So there are many challenges the “Big Switch” theory or concept. But there are a number of companies that are building up a very successful business model. Amazon being one, and a number of other companies offering cloud computing and growing extremely fast.

I am fascinated by the concept and the model of business, but I don’t think there is quite the pure cut between computing and the traditional utilities.

Pacific-Tier: Any other vision or looks into the future Hibernia may be able to share as you peer into the next 3 to 5 years?

Bjarni Thorvardarson:
I wish I could pretend to have a crystal ball, and say what our visions are, but our vision, really for the near to mid-term future is to continue our growth into the different enterprise verticals. We need to continue to service the market we comfortably define as our core markets, being North America and Europe. That’s where we will continue to focus our attention.

But we will to some extent continue to introduce new products that will leverage our network, and continue focusing on different verticals that we can also continue leveraging the network. The game for Hibernia over the next couple years is leveraging the asset. Those assets are not only our network, but also the experience of our company (employees) – the people we have, the processes, and the systems we have. Our competence and the network – that is what Hibernia is going to be not only for the next few years, but beyond.

Pacific-Tier: Do you see any potential partnerships or expansion across other parts of North America or into Asia at some time in the future?

Bjarni Thorvardarson:
Without any doubt, I am sure we will find partnerships that will benefit both parties, but it is nothing I can speak about or speculate about right now.

Pacific-Tier: Fair enough! Any final words on Hibernia, yourself personally, or what you see as interesting things happening in the market?

Bjarni Thorvardarson:
Not really, I am just enjoying working in this space, and I’m looking at a number of exciting opportunities. M&A opportunities, growth opportunities, and I am just excited to be here.

Pacific-Tier: As we all are, and thank you very much for your thoughts – it has been a great discussion.

Bjarni Thorvardarson:
Thank you! It is my pleasure!

Mr. Bjarni Thorvardarson is the CEO of Hibernia Atlantic since January 2005. Mr. Thorvardarson joined CVC, Hibernia’s parent company, in 2002 from ISB bank where he launched and managed the listed Talenta-Technology fund which focused on emerging communication and IT opportunities. Prior work experience includes investment banking at FBA bank, management of an MIS department and European Sales Director of an IT company. Mr. Thorvardarson holds an M.Sc. degree in Engineering from UW-Madison, an MBA from ISG in Paris and an M.Sc. in Finance from London Business School. Mr. Thorvardarson serves on the board of One Communications, Magnet Networks.

Read the Pacific-Tier series on Entrepreneurs and Innovators

Life is Not Fair, But We Must Be Fair

Normally I will not watch Fox News, and even if I somehow stumble upon Fox News I A great American, Jon Huntsmanwould rather watch the Cartoon Channel before listening to Glen Beck or Sean Hannity. But here I was, a Saturday night hitting the treadmill at the Burbank YMCA, and the TV lineup offered a college bowl game with two teams I had never heard of, the food channel, the house hunting channel, reruns of MSNBC’s Lockup, and a rerun of the world’s dirtiest jobs on Discovery. And Glen Beck.

His guest was Jon Huntsman, Sr. (Click here for a link to the interview)

Jon Huntsman, Sr., is the guy who discovered plastic containers, and developed the idea of using plastics and foam to protect everything from eggs, to Big Macs. And he is now the 47th richest man in the world.

“Life is not fair, but we must be fair”

For Huntsman it is all about your moral compass. You know what is right, and your moral compass will help you keep in the right direction. There is no excuse for a man (or woman) to do what is wrong – no excuse. It does not make any difference if somebody else is taking public responsibility for your actions – it is you pulling the trigger on your action. Don’t blame your actions on the shareholders, board of directors, or anybody else. If the moral or ethical direction of the company is wrong, work, invest, or participate in another activity.

Huntsman is an inspiration. The hour I spent with him on that treadmill in Burbank will echo with me for a long time into the future. The one guy in the entire Nixon administration who told the chief of staff he would not do anything unethical or illegal, and walked away from the problem. The one guy not indicted in the Nixon administration, because he was beyond reproach.

This is a guy who grew up in a remote part of Idaho (Blackfoot) in poverty. Clean living and hard work eventually brought him to the University of Pennsylvania, and the rest is history.

Life is Not Fair

There are simply people out there in the social Ether who are motivated by taking things away from others for their own benefit. They have no lingering issue hurting others, ruining their businesses and lives, or performing unethical or immoral activities by displacing their personal responsibilities on to their management or shareholders. Life is not fair.

But Huntsman strongly urges us to be fair in our business, interpersonal, and moral lives. We must be better than others who do not follow their moral compass.

“With integrity, nothing else counts. Without integrity, nothing else counts.” (Sir Winston Churchill)

Huntsman frequently quotes Sir Winston Churchill in his interview with Glen Beck. Integrity is all a man has to follow him through life. Regardless of your intelligence, your creativity, your dedication – without personal integrity your reputation will have a stain which will follow forever.

What it Means to You and I

We all have an inherent loyalty to our families, religious convictions, nation, schools, and companies. We will do anything to defend those institutions and people who demand our loyalty. Even if it means breaching the threshold of ethics, morals, and personal integrity. But it doesn’t have to be that way.

During my nearly 30 professional military and civilian years living in Japan, China, and Mongolia, I was frequently advised that to successfully do business or build relationships in any of those countries, I’d have to develop a high tolerance for drinking, smoking, and in some cases participating in activities that would stretch the limits of marital fidelity. I don’t smoke, drink alcohol, nor have I ever cheated on a wife or “significant other.” So how could I possibly do business in those countries?

Reality is, once the trading community or professional community became familiar with me, and learned I did not drink, smoke, or play around, they simply never pushed the point. My company had a great reputation, offered a great product, with outstanding service, and a commitment to our customers and industry. We made a lot of money in Asia – that was with Sprint International in the 1990s.The guys I worked with who liked to drink would go out for drinks – but the deals were done at the negotiating table. The market knew our company had integrity, and our employees gladly followed the company’s culture.

In the past few years I have been exposed to the lowest form of private equity life. People who haphazardly buy and sell paper, make promises, destroy companies (along with the careers and lives of those who worked in those companies), and hire high performance lawyers who are paid to find ways to exploit the “loopholes” of contracts in favor of the private equity companies. Huntsman also finds those people in contempt – those who make a living helping companies dishonor the agreements, handshakes, and contracts they sign.

Huntsman gave an example of how important a man’s word is to his own image, as well as the company’s image in his story of a company he sold at a price agreed to prior to an economic windfall that brought the valuation up to a much higher level. He agreed to sell his company for $54 million, although he company eventually reached a valuation of five times that amount prior to closing the deal.

Huntsman honored his agreed price, even at the urging of lawyers, shareholders, and other who advised him to get much more out of the deal. He refused – he had shaken hands and given his word. That was worth more than money. How many of us have the courage to honor our commitments at that level? Is money so important that our word, handshake, or agreement can be made void for a few dollars – at the expense of our integrity and reputation?

Huntsman’s final lesson was to treat people with respect. Nothing special, just treat people with respect.

And those principles, which are applauded in books, articles, interviews, and about 200,000 Google hits, appear to not only be real, but have also been part of his rise to one of the richest men in the world.

And by the way, he is also on the global list of most generous philanthropists. From donating to cancer research to building libraries, it is his intent to leave the world with nothing, giving back to the world who gave to him.

An inspiration. I am giving thanks this evening to men like Jon Huntsman who renew our faith in the idea of creating business and wealth through hard work, integrity, and honesty. This attitude will get us out of the current economic disaster, and motivate entrepreneurs to get the job done – and get it done right.

And thank you Glen Beck for brining Mr. Huntsman to us for a wonderful hour

John Savageau, Honolulu

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