Tactic 14. Purchase Data Center During Downturns
Getting the cost of the data center as low as possible is one way to provide a lower-priced peering solution and lure customers in. One way to decrease costs is by purchasing a data center in a down market, as described in the next notes from the field.
Value of the IXP = f(p , r , v , m ) - c
p : The population
r : The routes available
v : The volume of traffic exchanged
m : The market perception of the IXP
c: The cost of participatioon at the IXP
Ray the Hoster
(This story is repeated from an earlier chapter but with a different emphasis; here the story focuses on the acquisition of data centers during an economic downturn. )
In 2001 the economy collapsed. Ray had been waiting in the wings. Rather than fretting, he seized the opportunity to buy a moth-balled data center for literally pennies on the dollar. The generators were still shrink-wrapped, and servers were half unboxed and still there. Qwest had lit the building before the building was shut down.
Ray was network-savvy enough to identify which networking hardware he could get – also for pennies on the dollar – on Ebay to get the building connected and start his hosting company. He found the right combination of gear to get things going, and contacted Qwest at the end of its quarter to negotiate a great deal on bandwidth. He is the only one I have ever heard of who was able to buy an OC-48 “leased line” and pay for how much he used it, simply telling Qwest how much he would pay each month based on his own usage measurements! What a dealer.
Over the next few years, he filled the data center with paying customers as the economy slowly recovered. He then sold the hosting company for something in the neighborhood of $40M.
I serve on a few boards, and I have found that this story helps put things into perspective, especially for those who worry about the economy and making optimistic investments during downturns.
Ray is my favorite example of being network-savvy, opportunistic, and smart (frugal).