Picture for a moment a four-inch zinc-plated steel compression connector and a four-inch zinc-plated steel set-screw connector. Both pieces of hardware serve the same purpose of connecting a piece of conduit to an electrical enclosure. They even look similar. The difference, though, is that the screw connector costs $7 less.
On the surface, that may not sound like much, but for CyrusOne and its customers, it’s a big deal. The $7-billion company builds and operates mission-critical data centers for many of the world’s largest and most powerful organizations. Though it functions in the world of IT and high tech, CyrusOne is actually a real estate development company. There are no patents to protect or trade secrets to leverage. Instead, CyrusOne competes on scale, cost, and speed.
John Hatem, who joined CyrusOne in 2011, has spent more than two decades developing IT and data-center strategies at the company. To this day, he serves as executive vice president of design, construction, and operations. In 2015, CyrusOne captured nearly 12–15 percent of the market for publicly traded data-center REITs. In 2016, it did close to 40 percent of all industry leasing in the continental United States.
“We’re growing because of our ability to service Fortune 1000-sized companies and cloud customers,” Hatem says. “We attribute that to a development process maniacally focused on time to market and cost savings—while also maintaining industry-leading reliability.”
That’s why a simple move from compression to screw connectors didn’t seem like such a big deal on the surface. And yet, it is an example of one of the hundreds of design details CyrusOne’s development teams sweat. The company builds with prototypes that Hatem and his colleagues improve once a year. They swapped out the compression connectors ($20.99 each) for screw connectors ($13.19 each) in 2016, and that simple change will save CyrusOne up to about $75,000 on a typical data center while reducing installation times by an estimated 75 percent. This easy design change could save more than $1 million across CyrusOne’s entire portfolio.
The CyrusOne approach stands in stark contrast to the enterprise model, in which technology leaders view data centers as behemoth science projects. They spend months analyzing specific sites and selecting custom equipment. Generators alone can take more than a year to arrive. When the data center is finally complete, it’s already out of date. Worst of all, enterprise companies never export best practices or lessons learned because they only build one data center at a time. By the time they’re ready to build again, another science project is started and lessons learned never have the chance to be applied.
To this day, CyrusOne has 20 data-center projects in progress, with standardized equipment on hand and ready to go. Supplies arrive on-site in less than 60 days. And what enterprise companies do in two years, Hatem and his team can complete in six months. While it seems odd that few others are taking the CyrusOne approach, it may be too late for them to start doing so. The traditional cost for an enterprise data center is $30–$40 million per megawatt. Other publicly traded REITS advertise costs from $9 million to $12 million. CyrusOne’s leaders are locking in rates between $5 million and $7 million. “We have the scope and track record to command the market,” Hatem says, adding that he and his colleagues are locking large tenants into long-term leases before anyone else can.
“Making it simple and easy is a strangely unique method to data-center construction.”
CyrusOne’s goal is to get to a build cost of about $2–$3 million per critical megawatt and provide a flexible infrastructure that can accommodate the elastic demands of the cloud. “This will ultimately take changes in how customers think about the data center, and while it will not be easy, I believe it is achievable,” Hatem says.
CyrusOne calls its design-build approach massively modular. “Making it simple and easy is a strangely unique method to data-center construction,” Hatem says. His company is eliminating needlessly redundant equipment. Almost all data-center outages are caused by human error. By driving out hundreds of pieces of hardware, CyrusOne’s prototype designers remove some of the risk, reduce the likelihood of outages, and decrease costs associated with ongoing maintenance and operation.
Teamwork also plays a crucial role. Hatem and CyrusOne call upon the same vendors, contractors, architects, and engineers whenever possible. Those familiar with the CyrusOne process can work quickly with little oversight and then submit ideas and other feedback the company can use to “shave off time and squeeze out money” from future projects.
Recently, CyrusOne completed one of its fastest and most cost-effective data centers, a 30 mW, 120,000-square-foot project, in less than six months. The project—known as Goliath—was for Hatem a culmination of five years of design innovation. How did he and his colleagues achieve such a massive success? By applying a manufacturing mind-set to data centers. The company used a series of prefabricated electrical rooms with preinstalled equipment. For large cloud companies, it is a major obstacle for them to build and operate their own data centers. Workers assemble and test the equipment off-site while others stand up the structure’s precast, preinsulated shell, and complete the roof. The innovation allows CyrusOne to work faster and cheaper than before.
With Goliath complete, the company moved on to a project known as Alamo 2 for the same major client. Again, CyrusOne containerized all electrical rooms and completed 65 percent of all electrical work off-site in a controlled environment. The 18 mW, 120,000-square-foot data center was completed in less than seven months.
Success with projects such as Goliath and Alamo 2 has convinced CyrusOne’s leaders to create a new product offering anchored by its strength in scale, quality, and large, single-tenant deployments. CyrusOne is now offering the Cloud Center, a 36–45 mW data center that can be completed in seven months, at a cost of between $5 and $6 million per megawatt, depending on the market.
What CyrusOne is doing to the data-center industry is similar to what has happened to other industries throughout history. It’s providing scale, speed, and compelling economics in order to provide a good or service that end consumers can’t achieve by themselves. One example is how the vast majority of people in the world don’t grow their own food anymore. Rather, farmers and ranchers carry this out. Another is how manufacturers used to build their own power plants to power their factories but now rely on utility companies.
“We have proven this to close to 1,000 customers—that CyrusOne is the solution to their data-center needs,” Hatem says. “With over 50 percent of our year-over-year growth coming from existing customers, the evidence is clear.”
A few years ago, CyrusOne didn’t serve any of the leading public cloud customers. Since then, it has signed nine of the 10 key players. By every metric, the company is leading the way. And with domestic success on sure footing, Hatem and his colleagues have turned their attention to other parts of the globe. In 2018 and beyond, they’ll push into all major international markets.
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