Baton Rouge-based Venyu has been in the data center and services business since 1989. Businesses’ ever-increasing hunger for bandwidth and security persuaded the company this year to come down from the cloud long enough to launch a design-and-build segment.
Tommy Curb, Venyu executive vice president of business development and legal affairs, couldn’t quantify the size of the market for the new service, but the data center space has seen roughly double-digit growth for the past several years. It will continue to do so through 2020 and probably longer.
Venyu, which is owned by regional telecom firm Eatel, owns data centers at the Bon Carre Business Park on Florida Boulevard in Baton Rouge and in Bossier City. Venyu is adding a $20 million center in Shreveport, which will replace the Bossier City center, and a $35 million center in Jackson, Mississippi.
In its design-and-build venture, Venyu is targeting education, finance, health care, legal and other smaller organizations in rural areas that want to keep their servers nearby. Venyu will tailor the data center to fit its clients’ needs.
“The demand on companies to either retain data or to convert to some sort of technological advancement is just increasing,” Curb said. “So that continuously puts a strain on the IT departments of businesses and organizations to where they’re constantly adding servers and cloud storage to their own IT environment.”
All that IT pressure and spending translates into the kind of numbers that even late astrophysicist Carl Sagan might have found exciting.
In the United States, independent data center firms clocked $115.3 billion in 2015, according to financial and professional services firm JLL. That’s an increase of 6.1 percent, with 7.9 percent projected for 2016.
Publicly traded data center companies also are seeing demand increase. Two of the largest, Equinix and Digital Realty Trust, grew 2015 revenue by 12 percent and 9 percent, respectively. Wall Street analysts expect both to boost revenue by double digits in 2016. Much of the growth forecast involves massive data centers held by cloud companies like Microsoft or Amazon, which invest hundreds of millions of dollars in facilities, mainly to serve businesses in major markets.
All of which means Venyu’s latest venture appears to buck a national and global shift.
“The current trends in the industry are toward larger data centers that are better-managed and more efficient,” said Jonathan Koomey, a Stanford University researcher and business consultant. “The market for building smaller data centers, we think, is not growing as rapidly as the demand for larger, more efficient and much more cost-effective data centers.”
However, Leigh Martin, an Atlanta-based managing director for JLL, said while more and more companies are tossing their server needs to the cloud, many firms still need their own servers and a place to house them.
Everybody isn’t going to use one of the bigger data center companies or need a Tier III center with its redundant systems, Martin said.
“You could certainly make the argument that in smaller rural areas, there is some degree of need,” Martin said. “Some people prefer to be closer to the servers.”
Venyu says there’s another good argument for a company owning its own data center: The facilities are “extremely profitable.”
The EBITDA margin for centers — earnings before interest, taxes, depreciation and amortization — is about 40 percent, according to Venyu.
Venyu decided it could leverage all the expertise gained in establishing its own centers by offering the design-and-build service to clients, Curb said. Not that Venyu will be doing any of the actual construction work, mind you.
“There’s not any Venyu employees that would be walking around in hard hats trenching about or running a backhoe or anything like that, but we certainly have the subcontractors and other business partners that we can leverage to do that work,” Curb said.
Curb said Venyu already is in discussions with several potential clients, even though the company announced the service less than a month ago.
Koomey said data storage and services are expensive no matter which way a company goes.
The big expenses for data centers come from laying out a bunch of capital for equipment that, in lots of cases, isn’t run very often, Koomey said.
Koomey’s research, which cites reports from the Uptime Institute and McKinsey and Co., shows up to 30 percent of U.S. servers are “comatose,” meaning they use electricity but deliver no useful information.
Venyu has a plan to address that issue, with facility owners partnering with smaller IT firms in the area to increase the data center’s occupancy and increase its revenue.
Martin said there are companies that build smaller, modular data centers.
Those firms go in, put in a concrete pad and build a facility that easily can be expanded. The sites just need the right amount of power and connectivity, ideally to three fiber networks.
“So for really little cost, relatively speaking, you can ship in your data center,” Martin said. “I don’t know if that’s what their plan is or not, but it’s certainly an option.”
Curb said Venyu isn’t locked into any single data center model.
Venyu will build data centers in rural or metropolitan areas, set up maintenance schedules and contracts and act as a representative for the owner with equipment vendors. Venyu’s IT staff also can offer help with the data center’s network operations.
Venyu may even look at joint-venture arrangements with customers, Curb said.
Curb was unwilling to reveal projections for the design-and-build business’s growth but said he’s excited about the possibilities.
“We feel like there’s a lot of buzz in the IT world. Being able to bring this type of service to market and add it to our portfolio of services separates us from a lot of the folks out in the marketplace,” Curb said.
Follow Ted Griggs on Twitter, @tedgriggsbr.