A Massive, Fast-Growing Business, and One of the Best Ways to Invest In Property
Part One. Description of the business and Consumers
There is currently an ongoing technological revolution around the world. Artificial intelligence, 5G technology, IoT, and the number of telephone subscribers is over 4 billion, of which 2.5 billion have smartphones. The amount of video information on the network doubles every 2.5 years. In addition, the amount of traffic on the worldwide web doubles every 9 months.
Moreover, the massive transition of video and television technology to UltraHD 4K will at least increase the television traffic by twice. The number of security cameras that continuously transmit video information in the world is already over 100 million.
By 2018, the total annual volume of Internet traffic and data transmitted via mobile, telephone, and other networks reached 1.6 zettabytes, i.e. increased several times over the previous years. For example, in 2016, the total volume of digital information created by humankind was only 0.16 zettabyte. 1.6 zettabytes correspond to 1.5 trillion gigabytes. That’s about 4.5 trillion YouTube videos and 940 quadrillion text messages!
The rapidly increasing amount of data requires tremendous computing power and storage capabilities. Meanwhile, the capabilities of modern data centers lag behind the growth of traffic and data volume. This reason is why data centers are one of the fastest growing market segments. According to current statistics on 2,500 data centers based in the US, this figure is growing at least 10% to 15% per year.
According to the Edge Data Center Market, the current estimated cost of data centers is $4 billion. This amount will grow to $13 billion by 2024, i.e. in just 6 years.
The growth in the number of data centers is no longer dependent on crises or market fluctuations. Instead, it is because of data centers being one of the most stable and reliable businesses that exist.
We can divide consumer data centers into several categories:
Wholesale, such as Facebook and Microsoft, where companies buy data centers on a large scale and only have an interest in space and power supply
Medium-sized companies buy ready-made data centers with the entire infrastructure and install their equipment
Small companies typically buy several racks and use equipment provided by the company that owns the data centers
Hence, thanks to constant development in the modern world, consumer companies can quickly and conveniently buy ready-made data centers. As a result, the turnover of funds is accelerating and the capitalization of companies procuring data centers is growing. These companies also facilitate clients by assisting with the creation and launch of data centers. But this process is difficult and time-consuming and requires serious labor and financial resources (capital investments).
When it comes to creating a data center, you do not need to make multi-million dollar investments or build high-rise towers. In principle, you can create a data center in an area as small as 100 square meters. Rent utility rooms in buildings with no windows (no windows are a necessity for data centers). The main utilities required are electricity (thousands of servers consume a significant amount of electricity), broadband Internet, and air conditioning.
You will find data centers located in skyscrapers, offices, and even shopping malls around the United States. Post 9/11 evidence indicated the presence of huge data centers on at least 20 floors of the Twin Towers.
Now let’s talk financials. If you approach this business purely from the point of view of renting (subleasing) a premise, this business model is ideal for you. Consider this scenario: in an area of one square meter, you can install a rack holding 20 to 40 servers. You can rent the servers at prices ranging from $100 to $250 per month. In fact, for one square meter of space, you can generate $2,000 to $10,000 per month!!! Where else or, in what other business, can you earn $10,000 per square meter?
No single business or single private client will pay this much.
Of course, we are not exaggerating because you need to buy servers and racks, provide electricity, the internet, and you need administrators. However, even at the rate of $2,000 per square meter, the business is extremely profitable for the realtor who rents the premises.
Naturally, from the moment you make the decision to open a data center, considerable effort will go into building it, recruiting staff, purchasing servers, and commissioning. And as a result, your initial cost will take a hit.
The gigantic advantage of this business model is its excellent scalability. You can open a small data center with an area of 100 square meters (this makes less sense, as the profit decreases due to overhead costs). Alternatively, you can set up a center over an area of 20,000 square meters. The only catch is that you need to hire the right team. You don’t just have to install servers. Your staff should also be capable enough to sell/rent to customers. However, you can start with a small center, and then expand as sales grow.
Let’s talk about the technical details, starting with building a data center. Some companies build data centers on the principle of “build and cut”. They select buildings and handle retrofitting, wiring all communications, including cooling and installation of emergency generators in case of loss of power from the city. We will use one of these companies.
The next step in setting up the data center is “slicing” it into pieces. Allocate each part of the data center for a specific customer. The next step is installing arrays of racks, purchasing internet service providers, opening the NOC (Network Operational Center), and buying servers.
As of now, servers are affordable, costing between $2,000 and $5,000 if you buy brand new machines. Used units can cost as low as $100. Most customers will not care or notice the difference.
Our company solves any other questions you have about creating a data center. Even more, we can assist you with:
The selection and rental of the building (or premises)
Ventilation and cooling
Arrays of racks
The connection of Internet providers
NOC and the hiring of the necessary staff
Here are more details about the components necessary for a data center:
A building. In principle, this is a normal building with increased requirements for ventilation and maintaining optimum temperatures.
Array racks. Depending on customer requirements, you need to install 40, 42 or 45-unit racks.
Power Distribution Systems (PDUs) installed for each rack.
Internet Service Providers (ISPs), as in most cases, the equipment in data centers connects to an ISP to gain access to the internet. And, for a newly rebuilt data center, you need to negotiate with providers so they install their equipment and provide access to the global Internet. There are more than a hundred main suppliers in the world, and during negotiations, it is necessary to take into account who will be the consumer.
Discovery NOC (Network Operation Center), as you need service personnel with different specializations to support and maintain the data center.
Power and Cooling Technicians
Technicians for server hardware
Engineers for server and network equipment
And some employees must be local in case of breakdowns and/or installation of new equipment.
In addition, you can recruit server maintenance engineers, depending on the requirements of the final customer, in the US or hire them to work remotely in Eastern Europe, for example, in Belarus.
Likewise, you can and should rent the areas that are temporarily free of server racks as office space for companies serving the data center. This combination is ideal for IT service companies to have offices next to the data center.
According to various estimates, the growth of the office market, especially in the field of teamwork, shows a 100% increase per year.
Therefore, the combination of both a business and server racks for the data center in the rental space creates the conditions for a safe and diversified investment.
How Can We Help
Our company, together with AV5 companies, offers a new way for the construction and maintenance of data centers. Our method involves a combination of the reliability of the western “civilized” market and the developed engineering infrastructure of Eastern Europe.
We have 15 years of experience working with data centers in the United States and in Western Europe. We established contacts with engineers in the United States, Western, and Eastern Europe.
Here are some common mistakes that we can certainly help you to avoid:
Incorrect Positioning of the Data Center: Professionals take many things into account before installing their equipment. For example, the possibility of expanding the data center, the proximity and availability of backbone providers for connecting to the Internet, power fault tolerance.
Choosing a Data Center in a Seismically Unstable Region: This step will reduce the capitalization of the data center.
Incorrect Location of the Data Center: For example, you place a data center in the same building as a bank. However, the bank has a higher priority for reserve energy supply when the electricity goes out.
Staff Recruitment From Off the Street: Technicians and engineers will have access to important information. Therefore, proper selection of personnel will ensure a well-coordinated work and professional growth of the team with an increase in the company’s capitalization.
Lack of Necessary Insurance and Licenses: When working in a data center, it is necessary to provide insurance to all personnel so to cover all expenses in case of accidents.
We offer our assistance in creating cloud and data centers in the United States. Moreover, you receive business support at all stages, from building a business plan to the final sale of the data center.
Stage One: Preliminary Preparation
Selection of a supplier of wholesale (wholesales) sites for data centers among AV5 partner companies
The positioning of the data center, the choice of market and end consumers (targets), using the contacts of AV5
Selection of sellers among professionals who have experience in this field and their customer base.
Creating a brand of your data center and distributing information about services among AV5 partners in data center sales
Selection of technicians for maintenance of data centers, preparation of premises and the conclusion of necessary contracts. AV5 has the necessary resources and standard contracts to avoid hiring unknown technicians. Thus, we minimize the risks of entrusting unfamiliar staff with data centers.
Drawing up the requirements and selecting engineers.
Drawing up a business plan
Maintenance of contracts between end customers and the supplier of data centers (you), taking into account the agreement on the level of service provision
Stage Two: Data Center Installation
Install the data center after the conclusion of all contracts:
Data center design, data center map planning, placement of racks for servers, storage, and network devices.
Rack installation, construction of a Structured Cabling System (SCS).
Installation of power systems
Installation and customization of equipment (servers and network devices)
Preparation of documentation
Stage Three: Operation and Development
This is the most long-term and profitable stage: customer service. In addition to the following current contracts, at this stage, non-obvious proactive activities are also important, namely:
Gathering customer feedback on service quality
Periodic meetings of executive directors with directors of clients
Marketing promotion and improvement, so that customers can see that the company is actively developing
Monthly social events with decision makers from customers
Stage Four: Sale of Data Center
After establishing all business processes, recruiting customers, and showing profits, the company’s capitalization increases several hundred times. Consequently, at this stage, you can consider selling the data center.
Due to the swiftness of the data center market in 2017, there were 48 large transactions worth $20 billion. Meanwhile, in 2016, there were 28 transactions worth $10 billion and in 2015, 17 transactions worth $5 billion.
What Does Our Company Offer?
Our company AV5, along with our partner US BUSINESS SERVICES, offers complete support for your company to create, maintain, and possibly sell a data center, namely:
Creating a company with the support of US BUSINESS SERVICES, including registration, opening accounts, obtaining visas, etc.
Drawing up business and marketing plans.
Drafting the technical project and selecting the engineering staff with the help of AV5.
Branding, marketing by US BUSINESS SERVICES
Building a data center, finding and supporting end customers by AV5.
Presale and subsequent sale of the data center by US BUSINESS SERVICES and AV5.
Contact us to schedule a free consultation with our experts.