Data Center Infra Seeing Contined High M&A Activity

“Demand for data centers by global investors remained robust in the second half of 2021, with record-breaking merger and acquisition activity,” according to CBRE. “Nearly 95 percent of respondents to CBRE’s 2022 Global Data Center Investor Sentiment Survey, many of whom are the world’s largest institutional real estate investors, plan to increase their capital deployment in the data center sector,” says CBRE. 

In North America alone, transactions included:

• American Tower’s acquisition of CoreSite for $10.1 billion.

• Blackstone’s acquisition of QTS for $10 billion.

• Cyxtera’s SPAC merger with Starboard Value Acquisition Corp, valued at $3.4 billion.

• Mapletree’s acquisition of the Silas Realty Trust Portfolio of 29 data centers for $1.3 billion.

• Prudential & Digital Realty’s joint venture sale of 10 powered shell data centers for $581 million.

• DigitalBridge’s Vantage SDC acquisition of CA22, a 24 MW hyperscale data center, for $539 million.

Already in 2022, North American transactions include:

• KKR & Global Infrastructure Partners acquisition of CyrusOne for $15 billion.

• DataBank’s acquisition of four CyrusOne data centers in Houston for $670 million.

In the Europe Middle East Africa market, 2021 transactions include:

• IPI Partners acquired the dominant Nordic operator Digiplex.

• Iron Mountain acquired a turnkey facility in Frankfurt from Keppel Data Centers for €76 million.

• Antin Infrastructure Partners acquired leading U.K. managed-services provider Pulsant.

• Azrieli purchased colocation operator Green Mountain in Norway for 7.6 billion NOK.

• Blackstone acquired a triple-net facility leased to Equinix in London Docklands for £196.5 million.

• Keppel DC REIT acquired two triple-net facilities, one in the Netherlands and the other in the U.K. for a combined total of more than €100 million.

• Digital9 Infrastructure acquired Verne Global, a dominant Icelandic colocation provider for £231 million.

• AtlasEdge, the recently formed edge operator backed by Liberty Global, Digital Bridge and Digital Realty, acquired a portfolio of 12 assets from Colt Data Centers.

In 2022, transactions in EMEA include:

• KAO Data, backed by Legal & General Capital, Goldacre and Infratil, have acquired two data centers in West London via a sale and partial leaseback.

• Digital Realty agreed to acquire a majority stake in Teraco, Africa's leading carrier-neutral colocation provider, from a consortium of investors, including Berkshire Partners and Permira, as well as Medallion Data Centres in Nigeria.

In the Asia-Pacific region, 2021 transactions include:

• Vantage Data Centers and lead investor DigitalBridge acquired Hong Kong-based PCCW and Agile Data Centers.

• GLP acquired a 50% stake in Songjiang Internet Data Centre in Shanghai.

• Digital Edge acquired five data centers in Japan for $230 million.

• Equinix entered the India market through the acquisition of GPX India.

Already in 2022, APAC transactions include: 

• Equinix $525 million joint venture with GIC in South Korea.

• Keppel Capital to close $1.1 billion data center fund.

• Mitsui announced intention to invest $2.7 billion to develop data centers in Japan.

• GLP announced plans to develop 900 MW of data centers across Tokyo and Osaka and totaling $12 billion.

In Latin America, 2021 transactions include:

• Piemonte Holding acquired Globo’s Data Center in Rio de Janeiro.

• Squared Capital acquired KIO Networks, a leading data center operator in Mexico.

• Goldman Sachs Asset Management invested in Piemonte Holdings' Brazilian edge data center platform Elea Digital.

• EllaLink and Equinix delivered the first undersea cable between Europe and Latin America.

In Latin America, 2022 transactions include:

• Equinix opened a hyperscale facility in São Paulo and announced plans for two more in Mexico City and another in São Paulo.

• Ascenty launched two data centers in Rio de Janeiro and Hortolândia.

• DigitalBridge-owned Scala Data Centers began construction on two hyperscale data centers in Brazil, with one fully leased to a cloud provider.

• Tencent Cloud launched its first Brazilian data center.

• Ascenty plans to build its fourth data center in São Paulo.

• Microsoft announced plans to establish a Chilean data center region.

Do Office Vacancies Suggest Dispersed Work is Here to Stay?

With the caveat that the situation could change, office vacancies in major U.S. cities appear to be rising. Should that pattern continue, it would tend to confirm the notion that permanent work from home and hybrid work modes could become a permanent reality. 

source: Axios 

That, in turn, could mean fewer workers in the office at any given time; fewer workers eating in local restaurants or taking public transportation; shopping downtown or parking. 

Lower office utilization also implies fewer people using communications and gear at the office; less use of mobile communications downtown and more distributed usage of internet access and applications across metro areas. 

Aside from financial pressure on owners of office real estate; restaurant and retail shop owners; transit systems and parking lots, suppliers of business software and connectivity services will see changes. 

If network usage flattens in urban cores and increases in suburban areas, capital investment requirements could shift as well. There could well be less urgency for upgrades of downtown cell sites and more diffuse demand for upgrades across broader suburban areas, with fixed network broadband becoming an even more important mobile capacity offloading platform. 

Both mobile and fixed network demand peaks for “work” reasons could flatten a bit. App security will be a bigger issue as more workers work remotely, routinely. People might move away from urban cores to outlying areas, again changing the geographies where additional capacity has to be added.  

BT Pauses Digital Voice Changeover: Customers Were Confused, Disappointed

BT says it botched the transition of voice services on its fixed network from analog to voice over IP, and is “pausing all further Digital Voice switch-overs for customers who don’t want to move to the new technology straight away,” says Marc Allera, BT CEO, consumer division.

As it happened, BT underestimated both the customer confusion and the disruption power outages would cause for a service that formerly was network powered and often required new equipment to support broadband connections for those who did not have such service. 

The pause will allow BT time to create resiliency solutions including hybrid phones that switch to mobile in case of local power outages; battery backup units; mobile-only replacements for landline service and better mobile service to support those alternatives. 

“We underestimated the disruptive impact this upgrade would have on some of our customers,” says Allera. “With hindsight we went too early, before many customers, particularly those who rely more heavily on landlines, understood why this change was necessary and what they needed to do.”

SOURCE: itu 

The customer expectations issues are likely enhanced by the huge switch in use of voice services. Use of fixed network voice peaked globally about 2004. Since then, people have increasingly preferred mobile as the device and network for voice calls. In the United Kingdom, mobile voice usage has displaced fixed network voice, for example. Mobile call volume is an order of magnitude higher than fixed network voice volume. 

Twenty years ago, as service providers began the transition to IP voice, great concern was expressed about the end of network power, as the vaunted “five nines” (availability at 99.999 percent of the time) levels of service would be ended. 

Executives in most cases seemed not to factor in the abandonment of fixed network voice services and the replacement by mobility services. Customers quickly understood that mobile phones do not work if battery power is exhausted. 

That was never the case for fixed-line services, where customers expected their phones would continue to work in cases where local power was lost. 

In truth, powering issues had effectively grown for decades, even before the replacement of analog voice with VoIP. As consumers switched from corded phones to cordless, they already had begun to experience “loss of dial tone” whenever local power was lost. 

The issue BT might have faced was that most younger consumers had moved off the landline voice network or never had such service. 

That means a growing percentage of landline voice users are older and presumably less used to new technology, which exacerbates the technology transition. BT in this case appears not to have thought through the cultural issues it would face.

Many Meetings Should Not be Held

All of us go to meetings. But very few meetings produce apparent outcomes, or seem to add value to whatever it is we are supposed to be doing. Very rarely do these meetings actually help us produce identifiable outcomes of value. 

To be sure, some of that is by design. My own “why hold a meeting” driver has just three possible outcomes: make a decision, discuss an issue or share information. Only one of those three must have an outcome.

The objective of “discussing an issue” might, or might not, lead to future outcomes or action, but the third reason--to share information--has no outcome other than keeping other stakeholders apprised of what is happening elsewhere in any organization. 

As outlined by McKinsey, all collaborations fall into three fairly-similar buckets. We collaborate to make decisions; coordinate our work or share information. 

source: McKinsey 

One surefire harbinger of a meeting that should not be held at all is a meeting with no clear agenda, or no agenda at all.

Will "the Great Resignation" Change the Management of Knowledge Work?

If an apparent global trend of workers re-prioritizing work and life balance holds over the long term, there could be huge ramifications for office employee work life virtually globally. A Microsoft survey of 31,000 people globally shows that huge percentages of office workers report reassessing the value of work, compared to “life” activities. Put simply, health and well-being are more important than “work.”

source: Microsoft 

In some ways, that might always have been true: the adage that “your job is not worth dying for” applies. Faced with a widespread pandemic that did raise the odds of “death,” most people were enticed to make a new assessment of health risk and “going to work,” especially when governments and firms virtually forced them to stay away. 

It likely remains too early to see which changes of attitude or work practices will remain, and which will fade. “Hybrtd” work patterns blending in-office with remote venues probably will be more common. It is possible that fully-remote work will increase. Those are obvious possible outcomes.

What is less easy to predict are other changes, including the value and skills required of managers of often-remote workforces. That has gotten to be a bigger challenge for some decades as knowledge work has grown more common. 

source: Zapier 

And there is at least some evidence that there already exists a mismatch between manager thinking and knowledge worker thinking about what drives higher productivity. Covid has arguably had little to do with the divergence in thought. 

source: Oscar Berg

What might be fair to say is that, at least for the moment, knowledge workers have taken a hard look at their own priorities, leading to what many call the” “great resignation"  of people during the Covid pandemic. 

All that means there is a chance for changing practices in many areas of knowledge work, and at least some possibility of beneficial changes.

Disintermediation Strikes Again, Threatens Disruption, Again

Almost no part of economic, social, work or educational life has remained untouched by the internet, and it turns out charities that might once have been beneficiaries now are being disintermediated. 

In some ways, social fundraising sites were a progenitor, allowing people or organizations to raise donations on social fundraising platforms. But one new development involves people making Airbnb reservations in Ukraine--with no intention to stay--as a form of direct aid that otherwise might have been delivered using a charitable donation process. 

source: Gofrugal.com 

That sort of giving is another form of disintermediation, the process of removing  “middle men” or distributors, steps or layers or retailers from a supply chain. 

Airbnb CEO Brian Chesky says 434,000 such transactions had been booked so far on the platform, equivalent to $15 million transferred to hosts within Ukraine. By way of contrast, that is as much as a quarter of the amount donated to the Canadian Red Cross as of March 10, 2022, excluding government-matched amounts.

What remains unknown is the relative effectiveness of direct transfers of this sort. As with other social fundraising, recipient fraud or waste is conceivable: the property owners might not live in Ukraine, for example. And cash transfers of this type assume the banking system is working. It might not be working effectively, if at all. 

Such donations might not target the most needy. But such methods are nearly 100 percent efficient--getting all the funds directly to the recipients--instead of subtracting distributor costs. 

It will be some time before we see any relatively-impartial studies and assessments of such direct giving mechanisms. But for cleverness it is hard to fault. When such transfers can be cleared nearly immediately, there is probably no faster way to inject donations into an area. 

Longer term, there might be issues around whether direct giving is advantageous in some ways for allowing recipients to determine the best use of the funds, rather than aid agencies deciding what is best for them. 

But accountability issues might still be of value for some donors. Higher confidence that donations were used for a specified purpose might be valuable enough to dissuade donors from direct giving methods. 

Still, using Airbnb to make donations is clearly a case of disintermediation at work.

Will Blockchain Propel a New Wave of Disintermediation?

Disintermediation is at the heart of the promise and period of a wide range of potentially-huge new enablers of business and economic life, including blockchain, cryptocurrencies, distributed finance and distributed autonomous organizations. 

Disintermediation is the process of removing  “middle men” or distributors, steps or layers or retailers from a supply chain. 

For that reason, disintermediation has been a key business issue for all retailers and distributors since the internet emerged, reducing the roles or value of distributors of all types and increasing the ability of suppliers to go straight to their customers for fulfillment of sales. 

Disintermediation also has affected the connectivity business. Consider only the role of applications in creating messaging apps that directly displace carrier text messaging and voice services. Email had a similar impact prior to the emergence of messaging. 

Now 5G private networks are being evaluated and deployed to replace some parts of the public mobile network. 

source: WallStreetMojo 

Blockchain is a distributed ledger (database) system where details of transactions are stored across a distributed network of servers with no centralized repository of those transactions. The chain of records are indelible: once created they cannot be changed, which is how the integrity  of the information on transactions is maintained. 

Blockchains store data in blocks that are then linked together in series, which is where the name comes from. For that reason a sort of time stamp is created, as the chains form sequentially. 

As new data comes in, it is recorded in part of a fresh block. Once the block is filled with data, it is chained onto the previous block.\

Decentralized finance (DeFi) is an emerging financial technology based on blockchain that allows parties to conduct transactions directly, without the use of an intermediary bank, broker or institution.

A distributed autonomous organization is an online-only group of people who have entered into a contract with one another to reach a coordinated goal. The contract is enforced by the use of blockchain, so that if any member who violates the terms of the contract, their access to owned tokens is revoked automatically by the blockchain itself. 

The promise for users and peril for incumbents is clear enough. As always, disintermediation flattens hierarchies; removes middlemen from a value chain; reduces costs and enables more-direct transactions between buyers and sellers; creators and users. 

What blockchain, DeFi or DAOs could affect, in the connectivity and computing business, is settlements, transaction clearing, ordering and fulfillment, the way sales are handled, bad debt protection and fraud prevention. 

And that should mean the potential for lower operating costs and higher potential margins, partly because sales effort is automated, partly because cost of sales could drop, partly because bad debt is avoided, partly because cash float is improved. 

Other possibilities seem less likely, in large part because vested government interests are involved. DAOs have been used to raise large pools of money to buy assets, for example. Would any regulator ever allow a perceived national connectivity asset to be purchased by a DAO?

Could “service providers” emerge that use DeFi to allow customers to purchase access to computing or connectivity capabilities without directly engaging a facilities-based provider on a longer-term basis? 

Organizations already buy compute cycles “as a service,” typically with a quota of cycles purchased upfront. Could DeFi allow purchasing on a full on-demand basis, with no “bucket of usage?”

Disintermediation is a powerful process that reshapes industries and creates winners and losers. It virtually always leads to lower prices and efficiencies in supply chains. 

We have already seen a first wave of disintermediation in the connectivity and computing businesses. Will we see additional waves as blockchain-based business processes arrive? Probably. But we will see the first impact in settlements, then in sales. 

The other possible changes will involve broader changes that involve additional stakeholders, so would take longer, if they happen at all.