EdgeX

Bringing world class to the edge

01 June 2021 | Melanie Mingas

Cover

EdgeX is capitalising on the growth of edge, while giving a new lease of life to the corporate world’s divested assets. Melanie Mingas gets the details from John Parsons

The global market for edge data centres is expected to almost triple by 2024, from values of $4 billion in 2017 to $13.5 billion before mid-decade, according to PwC figures. However, the cost of building edge data centres is on the rise – of course – due to the pandemic. A survey by professional services company Turner & Townsend saw 79% report higher operating costs on data centre construction sites in 2020.

For those looking to establish a sizable edge footprint, this will likely cause issues.

One new, Oklahoma-based operator is executing on a vision that merges the explosive demand for edge facilities with the corporate world’s ongoing divestment of its private data centres.

Launching its first in April, EdgeX Data Centers is on a mission to bring world-class facilities to the edge in tier 2 and tier 3 markets.

“There is an explosion of build in tier 1 markets,” says co-founder and CEO John Parsons.

“But in terms of the tier 2 and tier 3 plays, that’s where we think there is not quite the supply of world-class facilities.”
EdgeX was founded by Parsons and fellow industry veterans Octavio Morales and Terry Morrison, who hold the positions of CEO, CRO and CTO, respectively. The three have been crossing paths for a number of years, starting in 2002 when Parsons and Morrison co-founded Perimeter Technology Center (PTC). Once scaled into the state’s largest commercial data centre provider, the business was acquired by Cequel III in 2011, following which Morrison stayed on as CTO and Parsons left to head Crooked Creek Investments, a firm that would also later be sold to Cequel.

As a newly appointed CTO, Morrison was the go-to for due diligence around acquisitions and the firm’s mid-market strategy started to take shape.

Meanwhile, over in Washington state, in 2003 Morales co-founded TierPoint, which would become Cequel’s next buy. Morales and Morrison led the new venture in an operations and sales capacity, and TierPoint became one of the most geographically diversified operators in the US, with more than 40 data centres in 20 markets.

Add a chance meeting between Morrison and Parsons just before the pandemic, and EdgeX was created. “It just made sense,” Parsons says. “Terry and Octavia worked together, Terry and I worked together.” Add CFO Patrick Rooney to the team, and the leadership line-up is complete.

“We felt like we were the early adopters of having that edge facility in tier 2 and 3 markets, where our facilities were back in the 2000s, and that this edge play was becoming more and more prevalent. The larger entities were looking to lower latency issues, pushing some of their infrastructure to the edge,” Parsons says.

But there’s a stumbling block, in that “all the edge facilities were lesser facilities, if you will.”

Parsons says: “We want to bring world-class facilities – the same quality that you would find in tier 1 markets, just in a smaller size – to the tier 2 and tier 3 markets. The vision we had right as Covid was hitting was bringing world-class facilities to the edge.”

A wholesale real estate play

For its first project, EdgeX repurposed a facility built by Devon Energy in 2010 – when oil was $100 a barrel – “and they spared no expense,” Parsons says.

Built by Holder Construction, Devon Energy started the divestment process last year, closing the deal with EdgeX in early April of this year.

The 65,000 square foot facility houses two 10,000 square foot data halls allowing EdgeX to offer the benefits of the edge to clients in “the ideal geographical location – right in the centre of the country”. Oklahoma is no Virginia, but it does offer some of the best tax incentives in the US. Initially clients are in financial services, digital content distribution and insurance as well as other areas.

On the tech upgrades, the only thing needed was new batteries for the UPS systems – hall A is nearly full of APC infrastructure gear, including racks, power distribution units and in-row cooling units.

“This data centre can be fully operational in a matter of weeks depending on the needs of a tenant,” Parsons says.
Real estate management has been outsourced to Hines, which managed the facility for Devon Energy and will
also be enlisted for EdgeX’s second data centre – incidentally located close by, but under wraps.

“We aren’t looking to have the same breadth of services on the hall floor as TierPoint does; this is more of a wholesale real estate play to some degree,” Parsons says.

Instead, the philosophy for EdgeX is to look to those industries that are shedding non-core assets. And in the current economic climate, there is no shortage of corporates with assets to shed.

“It’s just a stroke of luck that Covid occurred at that time and put so much pressure on technology and drove demand for data centre space through the roof. We don’t see that slowing down,” Parsons says.

“It seems that in almost any industry there are companies that build world-class corporate data centres and take those assets to turn them into commercial facilities, or lease them to a handful of tenants. We are not looking to be a cabinet-by-cabinet, rack-by-rack provider,” Parsons says, although services could enter the picture “at some time in the future”.

Commenting on the example provided by the oil and gas industry, Parsons continues: “Covid hit right as energy prices were plummeting so it was a double whammy for them. The first industry that provided good options for high quality facilities was the energy industry.”

Extending the edge

It isn’t the first time Parsons and co have leveraged the opportunities in such divestment trends; he and Morrison built PTC on a similar premise. But the pandemic, coupled with the introduction of next-generation technology, is now driving a new business case – and not just for EdgeX.

“Like the adoption of commercial data centres 20 years ago – in the late 90s there was an explosion of commercial data centres, then during the bust days 80% of them went out of business. We were the beneficiary of picking up some of these data centres back in 2002/03 when we started Perimeter,” says Parsons.

“I just think, in a large part due to Covid, it’s going to fast forward the demand on data centre space and in pushing some of their IT infrastructure to the edge,” he continues.

Given the dawn of 5G, IoT and the plethora of latency-sensitive applications the two will drive, such a push will irrevocably change the industry. The question right now is whether the explosive growth predicted in data-driven tech, coupled with the lead time on a typical edge facility, could throw out the balance between supply and demand. Add to that the threat of higher construction costs and is it possible to meet the demand? And, if not, what will that do for the cost of service and pace of innovation?

As with Covid, it’s all about the tiers.

“There is an explosion of build in tier 1 markets,” says Parsons, referencing the Golden Plains Technology Park, under construction in Kansas City – a project that will elevate the city to tier 1 status.

“Again, what we are trying to do is not put a data centre in a box, setting it out in different small markets. We want to bring world-class facilities to the tier 2 and tier 3 markets.”

In Parson’s eyes, the risk to this edge play is the development of a technology that can reduce latency without proximity, and therefore write the tier 2 and tier 3 markets out of the equation. But if that happens, it won’t be soon.
Parsons says: “We don’t see anything coming down that path for a long time that doesn’t also demand some kind of edge deployment.”