What’s Your Data Centre Model?

Data centres tend to look the same…well at least the new builds do. They all look as though they do the same thing providing space, power and connectivity and most of them complain that the market is highly commoditised. Two panel debates on “The Future of Co-Location” and “The Future of the Data Centre” at IPExpo in London last week highlighted both the challenges of a mature, highly competitive market but also the ways in which data centres can differentiate themselves. However if careful consideration isn’t given to the data centre’s business model then commoditisation with its consequent price pressures is only to be expected.

So what constitutes a business model? It certainly isn’t just about the financing, but there seems to be some uncertainty about what needs to be covered when considering your business model. A model devised by Alexander Osterwalder  and Yves Pigneur and co-created by 470 practitioners from 45 countries gives a sense of the breadth and depth of the subject. They define a business model as one that describes the rational of how and organisation creates, delivers and captures value and contains 9 building blocks.

1. Customer Segments. What groups of customers do you serve? There might be one or several. They might be organised vertically, geographically or by specific use cases.
2. Value Propositions. How are you going to solve the issues and satisfy the needs of your customer segments?
3. What channels of communication will you use to communicate with your customers? What sales channels will be most effective?
4. Customer Relationships. Everyone stresses that customer relationships are critical, but do you need to have a personal, high touch, face to face relationship, or would a more automated self-service type of relationship be more effective?
5. Revenue Streams. What revenue streams result from the value propositions you have put together. Can these be modeled successfully?
6. Key Resources. These are the assets required to offer and deliver everything above. Some, like the data centre itself, may be blindingly obvious, but others may be less obvious but equal critical in ensuring you can deliver on your promises.
7. Key Activities. What are the critical things you do on a daily basis that support your customers and your value propositions? How do these make use of your assets and leverage your channels to ensure you deliver your revenue streams?
8. Key Partnerships. The reality is that no one organisation can effectively deliver everything to satisfy its customers’ needs by themselves. In that case what activities need to be outsourced? What partnerships need to be formed to deliver the whole of the value proposition?
9. Cost Structure. Taking into account everything that has been put in place above, what is your cost structure and does it allow you to trade profitably?

We can be pretty certain that as much as data centre operators will have common elements to their business models, there will be significant differences around which customers they serve, how much emphasis they place on face to face relationships, what specific propositions they put together and what emphasis they place on the key activities to support their propositions. We already see operators with different offers around location, connectivity and add-on services and consulting. Focusing on and understanding the key elements of your business model could well be the difference between profitable growth and a race to the bottom on price in a highly competitive market.

This post first appeared on the old Cassini Reviews website.