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May 2018

DataGryd at 60 Hudson Street: Engineering a New Business Model for Wholesale Data Centers in Large Cities

DataGryd at 60 Hudson Street: Engineering a New Business Model for Wholesale Data Centers in Large Cities

DataGryd’s 60 Hudson Street facility in Manhattan is not only one of largest and most valuable datacenters on the East Coast, it’s also an icon in the history of the communications industry.

The 23-story building, completed in 1930, was originally the headquarters of Western Union which operated its international telegraph business there.  Then, following the breakup of AT&T in 1984, it became a premiere carrier hotel, connecting 1,000-plus telecoms.

60 Hudson Street was also the first to use international switches, which led to its becoming the home of Telx (Digital Realty), today one of the biggest datacenter/interconnect companies in the world.

Then in 2009, working closely with the building owner, two additional floors in 60 Hudson where developed to create a modern wholesale datacenter.  The result is DataGryd, the largest footprint datacenter in Manhattan with Digital Realty remaining the anchor tenant.

I was eager to visit DataGryd’s 60 Hudson Street facility because I’ve been a sucker for machinery and engineering plants ever since my Navy days aboard a steam-powered destroyer.  Sure enough, when I visited in December, I wasn’t disappointed.

I saw four massive 63,000 pound emergency diesel generators.  And imagine the headaches of getting approvals to drop these engines in the building by cutting a big hole in the roof of a New York historic landmark.

Against many odds, the DataGryd team successfully upgraded the engineering plant to deliver the precious electric and cooling power needed by today’s dense electronics. “DataGryd,” then, is the perfect name.  These days you can’t sustain many floors of data equipment without massive and uninterrupted electricity off the grid.

I recently spoke to DataGryd’s new CEO, Tom Brown, a Windstream veteran who’s on a mission to spread the word about the value and versatility of this modern engineering plant sited in a building with such an illustrious history.

Dan Baker, Research Director, TRI: Tom, what is it that customers like about 60 Hudson Street?  What’s the big value proposition for becoming a tenant there?

Tom Brown: Dan, what’s most appealing to the marketplace is that DataGryd has 60,000 square-feet of space available out of a total of 120,000 square-feet on the fifth and sixth floor here at 60 Hudson Street.  There are well over 300 providers residing in the building and we have tenants in many vertical industries, whether cloud providers and hyperscale firms or traditional service providers.

Now both power and space are a premium here in New York City, so we have a direct feed from the electric utility to our facility.

Why is a direct connect from the utility so important?

It’s diversity, Dan.  Our direct relationship with the electric utility means we don’t have to go through a third party.  So, in the unlikely event that the building power goes down, we would not be touched by that event in any way.  This is a mission-critical requirement to have network diversity and power diversity, especially for some of the hyperscale players who are deploying their own networks on dark fiber.

There’s also an additional five megawatts we will allocate towards the sixth floor at 60 Hudson Street.  That power is quite significant; it allows us to engineer the building to suit.

Now, aside from the 120,000 square-feet of total data center space, there’s another 55,000 square-feet of support infrastructure that lives in DataGryd’s own space.  We have our 13,200 Volt connection with Con Ed in our mezzanine space, from which we distribute diverse feeds to our third floor space.  We distribute power diversely to all our customer floors from that third floor.  It’s an efficient design because it allows DataGryd to send any amount of power to any place of our floors in the building.

If you look at data centers across the country, space is usually not an issue.  However, there’s very often a power and cooling constraint in these buildings, meaning lots of places can’t grow because they literally run out of power.

Greater network diversity and options are coming.  For instance, the DE-CIX interexchange in the New York metro is growing because they’ve lowered connection cost fees.  And NaaS providers like PacketFabric are making connections more efficient.  So all this puts a squeeze on what you can charge for cross-connects.

Digital Realty has a very fine collection of customers in 60 Hudson Street, so what can they do to offset their cross-connect expense: how will DataGryd enable that?

Well, through an agreement we have with the building owner, we can build conduit within the building.  And within this conduit, the provider can pull through whatever they want.  We are not in the connectivity business, but in the construction business so we can actually build that conduit.  So, they can pull through an 864-fiber or 432 cable and then negotiate with the partner to bring that cable in the conduit directly into their suite.  And what that does is eliminate the owner’s cross-connect charges.

When I was at Windstream, I ran the content, cable, gaming, and data center verticals on the wholesale side and it’s amazing how quickly things can grow.  Take AWS.  For several years their network kept tripling in size and they showed no sign of slowing down.

So, it became a real challenge to work the actual cross-connect within the various data centers and carrier hotels wherever it was: Chicago, Los Angeles, Dallas.  In many cases, the cross-connect cost was as much as the transport fees.

Reducing cross-connect charges for our wholesale customers is pretty simple to do, so we need to let people know that and say, “Hey, look at the added value that DataGryd delivers!”

Equinix’s purchase of the Stemmons Street carrier hotel was in Dallas was one of the biggest deals ever.

It was an awesome deal.  And my point of view is that consolidation is coming to the data center world.  You continue to see the Zayos and GTTs of the world buy up companies, so that’s going to come to the data center world too.  More M&As are coming and that’s exciting.

DataGryd already has a big advantage because people all over the world have heard of 60 Hudson Street. “Oh yeah, the carrier hotel in New York City.”

But what people don’t know is that it’s been a vibrant business all these years.  They say, “Hey, I didn’t know 60 Hudson Street has two available floors.” So we’ve got work to do to get our message out.  I could even go back to our building landlord; maybe there’s another two floors our investors might want to look at leasing.

Your rivals have established themselves outside Manhattan and boast about being able to bypass Manhattan and its high cost.  And yet your 300 tenants speak to the attractiveness of having a presence downtown.

Dan, I go back to the time 10 years ago when I was working at Level 3 and people would be patting themselves on the back about fiber overbuilds, saying, “You know, we put so much glass in the ground, we may never need to deploy another cable!”

But look at 60 Hudson Street today.  New cables are coming in and the fiber counts are literally doubling, in some instances tripling.  And there are plans for new cables across the pond and there’s no doubt that diversity will play a huge key in the decision about where they land.

So, I’ve reached out to the guys in New Jersey and 1025Connect on Long Island and I understand their point very well.  When I was at Windstream, we talked about diversity day in and day out.  But 60 Hudson Street is still viable.

We’re talking to the undersea cable guys and they’d love to hear DataGryd’s story about how we can minimize the expense of cross-connects at 60 Hudson Street.

I should also point out that even though there’s more diversity in the greater New York market, that doesn’t make New York City or 60 Hudson Street less desirable.  People want to achieve a certain balance of traffic.  I keep going back to that word “diversity” — and diversity is extremely key when it comes to building a network.

Network investment in New York is pretty extraordinary.  Crown Castle doubled down in fiber properties in anticipation of mobile growth.  Plus, the city is home to so many corporate headquarters, advertising agencies, financial firms, and intelligentsia of all kinds.

Yes, people really want to leverage the talent pool in New York.  But it’s also the customer base of the city that draws tenants, especially as mobility continues to grow.

When I was at Windstream I had the opportunity to handle some of the wireless providers and I can tell you the last agreement I signed, which was in December, prior to concluding my tenure there, they wanted 10 gig pricing to each of the towers.  Today, they are utilizing about 300 Meg.

That contrast tells you where this is all going. 5G will open up many more mobile phone capabilities.  Small cell is also another application that will drive the metro and create opportunities here at 60 Hudson Street.

What about the hyperscale companies?  Will they continue to gravitate to 60 Hudson Street?

Dan, there’s no question about it.  Google has increased its square footage.  We expect Amazon to invest more as well.  We’re also at a tipping point in the cloud business because its growth is going global.  AWS, Azure and Google are there, of course, but also IBM SoftLayer.  Even Alibaba has begun its growth in the United States.

Another big player is Oracle, which is making a tremendous play.  Actually, they have 300 or 400 square-feet, about 250 kW of space.  Today, Oracle is in 30 data centers worldwide, but by the end of the year they need to be in 100 data centers.

What the hyperscale players worry a lot about is latency.  And that’s another key advantage DataGryd has at 60 Hudson Street.  The connectivity in the building to 300 providers is just what’s needed to serve a metro area the size of New York.  Best of all, they’re not wasting precious micro-seconds tromboning their traffic in and out of the city.  This is exactly why 60 Hudson Street is considered a premium carrier hotel.

Tom, thanks for the fine briefing.  And good luck in keeping this historic building, 60 Hudson Street, a living treasure of communications.

60 Hudson Street

Looking up from the street outside, 60 Hudson Street, finished in 1930, is a solid and imposing building.  Inside, the dimly lit and 200-foot long lobby features 30-foot ceilings and feels like a medieval castle. 

Most impressive of all: the lobby is lined top-to-bottom in beautiful brown brick and tiles of various shades with Art Deco trim on the doorways and columns.  As luck would have it, I arrived as two tall Christmas trees were being decorated with lights in this dark cavern.  So as I looked up into the dark recesses above me, I imagined dozens of bricklayers doing their patient artistry.

Copyright 2018 Top Operator Journal


About the Experts

Tom Brown

Tom Brown

Tom Brown is DataGryd’s President and CEO, responsible for planning and implementing the company’s strategy, and managing the overall revenue growth of the company.  Tom joined DataGryd in 2018 and brings more than 25 years of leadership experience in start-up, turnaround and high-growth operations.

He has a proven track record of success in strategic and tactical market development, creation of brand awareness and customer relationship management.  Prior to joining DataGryd, Tom led the content, cable, and data center verticals within Windstream’s Wholesale Business Unit.

From 1999 to 2009, he was Senior Vice President of Sales and Marketing at FiberNet Telecom Group, Inc., where he was an integral part in the sale of the company to the Zayo Group.  Tom earned a Bachelor of Science degree from the University of Massachusetts at Amherst.

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