Spotlight on Cervalis: Strong growth and looking to expand
The Daily T1R, Jan 29th, 2012
Michael Levy, Kelly Morgan
Full service IT provider Cervalis had a strong year in 2011. The company saw excellent demand for all its services (colocation, managed hosting, managed security, managed storage, private cloud, desktop virtualization, business continuity-disaster recovery (BCDR) space and telecommunications and networking) and saw revenue grow 30% Y/Y. Furthermore, occupancy of Cervalis' newest datacenter in Totowa, New Jersey, tripled over the past year and the firm has multiple large contracts currently in negotiation for hundreds of cabinets each. Cervalis has begun to seriously look at expansion opportunities, as its three facilities, including the Totowa, NJ datacenter; Wappinger Falls, New York colocation and disaster center; and Fairfield, Connecticut, facility are filling up rapidly.
New Connecticut build and beyond
Cervalis has set a plan in motion to open a second Connecticut colocation and disaster recovery datacenter that will likely provide over 50,000 square feet of operational datacenter capacity upon total buildout. Cervalis has recently received approval to build a datacenter in an undisclosed municipality in the state and intends to begin construction shortly. Additionally, Cervalis has expressed interest in establishing a presence in a different region in the United States and is exploring various possibilities. This will initiate Cervalis' transition from a heavily greater NYC-centered firm into a nationally oriented provider.
Although Cervalis' customer base has expanded over the past year, its composition has remained largely the same. A large part of the company's business is comprised of New York business continuity services, with over 85% of Cervalis' customers based in the greater NYC area and approximately 60-65% being part of the financial services sector. Primary verticals still include finance, insurance, health care, law firms and media. Many of these must adhere to stringent compliance codes and Cervalis takes efforts to help customers meet these compliances. All Cervalis facilities are SSAE 16, SOC 1 and Cybertrust certified annually. Cervalis provides customers its own audits free of charge to facilitate compliance standards the customers must meet on their end. Currently, Cervalis is working to meet PCI compliance for its entire footprint.
Cervalis is a huge proponent of long-term customer relationships and has signed multiple 10-year leases. Cervalis told T1R about an older customer that leased six cabinets for years, but recently expanded to 40 cabinets and added various services, increasing its monthly bill by over 10 times. Many of Cervalis' customers that were initially colocated in its older facilities have set up an active-active configuration with the Totowa, NJ managed storage facility, replicating data on a transaction basis, to further ensure their uptime in any circumstance. Furthermore, some clients in the older facilities have used SAN replication and strong telecommunications rings to shift their primary workload to NJ colocation at the Totowa facility and make either Wappinger Falls or Fairfield their backup facility.
Cervalis has seen many of its long-standing customers virtualize their environments and reduce their footprints, which is often made possible by Cervalis' ability to provide 10-12kW per cabinet. Additionally, the provider says the vast majority of incoming tenants enter the facility with workloads that are already virtualized. Cervalis' colocation services technically start at the single unit and scale up significantly to wholesale sizes. The company happily accommodates customers of all sizes; for instance, in recent months the provider has accommodated multiple smaller, denser private cloud workloads as well as an incoming 7MW multi-thousand-square-foot deployment currently in negotiation. Cervalis disclosed that 95% of the cloud environments colocated in its facilities are private and that it is highly unlikely its security-conscious clientele will ever move closer to public architecture.
Cervalis has successfully differentiated its services in a highly competitive market by allocating particular focus to its business continuity and disaster recovery capabilities. All three of Cervalis' facilities are on the edge of what T1R considers the greater NYC market; this ensures that customers are colocated far enough from the 'blast radius' for most compliance standards.
In addition, Cervalis stresses is services and willingness to customize. It provides remote hands and other services that typical datacenters provide, but will go beyond that if there is customer demand, managing firewalls, for example. The firm will customize builds within its datacenters, going so far as to build private control rooms (NOCs) or bringing in specific power distribution and cooling equipment. It therefore offers wholesale-size space but with customized elements and the option of managed services, in addition to its more retail-type offering.
The firm has shown success so far with its services and strategy. As Cervalis explores opportunities in other regions, we believe the provider will seek opportunities on the periphery of major cities, as it has in New York. This focus on the periphery should allow it to target customers for disaster recovery and business continuity, then sell them services, while allowing the firm to differentiate itself from (or perhaps be a backup to) the likes of Equinix, Savvis and Terremark in new markets.
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