Speaker 1: 0:02

Welcome to Uplink, where we explore the world of digital infrastructure, uncovering the technology fueling AI and cloud innovation, with the leaders making it happen. I'm your host, michael Reid, and my guest today is Don Shute, senior Vice President at TierPoint. Don brings a sharp perspective on how AI is reshaping the data center world, from the return of co-location to the rise of liquid cooling and the evolving economics of infrastructure. We unpack why hybrid is here to stay and what enterprises need to consider as they build for an AI-driven future. Let's get into it. Well, don, thanks for joining us. Absolutely. I know you've been in the data center game for a while. It's the hottest place in the world right now, but I mean, everyone wants to be in your shoes. I don't know about that.

Speaker 1: 0:54

Maybe not in yours, james, it is hot though I mean. A few years ago, I don't think that many of your friends would have known what a data center was, and now. Now, all of a sudden, it's the coolest place to be and, funny enough, everyone thinks they can build a data center and all these random people are off going to buy land and we're going to develop data centers. A lot of projects are out there right now.

Speaker 2: 1:12

Yeah.

Speaker 1: 1:14

So talk us through, I guess, where it's landed. What you're seeing, AI is this crazy big theme. Is that what you're sort of seeing play out? How does that look in practice? We know you've got a huge amount of customers. You also deliver a lot of managed services to those customers, so you're quite broad. What are you seeing? What's going on?

Speaker 2: 1:32

Yeah, I mean, I guess, to kind of start with, you hit the nail on the head. The data center and industry has kind of gotten turned over on its head.

Speaker 1: 1:41

And yeah, it's cool.

Speaker 2: 1:45

And no pun intended, right, but really it's all of a sudden. There's true advances in technology around data center, kind of rollouts and for years and years. And what's going in them? Yeah, like the chips. For years the co-location market was pretty much the same old thing, yeah. And then, just within the past year and a half, you see these incredible advances in the technology. What's going in the racks? Yes, which is actually also creating a lot of engineering challenges, and you know we're having to get really smart about how we deploy new capacity in our data centers to really kind of enable these AI workloads and is it cooling Like?

Speaker 1: 2:25

when you say the technical challenges, I guess is like cooling's an issue.

Speaker 2: 2:29

Cooling is the big thing, how you gain the power. We're putting yeah, obviously significantly more power into each rack, which means what You've got to re from an engineering perspective.

Speaker 1: 2:39

I assume you're redesigning how power is rolled out inside a data center.

Speaker 2: 2:44

So I would say less about the delivery of the power to the cabinet itself, but the cooling of that cabinet, so ensuring that all of our new data centers have chilled water so we can actually bring water to the rack.

Speaker 1: 3:01

So that leaves everyone.

Speaker 2: 3:02

In what cold water pot say the under or above, or something that under above, yep, so so connected directly to a cabinet, and then you've either got there's multiple ways you can you can cool a cabinet. You either go into like a rear door heat exchanger where, just like a right it's.

Speaker 1: 3:17

It's kind of like a radiator.

Speaker 2: 3:18

Yeah, yep, yep. So you're blowing a lot of uh, cold air, you know, through the cabinet and that heat exchanger is actually taking the hot air and making sure that it's cool when it's expelled out the back of the cabinet, so you're not warming up the room.

Speaker 1: 3:35

It's cooling it after it's come through.

Speaker 2: 3:37

Yeah, because it warms up as it goes through the cabinet or through the hardware and then you don't want to expel all that hot air into the room because it just creates a lot of inefficiency in the data center and then there's this sort of direct-to-chip stuff.

Speaker 2: 3:50

Yeah yeah, so we're also doing that as well. So we've got some customers that are actually rolled out some direct-to-chip type cooling and so you're actually delivering cold water to kind of like a plate that the ship sits in and it just cools the hardware through conduction as opposed to convection, which is really the air going through and this is all new.

Speaker 1: 4:15

Like you've been in DioSense for a while, this is new.

Speaker 2: 4:19

It's newish, yeah it was the thing Up until a year, year and a half half ago we weren't doing any kind of liquid to the cabs, it's just traditional. Yeah, containment, um, air-cooled cabinets. So this is all. This is all new and it's all driven by that's crazy by the gpu yeah, yeah, it's been what people don't study eddie for years and years, and it's been a long industry. Right, right, yeah, crazy.

Speaker 1: 4:49

So what about liquid immersion? Is that a thing? It is a thing.

Speaker 2: 4:52

Yeah, and there's some great companies out there that are doing that. I have not seen it being rolled out kind of on a bit trickier scale basis. I think you know from what I've seen and I've got colleagues that work in that industry and they'll probably, you know, call me up after this and tell me I'm completely wrong but I think it kind of originally came out in sort of research-type environments, supercomputer-type environments. I have not seen it rolled out in kind of a you know more traditional data center for an operator. But it will happen, yeah.

Speaker 1: 5:24

So basically that chilled water, that you're delivering kind of a more traditional data center for an operator, it will happen. Yeah, that chilled water that you're delivering is either radiator or direct-to-chip solves most of the use cases that you're dealing with, or at least today, yes, today, maybe tomorrow, jensen, we've got something else that requires, like some sort of cryo God knows, I don't know the quantum something, something.

Speaker 2: 5:47

Yeah, yeah, and we're pretty technology agnostic when it comes to it. We, we, we can either recommend these kind of cooling technologies to a, to a customer, or they may come to us and say, we've already made a decision and, uh, here's what we want to use. Our hardware is really certified to this sort of specification. This vendor, here's what you guys go out and need to buy to chill our cabinets.

Speaker 1: 6:14

So give us the tech specs of the business, like how many data centers? Where are you at? What's going on? Yeah, yeah, yeah, are you?

Speaker 2: 6:20

growing. Are you shrinking? Yeah, we're shrinking. Yeah, yeah, yeah, we're giving up. Yeah, we're shrinking, yeah, we're giving up.

Speaker 1: 6:25

I've never heard somebody say I want to do more, no way.

Speaker 2: 6:29

I want less power, I want less, exactly yeah, yeah, so we have about 40 data centers. This is a lot. All in the United States. Yes, so we're in about 19 markets. And are you public, private, private?

Speaker 1: 6:42

We're privately owned A lot of private equity in this space.

Speaker 2: 6:47

Yep, yep, yep. And so we've been around for give it probably 15 years, 14, 15 years. And so we kind of grew up being a co-location data center operator. Lots of customers, lots of customers, sort of focused on tier two, tier three markets, mid-market enterprise was really kind of our target sweet spot and grew our cloud maintenance services business at the same time, and so now we have a pretty balanced business between cloud maintenance services and co-location yes, which has evolved a lot Like I bet.

Speaker 1: 7:21

There was probably a time where you thought everything's going cloud, people are seeing stuff come out, oh, yeah, I mean there's individuals that were probably seeing colo was dead a couple years ago.

Speaker 2: 7:30

So yeah, it's all over.

Speaker 1: 7:32

Yeah, that's right everybody's going to the cloud. Um, are you seeing that we've heard of repatriatization. We've heard of like I don't know, what are you seeing? Actually, you would see that from a customer's perspective we, we've seen everything.

Speaker 2: 7:44

I mean so? We've seen colo customers going to a private Cloud, then to a public Cloud. We've seen on-premise going directly to a public Cloud. We've seen public Cloud coming back to colocation or private Cloud. Is that for certain?

Speaker 1: 7:59

use, use case, or the whole thing, or just I would say across the board. Everything.

Speaker 2: 8:05

Everything and it's all really kind of the I think the the risk tolerance, the maturity of the organization, what the what, what business challenge they're trying to solve for. I mean, in many cases, you know, there is a like a cost predictability sort of aspect to the type of IT solution that you want for your organization and there are certain solutions that give you more predictable costs and if the CFO at that time has that mandate for predictable costs, then you may go from a public cloud to back to a private cloud or a co-location type of.

Speaker 1: 8:41

And it was always about innovation. It's so much faster, but I guess things are changing and you've got managed services that allow customers to leverage that, so you sure do you manage that on customers behalf as well, uh, like as a service for them inside the business today yeah, well, so we do.

Speaker 2: 8:59

Uh, we do a full suite of services and not only will we enable a private cloud solution, but we don't manage our applications, but really kind of an infrastructure perspective, so we'll roll out a private cloud for a client. We also do a lot of multi-cloud or hybrid-type solutions. So we've launched a public cloud service a few years ago and have grown our AWS and Azure business pretty significantly over the past few years, and what that's done for TierPoint is it's really given us, I think, a really strong hybrid story, I think that's unique for my side of sentence having that expertise, yeah, so it seems, like many of our peers, they've started to step back a little bit from the cloud managed services because the big focus for so many right now is let's grow out our co-location business, because there's so much opportunity out there, yes, and is the opportunity.

Speaker 1: 10:05

are you both hyperscale? You're a bit of, we know, colo. Are you also hyperscale?

Speaker 2: 10:10

So we don't typically play well in the hyperscale space, just because it requires a significant amount of capital just to roll out 250, 300 megawatts. Yeah, but we've done some pretty large deployments, but we, you know, our sweet spot is probably. So Kolo is not dead then.

Speaker 1: 10:33

Kolo is good Kolo is not dead.

Speaker 2: 10:36

Surprise, surprise. It's good for us, by the way. This is important.

Speaker 1: 10:39

We have a lot of investors sort of say that to us.

Speaker 2: 10:41

Yeah, me too.

Speaker 1: 10:45

I'm glad you shared all the different options, because they're all like, yeah, everyone's just going to the cloud and there's only one cloud, and you're like, well, hang on, it's not as simple as that.

Speaker 2: 10:51

And really it's not even just kind of the AI GPU operators that are going to Colo as well. So we still have a long list of enterprise clients that are still expanding with us from a colo perspective, but also net new customers that are coming in as an enterprise Are you still seeing actually coming out of their own old school data centers, or is that finished now?

Speaker 1: 11:15

It's really one colo.

Speaker 2: 11:16

Oh yeah, I mean, I think I read a research report the other day. I think it was like 30%, 40% are still on-prem, yes, and over the next five years that should shrink down to 10% or 15%. And it distributes between public cloud and colo yeah, and private cloud as well. Yes, yeah, yeah.

Speaker 2: 11:35

So we'll still see a lot of new customers going from on-prem to colo, on-prem or off-prem, I guess, into a third party, yes, but public cloud is going to see a lot of growth out of that as well, yeah, I think everything will.

Speaker 1: 11:48

Our sense is, it's like a high-tide floats all boats, everyone's rising, we're seeing some really interesting stuff, and I'd love your perspective on this sort of GPU as a service play that seems to be popping up. It seems like there's a lot of VC money out there. It seems like, um, there's a lot of vc money out there. A lot of people have gone and bought a whole bunch of gpus, uh, that put them in a data center, probably your data center somewhere, and they're like now, what you know, um, that's where I think, uh, the connectivity piece is becoming really interesting. Yeah, sure, and so I think, out of this crazy rise, everyone talks about power and space, but they're missing the fact that, well, connectivity is kind of yeah, gpu can't just be sitting on an island.

Speaker 2: 12:26

It's got to be connected to something, right?

Speaker 1: 12:27

this is quite. Yeah, a lot of them, I think, built islands and then thought, yes, now you know, with the early days where people call us up and they're like, um, we've got all these gpus and it's like, well, now how does someone get to you? Yeah, you know, we've got to build a old school, you have to go and get zale or someone to go and build a connection, all these different carriers, I mean, and the, and we just said, look just on ramp one port with us and then you can access all these different customers and they can just punch to you straight away. It's like, yeah, that mind blown. But it's like we've been doing this for a long time with the clouds and this is sort of the next cloud, the neo cloud or whatever they want to call it. Yeah, so talk us through connectivity and what it means for your business, your customers, and how do we play a part in that?

Speaker 2: 13:09

Yeah, well, and Megaport's been an awesome partner for TierPoint because I think you're enabled in, I think, 17-ish data centers and so a lot of access to our clients. Yeah, so I mean, obviously connectivity is key because, like I mentioned before, no matter what service you have, whether it's a public cloud, a private cloud or a co-location type environment, it can't stand alone.

Speaker 1: 13:37

It's got to be connected to something else and it sounds like you've got a lot of customers that are mixing, not just one. We do yeah, yeah. We do yeah yeah.

Speaker 2: 13:47

We do. And what's really interesting is we're now seeing as our public cloud practice is growing. We're seeing those clients who have kind of a hybrid environment, with us needing those, you know, needing a more private and secure access to their public cloud instances, so they're using the Megaport to connect back to it. Yes, to connect back to private?

Speaker 1: 14:08

Yes, and do they also do a bit of cross-cloud? Are they mixing between clouds as well, in your experience?

Speaker 2: 14:14

We're starting to see that as well. And that's something like we're rolling out an Azure local type private solution. Yes, that's interesting and we expect there to be a lot of use cases where there's a mixture of, from a DR perspective and a production perspective, needing to be a lot of connectivity going on between the environment.

Speaker 1: 14:37

And when you build this out, resiliency becomes key. So I mean, we've spent a lot of time in your space. It looks as like a red and a blue zone and sort of making everything as redundant as possible, and Microsoft's a great example. They've been building on their side as much redundancy as well. Yeah, so there's a lot of ways you can build these solutions with high, high availability, lots of redundancy. That's built in. How are you seeing customers consume? That Is that important to them. Each customer is different, and where's it all going?

Speaker 2: 15:09

I think each customer is a little bit different. But one example of where Megaport comes into play in a situation like that is, you know, it's kind of data center to data center connectivity. So we have we do have our own kind of point to point, you know solution that provides dedicated transport between sites. So Megaport is an awesome option for those customers to have kind of a redundant secondary between those things. And you've been in 17 data centers, it's very likely that you're in the ones that are highly being used by our customers.

Speaker 1: 15:49

Yeah, yeah, We've rolled out, we've seen. Do you have situations where your customers are in data centers that are also outside of your data centers that can leverage us in some way to connect in?

Speaker 2: 16:01

Yeah, so we do have customers that would say, go into one of the carrier hotel type data centers to access either another cloud provider maybe not one of the public clouds but some other private cloud option there and obviously some kind of more, I'd say off-prem type environments.

Speaker 1: 16:23

Storage or something. Yeah, yeah. Actually we've seen some interesting storage companies appear. We've seen some really bizarre use cases. Actually, someone turns up. They're like can you pump a whole heap of traffic this way? I'm always like, what are you doing with that? It's surprising to see what's happening. What are your customers seeing? Are they pushing you to try and save money by doing different options, or is it just like they turn up and tell you can you deliver this?

Speaker 2: 16:50

Yeah, you know I haven't seen the cost savings kind of element or push from our customers from that perspective, but it's typically quality of service and the options and really being kind of an easy button for them as well, because put yourself in the kind of enterprise customer's shoes, I mean, the options that they could go after are overwhelming, yeah. And so we want to be kind of the consultant and guide them to a solution that's going to be not only that we feel good about but is going to give them the best service.

Speaker 1: 17:29

And so you're expanding. Do you buy more data centers? Do you build more data centers?

Speaker 2: 17:35

Yeah, so I want to do everything.

Speaker 1: 17:37

We want to add more capacity mean we want to.

Speaker 2: 17:38

We want to add more capacity. We want to buy new data centers? We want to.

Speaker 1: 17:41

We want to build more um when you build you, you are you building. You said not, as you're not doing crazy scale. Yeah, um, what's megawatt size would you build?

Speaker 2: 17:51

I mean, I I think you know my, my thought. For for tier point um, for the types of customers that are really our sweet spot and where we do well, kind of a 20 to maybe 50 megawatt type data center would be perfect, yes, but I'm happy if we're like 10 megawatts, because we have plenty of demand out there.

Speaker 1: 18:17

And when you say the demand, are they looking for just different locations. When you say the demand, are they looking for just different locations.

Speaker 2: 18:22

So 2024 was interesting because it was where do you have a megawatt? Where do you have five megawatts? It doesn't matter where it is. I think that when the dust settles in this market, it'll be less like that and I think there will be a little bit more kind of location specificity to the requests.

Speaker 1: 18:39

And are they choosing a location because it's close to their office? Is it?

Speaker 2: 18:42

power, not necessarily. I mean there are some latency use cases where we're asked, like you know, within you know X, number of milliseconds to a metropolitan area. One of the interesting things that's driving some decisions not only've got you know cost of the utility power and uh availability, but it's, uh, you know, tax incentives as well yeah, so I was going to say the is that state, or is it?

Speaker 2: 19:08

it's, it can be municipality, it can be state, um, so and um the, the gpu and the hardware associated with with these workloads. It's very costly, so these tax incentives can be.

Speaker 1: 19:23

Costly? You mean just literally to buy the chip and put it in and there's tax associated with that, or are you saying the run?

Speaker 2: 19:29

of it, or both, so the capital required to purchase the hardware, and then, yeah, so there's different taxes for that. Yeah, you've got the sales tax, different taxes for that. Yeah, you've got the sales. Uh, you've got sales tax. Um, and the you know, and different again. Different states or municipalities may offer different tax incentives, um, and it's significant cost savings and for the operator.

Speaker 1: 19:51

Yeah, so do you see folks in your data center go? Hey, whatever is a better state you probably don't want to share, but I want to be in that data center and you could then build out more there, because because of that offering and that becomes like a value prop absolutely so we have like, uh, you know, north carolina is a great market for us.

Speaker 2: 20:07

So we've got two major markets are raleigh and charlotte, yeah and uh, and north carolina has been, you know, a tax friendly, a very tax friendly state. So we're investing in our, our data center capacity in that market because we know that even when the dust settles, this is going to be a really strong yeah it becomes the next.

Speaker 1: 20:27

It's not like where can I land? It's not going to land efficiently, yeah, and that's yeah, okay, and so you're going to build or so?

Speaker 2: 20:34

so you know we we're probably going to do both um, but we have existing data center um space you got, you've got that we're going to add power to I've got some room you can see it.

Speaker 1: 20:45

Come on, come on.

Speaker 2: 20:48

So we'll be pulling in some additional power into like for our Charlotte data center, for example. We were very, almost too successful in Raleigh, so we're pretty much, you know, we've got a little bit of power left, but you know, ideally we'll be looking for a new data center in that market.

Speaker 1: 21:05

And are you running out of? Is it purely? You've burned all the power and there's spice left in there. It's usually power now.

Speaker 2: 21:11

Yeah, I mean, it used to be that space was the premium and now it's the power.

Speaker 1: 21:15

And you can't get more in, so you just go and find.

Speaker 2: 21:18

Yeah, so it's a lot of, you know, becoming good friends with the utility providers and seeing how quickly we can get more power there.

Speaker 1: 21:25

Yeah which is a different game altogether. So what do you think about all these other people that have just entered into this space? There's a lot of them, right, A lot, and I find that you know when famous people on TikTok or whatever are now buying data center land, and I don't know what their expertise is, but it's sort of interesting.

Speaker 2: 21:45

Well, and that's one of the reasons I think that we're probably not going to be competing in that. Hyperskins, yeah, because there's a lot of capital. It's starting to become pretty crowded and I think there's been some discussion out there. There's just so many speculative projects out there in terms of but they're getting funded, land getting marketed as power oh, the perfect debt is channeling. This is going to be perfect as a gigawatt campus and whether it actually pans out and is real is yet to be seen.

Speaker 1: 22:20

But transacting someone's behind these things. Yeah, yeah.

Speaker 2: 22:24

Yeah, yeah. So we feel like we've got a nice sweet spot that we can operate in.

Speaker 1: 22:29

You know what you're doing.

Speaker 2: 22:31

Yeah, we'll be able to deliver high quality of service.

Speaker 1: 22:36

And so for you, your goal is to keep winning any size customer, but that sweet spot is sort of commercial enterprise, US-based ideally. We've got some international customers coming into our data centers as well, so we can help connect all those guys.

Speaker 2: 22:56

We're pretty open to. Our doors are open to anybody.

Speaker 1: 23:00

That is the unique thing about a data center you can actually have that local presence without a need to have some sort of global to actually deliver. Well, that's cool. So how can we help you? How can we love you more? Just keep landing, keep connecting.

Speaker 2: 23:15

No, I mean, I think again, megaport's been a great partner and I think, the connectivity options, I think you know, as you guys are learning more about, you know the connectivity requirements for these AI use cases. You know we should be sharing information and because really it's going to benefit both of us, I think it's changing quickly.

Speaker 1: 23:36

Yeah, this space has been running beautifully for a long period of time. It's gone a bit wild and everyone's got excited. But at the end of the day, it's still like shipping along 2025, 2024 was an interesting year. 2023 was like AI came into being. What's 2025 hold for you?

Speaker 2: 23:52

So, yeah, I'm looking forward to kind of continuing the momentum, you know, I think bringing more capacity online for customers and really kind of, you know, trying to get involved in some really interesting strategic projects.

Speaker 1: 24:06

yeah, that's cool and you've got I mean you've got salespeople all over the US we do, we do.

Speaker 2: 24:12

We've got a number of folks out there and they're, all you know, ready to get things going.

Speaker 1: 24:15

Yeah, yeah they're lined up with our crew, so it's exciting. So, yeah, we're going to do more together, absolutely.