Innovation in business can take many forms. New products can be developed to address previously unknown market needs. The world wasn’t in a holding pattern for light beer, for example, but then Miller made the connection between traditional barley and hops brews and expanding American waistlines, and you know the rest. Other times, subtle changes to existing products are the creators of new opportunity. The first Lexus was just a Camry with a different body style, better sound insulation, and some wood grain, but folks were still willing to pay a premium to purchase essentially the same car. The rarest form of innovation is those that actually change the nature of the contract between the provider and the customer.
The iPod is a prime example of a product innovation that changed the relationship between the customer and the provider. The product itself wasn’t all that complicated, in fact there were other MP3 players that did more at the time of its release. What Apple did was look at the buying relationship between music lovers and their traditional method of procuring it. Although it may seem like eons ago, before the iPod, if you wanted to purchase that one song your really liked (BW Stevenson’s “My Maria” anyone?) you had to buy the album, eight track, cassette or CD that contained it along with the 8 or 9 crappy songs that came along with it. By enabling users to buy the individual songs that they wanted for 99¢, the iPod changed the music purchase paradigm.
Historically, the data center industry has used a business model similar to the pre-iPod music industry. You can get a data center, but you have to take all the ancillary baggage that comes with it (a.k.a., the eight crappy songs). Unless you’re located in a few select major markets, you can’t have a data center where you want it unless you build it yourself, have a customized facility built for you, or, if you have a building, you can find a provider to put pre-fabricated modules into it. You can typically only lease your data center space, have it operated by your provider’s personnel and share all the common areas with the other customers within the facility. If this looks like control over you data center operations is largely out of your hands, that’s because it is. As for expansion, branding and locking out you competitors—good luck.
In developing our Compass standalone data center solution, we looked closely at the provider/customer purchasing relationship. As in the case of the iPod we found that what customer’s wanted was analogous to the ability to purchase the 99¢ song, but the traditional data center business model doesn’t support this ability. It is provider, rather than, customer centric. What we found was that customers wanted a true product that contractually put the control of their data center operations and decisions into their hands. In essence they were looking for an off the shelf, shrink wrapped data center product that included the functionality that they viewed as essential like a hardened shell, Tier III certification and LEED Gold compliance that could be located wherever they needed it to be, without the need to share any common areas. By combining the physical attributes that customers desired with multiple options in the area of acquisition (lease, buy or hybrid), operational and security personnel (theirs or Compass’) and the ability to expand their data center on their schedule without having to pre-lease space, the Compass standalone product provides customers with the equivalent of the ability to purchase the 99¢ song. In short, the control over their data center operations is placed in their hands rather than dictated to them. The “album oriented” business models of the vast majority of wholesale providers preclude them from being able to offer this level of customer control.
A historical examination of most businesses find that they typically move from an initial phase of innovation to one of parochial inflexibility that serves the goals of the provider (be it a record company or data center provider) rather than their customers. Only by examining the existing buying relationship between customer and provider, with the express intent of reinventing it, are these paradigms broken. In developing the data center as a product rather than a project, that is what we’ve attempted to do at Compass. We believe the productization approach to data centers won’t meet everyone’s needs, just like the iPOD didn’t in comparison to competing MP3 players. Needless to say, I’d be happy with that iPod market share too one day…