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A look at the fully-packed racks inside a Facebook data center facility.

Facebook has decided to begin building its own data centers, and may announce its first facility as soon as tomorrow. The fast-growing social network has previously leased server space from wholesale data center providers, but has grown to the point where the economics favor a shift to a custom-built infrastructure.

“Facebook is always looking at ways to scale our infrastructure and better serve our users,” said Facebook spokesperson Kathleen Loughlin said last week. “It should come as no surprise that, at some point, building a customized data center will be the most efficient and cost effective way to to do this. However, we have nothing further to announce at this time.”

That may change tomorrow at noon, when Oregon Gov. Ted Kulogonski is scheduled to unveil the identity of Company X, the mysterious tenant in a data center project in Prineville, Oregon. Construction is already underway on the 117,000 square foot data center at a site near the Prineville Airport, which is expected to employ 35 workers.

Not Google or Yahoo
The data center is being built by Vitesse LLC on behalf of an unidentified tenant. But Vitesse has said Company X is not either Google or Yahoo. Data center industry chatter suggests the tenant is a large social networking site – which usually means Facebook.

Facebook’s move to build its own data centers was foreshadowed by its plans to implement custom servers and an innovative power path design, which will allow the company to reduce the energy loss during power distribution from the current 35 percent to about 15 percent.

Designed for Efficiency
The new design foregoes traditional uninterruptible power supply (UPS) and power distribution units (PDUs) and adds a 12 volt battery to each server power supply. This approach was pioneered by Google, which last year revealed a custom server that integrates a 12 volt battery, which the company cited this design as a key factor in the exceptional energy efficiency data for its data centers.

Facebook’s extraordinary growth has forced the company to continually invest in its infrastructure. The social network, which recently crossed the 350 million user barrier, has expanded by leasing space from “wholesale” data center landlords,including Digital Realty Trust, DuPont Fabros Technologies and Fortune Data Centers.

Since the beginning of 2009, Facebook has signed two leases for additional space in the ACC5 data center in Ashburn, Virginia operated by DuPont Fabros. The company has also added a data center in Santa Clara operated by Digital Realty, and from Fortune down the road in San Jose.

Switch From Wholesale Approach
Wholesale providers build the data center, including the raised-floor rechnical space and the power and cooling infrastructure, and then lease the completed facility. The tenant pays a significant premium over typical leases for office space, but is spared the large capital investment to construct the data center. This has positioned Facebook to continue growing rapidly without having to build its own facilities.

But Facebook has now decided to join the club of huge Internet companies that build their own data centers, a group which includes Google, Microsoft, Yahoo, eBay and Oracle. This typically requires a larger up-front investment in construction and equipment, but allows greater customization of power and cooling infrastructure.

The Appeal of Hydro Power
The Prineville site is several hours from an existing Google data center in The Dalles and a Boardman site where Amazon is said to be resuming construction on a major data center project. The Prineville site is located near the Prineville Airport in an enterprise zone, which allows the city to waive property taxes for eligible projects.

The project is the latest indicator of the growing appeal of the Pacific northwest as a destination for companies seeking the lowest operating costs for their data centers. The region’s abundant supply of affordable hydro power is a major factor in its appeal, as are tax incentives like the tax exemption being discussed in Prineville.

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Facebook to Build Its Own Data Centers

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For years, Akamai Technologies (AKAM) was the market share leader in the content delivery sector, and had a pricing premium built into many of its services. For many rivals, a key marketing pitch was being cheaper than Akamai. When the market was flooded with VC-backed startups, it was assumed that competition would eventually force Akamai to alter its pricing.

Those predictions went unfulfilled for several years. But the game has changed in recent months, according to Dan Rayburn, who tracks CDN pricing trends closely through regular market surveys.

“Over the past four weeks I have seen bids where Akamai has matched pricing from Limelight, Level 3 and EdgeCast or in some cases, undercut their pricing all together,” Dan writes at The Business of Online Video. “I have seen fewer video contracts steer away from Akamai in December and January and it’s clear the company is taking a serious pricing reduction strategy and applying it to a wide portion of their video business.”

Dan doesn’t believe this is a permanent change in pricing philosophy by Akamai, but rather a move to expand its strategic discounts, which were previously reserved for large customers. He notes that Akamai doesn’t need to be cheaper at its rivals, and going forward will likely recalibrate its pricing to regain some margin. But the playing field has changed.

“For Akamai’s competitors, this is not good news,” Rayburn writes. “Speaking to a couple of them over the past few weeks it’s clear that they are feeling the pricing pressure and they all acknowledged that Akamai is now getting very competitive on pricing. When Akamai’s pricing was so out of whack, their job was a lot easier. But with Akamai now playing hardball, it makes their job that much tougher.”

The big winner in this battle: the content delivery end users who will be paying less for these services.

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Akamai Price Cuts: Bad News for CDN Rivals

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As data centers get warmer, the environment gets less forgiving. That lesson was learned the hard way at the University of Pennsylvania, which on Tuesday had to shut off the IT systems supporting the school’s financial, research and student services.

The University Data Center experienced “an excessive heat condition” on Tuesday afternoon, according to the Daily Pennsylvanian. The incident occurred when one of the two glycol pumps supporting the Data Center was accidentally switched from automatic to manual during an equipment replacement, resulted in overheating.

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U. of Penn Data Center Overheats

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Continuing its expansion beyond the wholesale data center market, Digital Realty Trust said today that it will partner with KDC to offer build-to-suit data centers for corporate customers. Digital Realty (DLR), the largest developer of data center properties, said the two companies will partner to build custom data centers for clients, who then lease the building.

“For the first time, customers have a one-stop shop for their build-to-suit data center projects,” said Chris Crosby, Senior Vice President, Corporate Development at Digital Realty Trust. “Additionally, we are able to provide a lease for the custom data center (including the mechanical and electrical plant) without financial contingency, offering a simple financial model that saves customers significant capital.”

Build-to-suit projects are less risky than wholesale multi-tenant data center projects, which are typically built either on a speculative basis or based on a commitment from an anchor customer. In either scenario, the project goes forward before it is entirely leased. 

The build-to-suit offering from Digital Realty and KDC targets companies that prefer  a dedicated data center over a shared facility, while allowing them to benefit from Digital’s design and construction management experience. This builds on the company’s POD Architecture Services, which allow companies to license Digital Realty’s data center designs and save money on procurement by leveraging DLR’s bulk purchasing power.    

In KDC, Digital Realty has a partner with extensive experience in this niche. “KDC is the leader in corporate build-to-suit projects, having developed more than 110 over the past decade,” said Crosby. “The firm has a tremendous track record in completing custom development projects on-time and on-budget. KDC’s expertise is a perfect complement to Digital Realty Trust because we are the ultimate landlord for built-to-suit datacenters.”

“At a time when most companies are having difficulty obtaining financing for major construction projects, our alliance provides a simple, best-in-class process for the leasing of a custom datacenter facility,” said Steve Van Amburgh, CEO at KDC. “This alliance is a natural complement for both companies.”

“The timing is ideal for the emergence of a national developer that can finance and develop build-to-suit data centers that will fit the location and technical needs of the end user,” said Ab Atkins, Senior Vice President at KDC. “The alliance between KDC and Digital Realty Trust is the perfect platform to meet this market need head on.”

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Digital Realty Targets Build-to-Suit Market

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VYCON, which makes flywheels for backup power systems, announced today that it has closed a $13.7 million round of funding. The Los Angeles company said it would use the financing to ramp up manufacturing to meet strong demand from data centers, hospitals and rail transportation applications.

Flywheels are an alternative to using batteries in a data center UPS (uninterruptible power supply) system. A flywheel is a spinning cylinder which generates power from kinetic energy, and continues to spin when grid power is interrupted. In most data centers, the UPS system draws power from a bank of large batteries to provide “ride-through” electricity to keep servers online until the diesel generator can start up and begin powering the facility.

The funding, led by the BankInvest Group in Denmark, includes conversion of $6.5 million in existing convertible notes and $1.1M of existing trade debt. Several of VYCON’s existing investors participated, as well as several new investors.

“We’re extremely pleased in the confidence of our existing investors and at the same time welcome our new investors,” said Vatche Artinian, CEO of VYCON. “While the past year included extremely difficult economic conditions around the globe, VYCON enjoyed tremendous sales growth during the year, particularly in the power quality markets and was able to achieve several important milestones. This latest investment positions us well to accelerate our expansion strategies. We’re excited about the fast growth of the energy storage marketplace and VYCON’s opportunities in the new decade.”

In addition to working with data centers and hospitals, VYCON said it worked closely with local port operators and metro transit authorities to obtain American Recovery & Reinvestment Act of 2009 (ARRA) grant funding for projects using clean flywheel technology. “We see tremendous opportunities for organizations to integrate our flywheels into their energy infrastructure that will enable them to lower operating costs and improve overall reliability and uptime of their systems,” said Frank DeLattre, president of VYCON.

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Flywheel Maker Gets $13M Investment

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Verari confirmed Tuesday that an investment group led by founder David Driggers has acquired the company’s assets and will ”re-start the Verari engine” with a focus on working through partners. In a statement on its web site, Verari announced the “successful acquisition of substantially all of Verari Systems’ corporate and intellectual property assets by an Investment Group led by Driggers.”

The high-performance computing company will change its name from Verari Systems to Verari Technologies. On Dec. 11 Verari halted most operations and laid off most of its staff, and its assets were placed for sale in an auction. Driggers’ group purchased all of Verari’s inventory, equipment and technologies and said it will support past Verari Systems’ customers.

Driggers said Verari Technologies will focus on blade-based servers and storage for high-performance computing, as well as data center containers.

‘Back to our Roots’
“We have the opportunity to go back to our roots of being a consulting company that heavily partners to deliver custom solutions for our customers,” says David Driggers. “The ‘new Verari’ is going to build stronger partnerships with our customers while delivering the solutions they require. I’m a strong believer that companies are more successful when they listen and collaborate with their customers.”

Verari’s intellectual property assets include the company’s patented Vertical Cooling Technology, BladeRack architecture and modular data center patents.

Focus on Licensing
“You’re going to see a concerted effort on our part to license and promote these unique technologies,” states Mr. Driggers. “With the ever increasing compute and storage issues our customers are facing today, I believe we are going to be well positioned to help them solve even the most demanding challenges.”

That includes Verari’s FOREST container offering, which has recorded some high-profile customers wins in recent months, including sales to Qualcomm and a deal with NASA to house its new Nebulacloud computing platform. Microsoft also uses a Verari container to power its Virtual Earth service.

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Verari ‘Reboots’ With Focus on Partners

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A NaviSite data center in Silicon Valley was without power for an hour this morning after severe storms knocked out the facility’s utility power from PG&E. NaviSite’s San Jose data center lost utility power from PG&E at 4:45 a.m. Pacific time, and backup power systems failed to operate as designed.   

“Generator power has been restored to the data center in San Jose, but the site was without power for approximately 45 to 60 minutes,” NaviSite reported on the company blog. “The data center has been and continues to run on generator power.  We are still waiting for street power to become available, but will not switch back over until we have an understanding of what caused the original issue.”

NaviSite (NAVI) did not indicate the precise cause of the outage, but one of its customers supplied more information. “Our backup power systems initially functioned correctly shifting to battery power as a bridge to generators which then failed to turn on,” ProStores said on its Twitter feed.

ProStores provides turnkey web stores for retailers who sell their goods on eBay. AuctionByteshas more coverage of the ProStores outage.

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Storms KO NaviSite San Jose Data Center

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TechCrunch has a post this morning from digital music veteran Michael Robertson on Apple’s “Secret Cloud Strategy” and the importance of the software technology that it acquired from Lala.  “An upcoming major revision of iTunes will copy each user’s catalog to the net making it available from any browser or net connected ipod/touch/tablet,” Robertson writes, adding that more than 100 million iTunes users will be able to upload their catalogs to the net with a simple “An upgrade is available…” notification dialog box.

Software is dandy. But as we’ve previously noted, that kind of storage requires a ginormous data center – which Apple is already busy building in Maiden, North Carolina. For those just joining this story, here’s a summary of our reporting on Apple’s move into the clouds.

• Is an iTunes “Reboot” Driving the iDataCenter Project?
• The iDataCenter and the Cloud
• Maiden iDataCenter Will be 500,000 Square Feet
• It’s Official: Apple Data Center to North Carolina
• The Apple-Google Data Center Corridor
• Apple iDataCenter set for Maiden
• Apple Moving Quickly on NC Project

Will Apple have anything to say about its cloud computing ambitions in its hotly-anticipated product announcement Jan. 27 in San Francisco? Who knows. Speculation is already out of control, with most of the focus on the expected rollout of a tablet computer. But Apple’s plans for its huge new data center won’t remain secret forever.

Cloud background from SoraZG via Flickr.

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Where Apple’s ‘Secret Cloud’ Will Live

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Chi-X Canada has selected Switch and Data’s “Financial EcoCenter” at 151 Front Street in Toronto as its primary data centre, the companies said today. Chi-X Canada will retain its current Exchange Tower data centre as its backup facility, and expects the move to 151 Front Street to take place in late Q2.

Chi-X Canada provides colocation and advanced tools to financial traders specializing in low-latency trading. The move to Switch and Data (SDXC) will allow Chi-X Canada to grow its colo operation and provide faster connectivity to its subscribers.

“Since launching nearly two years ago, one of our primary focuses has been working with both our global subscriber base and the vendor community to provide fair, seamless and, above all else, low-latency access to our industry-leading trading platform,” said Dan Kessous, COO of Chi-X Canada. “Switch and Data’s world-class Toronto facility will enable us to provide the level of service that our existing clients have come to expect from Chi-X Canada, while at the same time allowing us to continue bringing new global trading participants to Canada.”

“By virtue of its downtown location, our Toronto Financial EcoCenter sits at the terminus of several of the long-haul fibre optic cables originating in New York and Chicago,” said John Panzica, Vice President Financial Services Practice for Switch and Data. “As such, many of the world’s leading trading firms and vendors are already connected, making 151 Front Street an ideal location for Chi-X Canada’s primary data centre.”

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Chi-X Canada Colos at Switch & Data

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Daniel Golding, who has tracked the data center and hosting sector for Tier 1 Research, has joined DH Capital as a Managing Director, it was announced today. DH Capital is an investment banking firm serving the Internet Infrastructure and telecom sectors, which in recent months has arranged financing for companies including SoftLayer Technologies and Cervalis.

“We are thrilled to have Dan join the DH Capital team,” said Peter Hopper, President and Co-Founder of DH Capital. “Dan’s reputation as a leading analyst is well known and well deserved. Dan will be bringing his considerable talents to DH Capital and, most importantly, to our clients. His addition to our firm further strengthens our position as the leading advisor for M&A, capital placements and consulting services to the Internet Infrastructure sector.”

Golding had been Vice President of Research at Tier1 Research, where he supervised the firm’s research efforts for shared, dedicated, and managed hosting, and led the firm’s entrance into the data center and cloud computing sectors. Golding was chairman of the Hosting Transformation Summit for the past three years, and also served as a member of the executive team at the 451 Group, Tier 1’s parent firm.

“The best part of my job is helping firms to chart a new course through this complex market and turn their plans into realities, from server architectures and network products to financing and investment options” said Golding.

Prior to Tier1, Dan worked for enterprise consultancy The Burton Group, providing advice on network strategies to Fortune 500 and Global 2000 firms. He previously led global peering efforts at America Online and served as a nuclear engineer in the US Navy.

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Daniel Golding Joins DH Capital

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