VeriCenter Plans A Utility-Computing Framework For The Future

Continuing with an aggressive acquisition strategy, VeriCenter Inc. has added the latest piece to a nationwide set of regionally based data centers it is building that it believes will be the groundwork for a utility-computing evolution in the next decade.

VeriCenter announced this week it has acquired Agiliti Inc., a St. Paul, Minn.-based provider of enterprise hosting services. The acquisition includes Agiliti's 10,000-square-foot data center, 45 employees, and about 100 customers. Terms of the all-stock deal weren't disclosed.

"We believe the road to utility computing is going to drive through the data center of the future with companies like VeriCenter," says Mike Sullivan, founder and senior VP of VeriCenter, a provider of enterprise hosting and managed services.

The acquisition gives VeriCenter its first presence in the north central United States, says Gray Hall, chief executive of VeriCenter. The addition of Agiliti is expected to increase VeriCenter's revenue by about 20%, and also boost its customer base about 20% to around 500, he says.

VeriCenter was founded in 1999, and expanded significantly in late 2003 when it acquired four data-center operations from Sprint. That acquisition included centers in Boston, Atlanta, Denver, and Dallas. VeriCenter also operates in a limited partnership in a Kansas City center owned by Sprint, and owns two centers in Houston where the company is headquartered.

The company has recorded 19 consecutive quarters of revenue growth, and was on a run rate for about $45 million in revenue in 2005 prior to the Agiliti acquisition. About 80% of its revenue is through managed data-center services, and about 20% through co-location services.

"We're offering a suite of services that is an evolution toward infrastructure as a service, software as a service, and finally utility computing," Sullivan says. Currently VeriCenter offers "flexible" monthly contracts. New payment options will be introduced as software matures to be able to more accurately track usage on compute cycles, or hourly increments, he says.

An example of a flexible hosting contract is its work with International Speedway, which operates nine NASCAR racetracks, including Daytona. A few years ago the company moved its ticketing to a consolidated Internet system that's operated out of one of VeriCenter's Houston centers.

Each year, International Speedway experiences heavier demand during "Speed Weeks," from mid-February through late April. VeriCenter is able to provide an increased computing capacity for 90 days, which is then reverted back to its normal capacity loads for the remainder of the season.

Stewart Mortgage Information moved a majority of its data-center operations to VeriCenter last year, according to Brian Davenport, senior VP and CIO of the financial-services provider. The company was faced with making a major upgrade of its infrastructure and determined it would make more sense to turn to an outside company that specialized in data-center operation, he says.

"We wanted to find a way we could provide a high level of service without incurring the extremely high infrastructure costs," Davenport says. In addition to the cost of equipment, Davenport says Stewart can now access the skill sets of highly specialized technologists at VeriCenter without the cost of having a corporate staff, "which we would potentially only fully access about 20% of the time."

Stewart implemented its deployment with VeriCenter in October, and to date has seen a 15% to 20% reduction in IT expenses, which Davenport expects to improve further.

In the years ahead, VeriCenter believes it will find itself as both a partner and competitor to large companies such as Hewlett-Packard, IBM, and Sun Microsystems, which also have begun to offer utility computing-style product offerings.

A current example is VeriCenter's work with IBM Global Services. When IBM wanted to create an industry-specific utility computing offering for the petroleum industry in Houston, it turned to VeriCenter to be the operator of the data-center operation in support of the engagements, says David Gelardi, VP of deep computing capacity on demand for IBM. "As IBM or other players craft offerings, it may be cost-effective for us to use a partner like VeriCenter to build out and run the operation side," he says.

Building out a network of regional data centers is key to VeriCenter creating its eventual utility computing offerings, Sullivan says. Businesses, particularly the midsize companies that VeriCenter most often engages with, like to have a local presence for their IT infrastructure requirements, he says. VeriCenter plans to continue to expand both with acquisitions and greenfield projects.

"We believe utility computing will evolve regionally first," Sullivan says, "just like the electric utilities evolved around the concentration of metropolitan areas."