Firm Plans Storage Services Empire

A holding company based in Virginia is building a small empire of domestic colocation and managed service facilities featuring storage.

Managed Data Holdings (MDH), a three-man firm started in June 2007, made its second acquisition in seven months this week with the purchase of Data393, a Denver-based colocation facility with 30,000 square feet of space, over 500 customers, and a focus on dedicated Internet access.

The buy follows MDH's purchase of InteleNet, another data center colocation company based in Irvine, Calif. InteleNet features about 30,000 square feet more facilities and supports over 400 customers, MDH claims. Its specialty is managed services.

About 85 employees work for either Data393 or InteleNet.

Terms of both the Data393 and InteleNet purchases weren't disclosed, but MDH acknowledges filing for antitrust clearance from the U.S. Department of Justice in October 2007 prior to the purchase of InteleNet. That kind of scrutiny isn't required unless a purchase is over $55 million.MDH CEO Peter Stevenson says his company is fully funded for more buys in 2008, though he won't release the amount of capital MDH has gotten from Great Hill Partners and Catalyst Investors. Mum's the word too on where and when MDH will buy again.

Stevenson's more forthcoming on MDH's strategy. He was the CEO of Globix from 2002 through 2006, overseeing that company's exit from Chapter 11 and its ultimate asset sale. He joined up with MDH CFO Doug Butler, ex-Looking Glass Networks, and with Evan Mullan, ex-First Avenue Networks, now MDH's chief operations and integration officer. "We looked at the fragmented state of colocation and managed services... We hoped to acquire one or two companies to create a platform for sale to Fortune 1000 midsized companies in select Tier 1 and Tier 2 markets in the U.S."

By "platform," Stevenson says he means facilities that are already doing well and can organically grow via not only colocation services but selected business services -- namely, managed storage and security.

"Storage is an important part of our strategy. We're seeing very strong growth in terms of customer inquiries. Utilization on platforms of double-digit terabytes [of storage] is already there," Stevenson says. Storage services also can scale up via equipment upgrades, he maintains, instead of requiring personnel additions the way some application-based services do.

Both Data393 and InteleNet offer managed storage, online backup, and disaster recovery services.Data393's Fibre Channel storage infrastructure is based in part on storage gear from EMC, Avamar, and Compellent, as well as equipment and software from Cisco, Microsoft, and Red Hat. Stevenson won't disclose storage suppliers for InteleNet, but indicates there may be a change underway.

As well as midsized organizations, key prospects for the MDH companies include divisions of large enterprises seeking an alternative to corporate contracts with providers like Savvis or AT&T. "Maybe the North American division of a company doesn't want or need a big international player. We provide a more hands-on, personal touch," Stevenson says.

Stevenson is careful not to isolate any vertical markets, which he sees as a recipe for getting stranded in a niche. MDH has customers in financial services, Web 2.0 and SaaS, construction, shared hosting, insurance, and media/entertainment, he notes. But he acknowledges that MDH is a particular fan of gaming companies. "Once they're in, they grow like weeds. They need huge quantities of capacity, endless capacity."

MDH faces some serious challenges. The services market seems poised for progress this year, but storage customers are demanding the right formula. While newcomers like Nirvanix appear to be making headway, other companies, like MTI, have seen their fortunes wane. At the same time, big players like Dell and EMC have entered the ring, amid offerings from existing service providers AT&T, Savvis, Verizon, XO Communications, and others. It's a field that will be tough for any new players,

Pete Stevenson is undeterred. "We're pretty bullish and focused on 2008. It's an important business."Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.