Peak 10 CEO Chris Downie On $1.7B ViaWest Merger And The Future Of Data Centers

Since its founding in 2000, Charlotte-based data provider Peak 10 had been gradually expanding by buying new properties, primarily on the East Coast. Then, last month, the company acquired competitor ViaWest in a $1.7B deal to make it one of North America's largest data center providers.

The deal came nine months after Peak 10's new CEO, Chris Downie, was brought on to help expedite the company's growth. The merger will make Peak 10 the largest privately held data center provider in North America that offers both co-location and cloud services. Its geographic presence will double, from 10 to 20 markets, and expand to the West Coast. 

"In one fell swoop, we put ourselves in a materially different competitive position," Downie said. "Peak 10 has had an aspiration to go national for a long time. ViaWest had an aspiration to go national for a long time. Neither company had the opportunity to do that overnight, and this transaction provides us that opportunity."

Peak 10's clients include the Professional Golf Association of America, Gorilla Glue and Chiquita bananas. The company has data centers in Charlotte, Raleigh, Richmond, Nashville, Atlanta, Tampa, Jacksonville, Miami, Cincinnati and Louisville.

In merging with ViaWest, it will add clients such as Overstock.com and New Belgium Brewing Co., and it will gain data center properties in Phoenix, Las Vegas, Austin, Dallas, Minneapolis, Salt Lake City, Denver, Oregon and Calgary. 

The deal is expected to close in August, and Downie said he has been working on integrating the two companies since the day after the announcement. The companies use many of the same systems, but he said such a large merger is still logistically challenging.

"While the companies are pretty similar in profile, it's no easy feat to put together two companies that will be one very large company at the end of the day, with 1,000 people supporting a customer base of 4,200," Downie said. "We've got to make sure we're focused on making the customer experience as seamless as possible." 

Even as he works on the merger, Downie said he is still keeping his eyes open for more expansion opportunities. He said Peak 10 will pursue opportunities as they arise, but would prioritize expansion in its existing markets and nearby areas. 

While the company's reach will extend from ocean to ocean, it remains without a presence in some of the nation's largest data center markets: New York/New Jersey, Chicago and Ashburn, Virginia, a massive data center corridor in the D.C. suburbs. 

"It's not on the immediate horizon," Downie said of an expansion to Ashburn. "That’s no easy execution consideration given the providers that are there and the scale that they have. Although, with 4,200 customers and significant enterprise and network resources, it is a logical extension for us."

Peak 10's expansion comes at a time of rapid growth and change for the data center industry as providers shift services to the cloud. Following the completion of its merger, Peak 10 will have 20% of its revenues coming from cloud, with 70% coming from traditional co-location services and 10% coming from managed solutions. 

Downie said cloud storage has become increasingly significant, but he thinks it is still in its infancy. 

"Providing it to your customers will be a table stake like electricity is at some point in time, but at this stage of its evolution, it’s not simple," Downie said of the cloud. "You have to understand where you want to participate in the value chain ... We're focused on the core capability set we can deliver long term. It's not going to be everything in cloud."

While Peak 10 is a retail data center provider, catering primarily to small and midsize companies, some of the sector's most rapid growth has come on the wholesale side. Tech giants Amazon, Google and Microsoft, which provide hyperscale computing services, spent a combined $31.5B on data centers in 2016, up 22% from the prior year. The companies are growing their cloud infrastructure so quickly that they have begun leasing data center space because they cannot build it fast enough.

"They are certainly changing the game," Downie said. "Hyperscalers with marketing muscle are forcing enterprise to realize they’ve got to engage with experts as it relates to IT resources."

But Downie does not see these tech giants as a threat. Rather, he believes they create an opportunity for retail data center providers like Peak 10. 

"There is a whole universe of people in large, medium and small demand sets who need to find non-wholesale environments to engage in critical IT resources," Downie said. "You guys keep scaling wholesale. It just creates more opportunities for me to be more differentiated for a fairly different enterprise demand set that isn’t always going to be looking for wholesale."

Downie will be a panelist at Bisnow's Data Center Investment Conference & Expo East on Wednesday in Ashburn.