The acquisition of containerized data center maker AST Modular by Schneider Electric was spurred by a desire of the French-owned energy and manufacturing giant to extend its portfolio into a growing sector. It could also be seen as a move into the IT world and the developer side of the data center business.

Schneider has identified and decided to go for a huge opportunity but it has also potentially found a whole new set of competitors among its existing partners.

Kevin Brown, VP of data center global offering and strategy at Schneider Electric, is the man who drove the acquisition. He told FOCUS: “One of the first companies we contacted was IBM. Products are still being delivered to IBM [from AST Modular]. The indications we’re getting today is that there is no reason to think that would change.”

The desire is for it to be ‘business as usual’ but discussions about exactly how the interrelationships will pan out are ongoing. While it is Schneider’s competitor Eaton that is credited with supplying power and cooling for IBM’s PMDC (portable modular data center), Schneider supplies power and cooling components for the scalable modular data center – its non-ISO container offering.

It is clear that the pre-existing inter-relationships between AST and its partners were key considerations during negotiations and remain vitally important going forward.

Behind the acquisition
It was on 10 January 2014 that the highly acquisitive power machine maker and power management giant said it would buy Spanish container data center manufacturer AST Modular for an undisclosed sum. Based in Catalonia, one of AST’s biggest single customers is IBM, for which it builds the PMDC.

Schneider knows it is buying a manufacturing capacity in Barcelona, Spain and Miami, Florida. It is also gaining existing partnerships and a customer base along with established distribution channels in the US and Latin America (LATAM).

AST has strong brand recognition across the Spanish speaking region. Its containerized data centers have been deployed in extreme locations for oil and gas customers. This is a sector which is very focused on modules for their high level of transportability. Exactly how many containers have been shipped either under the AST brand or those of its partners is never discussed.

Among those locations publicly announced under the AST brand are shipments to places such as Iceland, Haiti and Denmark. Its strong oil and gas presence has also seen products placed in locations near the southern Iraqi city of Basra on behalf of client BP.

Schneider gains AST’s experience in product development and deployment through the acquisition. “The firm has a strong, established customer base and there is minimal product overlap. There is also the geographical reach, especially in Spain and LATAM,” Brown said. “Manufacturing capacity is not the main reason for buying AST.”

The prime motivator was position. Schneider Electric does not believe in absolutes. It believes that modular data centers will take a bigger slice of the market but not that modular will be the only – or even the most popular – option. Overall, it sees a good mix of formats for data center infrastructures.

“We are very strong in power and cooling infrastructure and are moving into modular IT rooms. Talking with Henry (Henry Daunert, CEO at AST Modular) we discussed different opportunities and recognized that we saw the industry moving in the same direction,” Brown said. For AST, as an operation it gets access to capital and an ability to think globally with a potentially bigger salesforce and target customer base. For Schneider, it is buying expertise it would struggle to develop in an already fast moving market.

The competition
Brown has strong views on the existing offerings in the container and modular data center market. “There exists a lot of hype. Going back to Sun’s Blackbox (Sun Microsystems is now part of Oracle) it was geared towards high density and needs for vast amounts of deployed IT. That was when it made economic sense. But if you didn’t need high performance computing then the economics did not stand up.”

As for HP’s POD (Performance Optimized Datacenter) architecture, he said: “The HP POD is an IT play and HP wants to get people to standardize [on its IT]. HP can’t really do power and cooling on its own and is a valuable partner of ours.”

Brown believes Schneider’s advantage with AST is in owning the stack from the M+E through to the housing: “But we are not tied to the IT equipment.”

As for specialist suppliers in the modular market, Brown said he believes their view is limited. He said: “There is a tendency in this market for players to come in with a religious zeal and say ‘everything should be one way and never should be any different’. There may be in the future a value in this type of extreme standardization. Standardization is clearly of value and the approach is valid. Standardization brings speed of deployment and predictability of performance. But in many, if not most cases, constraints and preferences exist.”

Naturally other suppliers don’t see it in exactly the same way.  Troy Rutman, director of  corporate communications at modular supplier IO said: “We believe the prefab modular market will continue a process of refinement that began in earnest last year. For enterprise customers’ critical workloads ‘containers’ won’t fly. They will seek purpose-built units of infrastructure with converged capacity via vanity-free compute gear, and which are existentially integrated with software for security, control and sophisticated analytics.”

This also highlights other discussions that will be ongoing with AST customers. Along with IBM, it is understood that AST had pre-existing relationships with HP and Dell.

Integration
As with any acquisition, the first step in the integration process is to reassure the customers that the future is bright. There then follows the discussions with AST partners for which it acts as Original Equipment Manufacturer. These discussions are the normal consequence of any acquisition and they will occur concurrently with ongoing efforts to integrate AST into Schneider with discussions about branding, client service and management and go-to-market strategies.

For existing relationships, the implications are considerable. Will IBM stick with AST products? IBM declined to comment directly on the acquisition of AST. But Brown sees good things and great opportunities.

“How will we go to market? We will focus on customer benefits. How do you simplify the data center build experience and make it much more predictable,” he said. “With the densities, and some of the nature of the deals we’re seeing, I expect to see some specific segmentation. We’re seeing activity with colo providers, enterprises and in brand new builds and existing facilities that require expansion. Larger customers are requiring consistent designs they want to deploy in multiple locations.”

Could this point to the development of Schneider-branded sector-specific container product lines for industries such as oil and gas? “We could annoy a lot of people if we were to try but we give consideration to our partners such as Dell, HP and IBM. If a customer is doing a specific IT deployment it is natural that they go to those guys,” he says.

IBM and Schneider in alliance
“Are there times when there will be best of breed requirements? We believe yes and that is the strategic intent behind what we’re doing,” Brown said. “The likelihood is that the customer will want us to take a greater role and we want to ensure we maintain customer trust. But we recognize that it is a big market and we’re not going to do everything on our own.”

Schneider now owns another piece of the stack. It is moving into data center development design and build and the acquisition of AST will accelerate this.

“We’ve been involved with modular builds going back ten years and with power and cooling architectures for 30 years. It is accepted that most IT equipment refresh has a major impact on power and cooling architecture and today we have to be more adaptable,” Brown said.

Some customers are not building a 10MW site but are building out five 2MW sites with a pull-and-plug vision.

He said: “If 15 to 20% of the market is built in a modular way in the next five years then that is a very significant part. But that is far away from the some of the rhetoric that there is only one way to build a data center.”

This article first appeared in FOCUS issue 34. To read the full digital edition, click here. Or download a copy for the iPad from DCDFocus.