Three of the fastest evolving pieces of the infrastructure puzzle today are interconnection, cloud connectivity, and software-defined networking. Australian-based Megaport lives at the bleeding edge of all three, and they recently announced plans to take their platform and business model into the major markets of North America and beyond. With us today to tell us about Megaport’s expansion plans and their approach to the market is CEO Denver Maddux.
TR: Megaport is a relatively new name on the scene, how did the company get started?
DM: Megaport was founded in 2013 by Bevan Slattery, a highly regarded and repeatedly successful entrepreneur in Australia. It was originally founded as a company that would do elastic bandwidth and metro dark fiber. The concept was to provide cost effective metro infrastructure and over the top build a flexible, elastic fabric with rich bandwidth and really a good cost structure. Then, when I joined the company in October of 2014, Bevan and I discussed long term strategy. The goal was to take the company global, but the concept of constructing, owning and operating metro dark fiber in markets outside of Australia at the time seemed something that was not fully aligned with our growth plans and slightly competitive with potential ecosystem partners. So we sold off the dark fiber piece, and retained the Megaport brand and the Megaport Fabric.
TR: What is the Megaport Fabric?
DM: It's effectively a very large, fully automated layer 2 provisioning fabric with the opportunity to build a lot of services over the top. There are a few native products inside the fabric as it stands: access via a physical port, an integrated peering fabric, metro virtual cross-connects, and cloud networking services.
TR: What problem are you solving for the market with this fabric?
DM: The concept of the business is pretty simple. The way that bandwidth has been bought and sold over the last 20 years is fairly un-evolved. Not a lot has changed, whether it's billing delivery models or service delivery mechanisms. We wanted to create a new way for networks and services to interconnect by developing a SDN platform and giving our customers the ability to completely manage their services with Megaport from a networking and billing perspective. Self-service and instant service delivery are important elements to deliver, with complete speed and commercial flexibility. I've built and bought networking services around the planet for 20 years now, from Goodnet in the mid-90s to Global Center and Global Crossing through 2003, and then at Limelight networks and eventually Microsoft. Over that time, the model by which one acquired bandwidth was widely unchanged. You bought a circuit and hoped you filled it up to get the most appropriate per unit economics. Or you had enough volume to buy at the appropriate wholesale level and drive an effective cost per megabit that would allow you to scale. It was a challenge for anyone to do anything out of the box and think of something other than P95 billing or prepaying for a full circuit.
TR: How does Megaport hope to change the way buying circuits works?
DM: Bevan's vision was the ability to effectively order and control infrastructure and services with something as a simple as a mobile app, for example to size up and size down bandwidth into network providers or cloud service providers or even just peering partners without having to type console commands into a router. One of the advantages of starting from ground zero is that you already have that model as part of your DNA. You build the appropriate billing systems and financial forecasts, and make engineering decisions that are built around offering elastic and transitory services rather than try to force everyone through a 12/36/60 month contract with fees and bandwidth you may not use but will certainly pay for.
TR: How does this approach manifest itself in your own internal operations?
DM: For us, from the minute an order is put into the system the entire process is automated. The concept of automation was built in from the very beginning, and I think that is one of the most pioneering aspects. It was a goal to not have a large provisioning team of people that sat around and stared at order forms, logged into devices, and made actual manual configuration changes to them. The flexibility with which customers can configure virtual services that align with their network infrastructure is well thought out, and for me has been some of the most interesting engineering work.
TR: What hardware and software actually make up this infrastructure?
DM: The hardware is off the shelf, using primarily Brocade devices. We've created our own controller which allows us to ingest any number of devices, and specific agents that plug into that controller for each type of device that can be configured on a per device basis. We've also created our own billing system that allows for some really robust account management. All those elements come together through common APIs, which allows us to do quick evolution of any particular components without affecting the other elements.
TR: That sounds like a lot of software development, do you do the work in house or outsource it?
DM: We have done the vast majority in-house, but it’s not a big team. For the mobile apps we have gotten some outside help simply because some companies are more efficient at things like skins and such. Yes, it's a lot of coding, but it’s been done over the last couple of years and now we're really just into evolving it and making it better. Once you have a good design, feature development does not require a ton of engineers. We're on the verge of releasing the 2.0 version of our API.
TR: Why take on North America now?
DM: The model when it was launched was ahead of where the market was, and it has taken some time for people to start adopting it. We were looking for indicators that we were getting good adoption across specific verticals. The truth is, we have the ability to go after a number of different businesses on different service elements, and we have been picking up content and service providers as well as enterprises. Since we're getting traction like that in Australia, which is a tough, competitive, self-contained market, we felt the service model would work in other markets. Also, the feedback at cloud conferences and from our channel partners has been 'when are you coming to the US'. Australia is a captive audience of nearly 24 million people with a limited number of enterprises. Going to a market like North America or Europe, where you have how many multiples of that opportunity, seemed like a no-brainer.
TR: How easy do you expect it to be to implement your business model here?
DM: We can scale the service itself really easily. It’s a fairly simply designed engineering model, easy to sustain and grow operationally. We've had to staff up from a sales and marketing perspective, as clearly selling in Australia is a very different beast than selling in North America.
TR: What North American markets will be your first targets, and where will you aim after that?
DM: Our first builds here will be in our anchor markets, which are the most well connected infrastructure markets in North America that everyone goes to first. We'll do the east coast markets with Ashburn and New York, the middle markets of Chicago and Dallas, and the west coast markets of LA, Bay Area, and Seattle. After that, there are a few other intermediate markets we also think are important and growing that we want to develop and take some risks. We’re looking at a new market in Ohio, an alternative to Miami in Florida, and we have plans for Toronto and potentially Vancouver as well. The first core sites will come online in September.
TR: After your initial market build-outs, will you be focusing on depth in each market or on adding new markets?
DM: We think that building a deep rich ecosystem of addresses in an existing market provides a lot of service functionality for customers. Going to a new market is great, but if we can be in 100 facilities across 10 markets, that might be better than 100 facilities in 25 or more markets. One of the concepts we'd like to grow is that the address of your location should not be the most important part of a decision to deploy. Cost controls a lot of that, but people do pay premiums to be in certain addresses. But not every business can sustain that, and they need to be on equal playing ground from a service availability and optionality perspective.
We're aiming at a very short ROI on a per site basis for our capital deployments. It's not a lot of customers in total that we need to bring onto the fabric to make these sites work, which is good news for both us and any potential data centers that want to see Megaport in their facilities. If we can find a few customers in each location then we can make those sites prove out and get deeper into those markets.
TR: You are also looking at expanding to Europe in the future. Do you see these global markets as each a very different nut to crack due to cultural differences?
DM: I think it's the same, honestly. Culturally speaking, certainly the way work gets done in Australia versus in Singapore, Hong Kong, France, Germany, or the US is all so different. If you just look at technology services, though, at this point technology seems fairly universal. If you take a good service model into a number of markets, if it's actually good chances are it will be used across the geographies. The real issue tends to be how you approach the market with it: what are the different market sensitivities to be aware of? And how do you work in that market in a way that you're not just another disruptor? We want to be a disruptor of course, but we also want to be doing something of value.
TR: Do you see M&A as a possible strategy to speed your expansion?
DM: I’m not going to say no, but it's not a first place strategy for us. To acquire a company that had the same DNA as us could be interesting, but how many are there? I don't really see any today, although a couple may get close. I suppose if there were an opportunity there, we could do it and maybe we will. But it's not something we're going to run after. I've been through so much M&A over the years, and the on-boarding of companies, big or small, is a lot of work and can be really distracting. We think that our products are good enough that organic growth is the right story.
TR: Thank you for talking with Telecom Ramblings!
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