Industry Spotlight: Digital Transformation with Aligned’s Tim Shaheen

September 28th, 2020 by · Leave a Comment

The data center sector has evolved substantially over the last few years with both hyperscale demand and the influence of infrastructure funds changing historical patterns, and this year’s COVID-19 pandemic has added yet more to the mix. Newer, dynamic players have been moving quickly in response.  One such player is Aligned, which is rapidly expanding in markets like Ashburn, Dallas, Phoenix, and Salt Lake City.  Aligned recently raised $1B for the next phase of its growth in a move the company bills as the data center sector’s first-ever sustainability-linked financing as well as one of the largest private debt raises in data center history.  With us today to talk about Aligned’s business model, its plans, its relationship with Macquarie, and the effects so far from the pandemic is Tim Shaheen, EVP, Strategy & Development.

TR: What makes Aligned different, and how did you get involved?

TS: Aligned has the right capital stack for today and for the future.  Macquarie’s global reach and what I refer to as ‘patient capital’ provide us a distinct advantage.  When I think about legacy Macquarie investments like toll roads, airports, etc., as compared to the data center landscape, it’s all about having a pulse on the market and conducting thorough due diligence in strategic locations, securing land and power, and certainly understanding the permitting and build process.  That all converges to offer speed-to-market and an elegant solution for companies that need to build quality data centers quickly and at the right price point.  It has been about a year now since I joined the Aligned team.  Prior to that, I was responsible for the hyperscale and cloud business segments at EdgeConneX. I’m excited to be here; we’re experiencing fantastic growth, expanding in all of our current sites, and looking at some unique markets globally.

TR: How does having the backing of an infrastructure fund like Macquarie give you an edge in the data center space?

TS: Five or six years ago, you used to be able to go to the market and ask customers, “I’m thinking about going here, do you want to join me?” With a few exceptions, the data center companies were typically the drivers behind the growth of a specific market.  Today, the landscape has changed quite a bit and those days are gone.  With accelerated digital transformation and the rate at which our customers need to expand to service their own clients, data center development has grown far more sophisticated in nature. In some cases, customers have already sourced their land, power, and even alternative energy sources. I think you have to plant a flag, and you have to be a little more thoughtful in how you go about doing it. The core markets will always be the core markets, but I see a lot of opportunity in emerging markets, which we used to call tier-2 and tier-3 markets, and not just the U.S., but also in Europe and LATAM.  Having a great capital partner in Macquarie allows us to be nimble, to pivot very quickly and to solve problems in ways that our public, and frankly most private, counterparts simply cannot.  That might be through a more flexible deal structure, or unique markets or regions that may not be obvious today, but will become critical in the near future.  We have great capital partners, a standardized supply chain, 50MW rolling inventory available as needed, and the right build and design partners to go and execute on that strategy.

TR: How does the broader partner ecosystem you depend on evolve alongside?  What is changing there?

TS: The demand is here to stay; I don’t think anybody doubts that. What we’re seeing a lot from ecosystem partners is that the ground has shifted a bit, and customers are looking for alignment between their values and culture with our values and culture.  Whether that’s green / sustainability initiatives, safety, diversity, etc., matching that with our customers – as well as our partners – is becoming increasingly important. Customers ask us to share that level of detail, which is a significant change from what the process and practices looked like in 2016 or 2017. It’s not that it wasn’t important then, but now it’s standard in almost every RFP response template.

TR:  How has the pandemic changed things, both for you and Aligned?

TS: Well, I’m not on an airplane every week or so like I used to be, but I’ve adjusted. This is the new normal. We have some established and trustworthy partners in the Americas and Europe, that serve as our boots on the ground. Quite frankly, we haven’t noticed a hiccup at all.  If anything, I think we’ve become a little bit more efficient.

TR: What effects are you seeing in the broader data center industry?

TS: The pandemic is contributing to a shift in the industry from core markets out into some more unique sites that may have been considered tier 2 or 3 a short time ago. For example, 3-4 years ago, Salt Lake City was considered a tier-2, maybe even a tier-3 market.  But we are now seeing a ton of activity there from large enterprises and hyperscalers deploying there.  I think in the next 24 to 36 months, you’ll see it perhaps even double in size, and there are a handful of markets out there like that.

TR: How does that accelerate the shift into formerly edge markets like Salt Lake City?

TS: I think what has changed is the proliferation of on-demand services from home. Whether those are Zoom conferences, Microsoft Teams, kids soaking up YouTube, Netflix and online gaming, or other platforms. Because of this demand and its impact on latency, it’s no longer realistic to serve, as an example, the Salt Lake City market from Los Angeles. You need to have a pretty large presence in the particular market you’re trying to serve. As another example, Phoenix is a market you could argue is on the cusp of being a tier-1, but we’re now suddenly seeing a tremendous amount of activity simply because backhauling from Dallas or Los Angeles just isn’t good enough anymore.

TR: How do you approach shifting resources to such markets so quickly?

TS: I would tie all that back again to having the right capital partner that is willing to make bets in some of these emerging markets.  I’ll use some hockey analogies: do you want to skate to where the puck is today, or to skate to where it’s going? Having Macquarie’s backing allows us to create some of those breakaways.  But even without the pandemic, I think that accelerating digital transformation is resulting in more requirements for modularity and speed-to-market.  Even in markets like Ashburn, where we closed out our first building and are well on our way constructing our second, having 50 MW of long-lead, auto-replenished inventory available that Macquarie has afforded us has allowed Aligned to score some significant wins. The ability to pivot quickly in this new world makes us really well-positioned for the future.

TR: What future trends should we be keeping an eye on in this sector and how do you plan to address them?

TS: Scalability and flexibility.  Those are words are said a lot in this industry, so what do I mean by them?  If I refer back to our ability to have 50MW of inventory available and auto-replenished as we need it; we have that so that we can pivot, move, and adapt quickly. We cannot predict the future, but we can future-proof as much as we can, such as with our cooling technology, but also with our standardization of supply chain, build and operational processes.  Whatever market you are in, it has to be a rinse, repeat type of strategy — not even strategy, but protocol. Speed-to-market is what it’s all about. It’s about anticipating what those new markets are, listening to your customers and helping to solve their challenges.  

TR: What markets are you currently investing in right now, and where do you foresee expanding into?

TS: We are continuing to expand in our current four core markets. I cannot speak to specifics in terms of where we’re going to go next, but with Macquarie’s global reach, we’re looking not only into additional markets in North America, but also internationally. When we approach a new market of interest, we first look at the power, and only then do we take a look at the land.  That is a little bit unique versus when you’re dealing with a traditional provider who starts by looking for a parcel of land in the right market with the right fiber access. If there’s no power there or the power is 12 or 24 months away, finding the right piece of land with great fiber connectivity isn’t really going to matter too much.

TR:  Would you prefer to enter new markets organically, or is M&A a possibility as well?

TS: We’re always on the lookout for great opportunities, so ‘TBD’ is the best way I can answer that.

TR: What’s the biggest challenge ahead for Aligned?  What keeps you up at night?

TS: Although we have what I believe is the industry’s most scalable and flexible solution, we’re always thinking about how we can get even better. How do we continue to refine our standardization model while ensuring that we’re listening to our customer’s needs and solving their challenges or helping them address their goals?  We need to continue doing that, and continue to keep our finger on the pulse of data center sustainability, scale, safety, culture, etc., and match that up with what we have in our Aligned tool and solution set.

TR: Thank you for talking with Telecom Ramblings!

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Categories: Datacenter · Industry Spotlight

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