Q&A with Jon Temple, CEO nlyte

The Boardroom

by Steve Evans| 13 July 2010

Data centre performance management firm nlyte has seen rapid growth during the recession. CBR talks to CEO Jon Temple

The big trends we're seeing in IT at the moment - data centre migration and consolidation, virtualisation and cloud computing - are right in your space. What impact are they having on your business?
It feels like we're coming to a tipping point in the market. I think awareness of our category has been an impediment in the past, people know they're suffering but they've not been aware that there's something to inoculate against that pain.

Has the tipping point been economics?
It's been primarily driven by an insatiable appetite to reduce operating expense, particularly as it relates to power consumption. 40% of the cost of running a data centre from an Opex perspective is purely attributable to power. In 2014 it's going to be more expensive to power a data centre than it is to actually buy and manage the equipment in it. It's a real problem and getting worse.
There is a need to reduce costs but it's also about how you go about it. What we've seen from our customers is that between 15-20% of the assets in their data centre are powered up and on the network but not doing anything. Part of what we do is telling customers what they're not using, and turn them off or redeploy them.

How much of a driver is the environmental issue?
I still believe the top priority for our customers is around reducing expenses and improving efficiency, good old fashioned economics. There's a lot of industry fatigue around the green IT message but it's a by-product of what we do. Data centre infrastructure management is there in part to support green initiatives and provide a lot of value there. But in terms of why people buy it it's still about economics.

What impact will the CRC here have?
The penalties for non-compliance [of the CRC in the UK] are just not significant enough to change people's behaviour. But I think there will be a day when the taxation surrounding non-compliance will force people to change.

Do you think that before the recession there was a real desire to be green or has it always been about money?
I think there is a big difference between an outbound PR initiative around supporting green initiatives and tangible projects inside a company which demonstrate that. As an industry we have seen more 'talk' than 'do', but I think that will change. CIOs at large corporations around the world have effectively been put on notice that energy management will be one of the key performance metrics by which they are measured over the next decade.

Is the green agenda it turning into a company-wide issue rather than an IT one?
Absolutely. In the past people running data centres were more concerned about keeping the lights on because they are mission critical, and as a consequence of that we saw a massive over-provisioning. But that costs millions of dollars and as a consequence of that data centres today only run at about 50% of their peak capacity. Where we come in is by helping companies to optimise their investment and get more out of it rather than buying new infrastructure. We can add about 5 years to a company's data centre investment, which just goes to show how inefficiently these environments have been run in the past.

But from your point of view does it matter why companies are buying your product?
Yes and no. We can take advantage whether they are leading with operating expense reduction or environmental sustainability. The vision of our company is to contribute to a more environmentally-sound world, one data centre at a time. So in keeping with that it's very important to us as a business to lead by example. I would be deeply upset if we don't see our customers picking up the pace and taking more concern over the environment.

Does the push to cloud computing present you with any additional technological challenges?
Cloud requires large centralised data centres to deliver the application capability so any time there's an investment in new data centres they will need to be efficiently managed and optimised. Just because companies may default to receiving their applications on demand that doesn't negate the fact that data centre infrastructure management is an important part of that; it's just that it will be the cloud provider using the technology rather than the end user. As far as cloud computing is concerned we're in a no lose situation.

And virtualisation?
The challenge that it brings is, from a management perspective, how you think about tracking a virtual asset. The net of that is that virtualisation brings value to the data centre by optimising computing capacity but from a management perspective it brings more complexity. We simplify that by visualising and managing virtual assets in a VMware environment they same way as a physical asset. We bring simplicity to complexity.

How did nlyte perform during the recession?
We had a recession?!? We grew 130% year over year between 2008 and 09 and are tracking to grow 100% this year over 2009. It was the worst recession in living memory but we're bucking the trend and continuing to thrive. I think that speaks to the topical nature of the challenges we're trying to solve.

How do you plan on maintaining that growth and staying ahead of the competition?
Our target market is those companies with over 100 racks in their data centre, and there are just over 106,000 data centres in the world that fall into that category. They house about 50 million racks. By the end of this year one company in 100 will use some type of capability to manage and optimise their data centre infrastructure, and the rest will be looking into it. Our job is just getting started.

Don't you think you'd fit better within one of the big four [IBM, HP, BMC, CA] to provide a wider management/optimisation platform?
Our technology is completely complementary to those four data centre infrastructure providers - we focus on optimising the physical assets such as power and heating while they focus on network and server performance. We have a partnership with BMC for example whereby they are reselling our capability. I think it speaks to the fact that those vendors see this as a real category and a missing part of their offering.

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