I am interested in applying IT and communications technologies (ICT) to the energy sector. One such area is the data center market. This segment is very interesting because it involves ICT and facility management and operations in the same place. Besides, I can relate to the IT side of the house easily because of my background. Over the past few years, I’ve gradually learned the facility side as well.
I have followed what PowerAssure was doing for several years. In brief, they apply ICT technologies to data center operations and optimize power use and consumption by traffic-controlling power distribution within the data center. They raised more than $30 million but ran out of gas at the end of August this year. I talked to Clemens Pfeiffer, who was founder and CTO of PowerAssure, from time to time to follow their progress.
On a recent afternoon, I found that Clemens got a new job at Tier44,, which confused me a lot because PowerAssure was Clemens and Clemens was PowerAssure. So I asked him what was going on.
Here is what I found out from him.
PowerAssure ran out of operating capital at the end of August and everyone was let go. But Clemens started a new company right away, which was named Tier44, adjacent to where PowerAssure used to be.
Tier44? That is a strange name. Uptime Institute, a division of The 451 Group, originally defined the tier system for data centers (tier 1 to 4) with the facility focus. The larger the tier number, the more reliable a data center is, so tier 4 is the most reliable data center from the facility point of view. By making it 44, Clemens wanted to emphasize that in addition to the facility side, the IT side needs to be reliable, i.e., tier 4 for IT. The integration of facility and IT has been mentioned by many analysts, consultants, and practitioners. But there is still room to move in that direction, which is a good one for uniting both IT and the facility for optimized holistic data center operations.
Market Segment Category
Among some of the new trends in the data center market, data center infrastructure management (DCIM) has been mentioned everywhere. Even though DCIM covers many categories like monitoring and asset management, it involves too many categories and segments. PowerAssure was categorized under the market segment of DCIM, but I felt that DCIM includes too many categories and needs reclassification. Clements said they are currently being classified as data center service optimization (DCSO) by The 451 Group, which owns Uptime Institute.
In short, DCSO is defined by The 451 Group as:
DCSO systems will provide a more business-, cost- and service-oriented view of the datacenter, drawing on external resources, integrating with multiple systems, and enabling the optimization of datacenters services in real time and throughout the lifecycle of a facility. DCIM systems managing the underlying facilities infrastructure are a critical and subsidiary function.
I think PowerAssure will fit into this category rather than the original DCIM category. I am sure more companies will come out with technologies that will fall into this category later. It is good to have a higher level view towards the optimization of data centers services for its wider acceptance.
One thing I mentioned to Clemens was that most decision-making people at data centers are facility or business/financial focused, and presenting complex technologies might not be the best way to persuade them to adopt such technologies. In other words, what PowerAssure had was way ahead of the market, even for some technically savvy facility managers. Clemens agreed with that assessment.
When very complex technologies are marketed, you can adopt direct sales force with solutions sales. The problem with this approach is that it usually takes time to penetrate into a potential account and retain a sizable number of sales people who are usually compensated with how much they sell rather than a fixed salary. They tend to like to sell products that are easy to explain. When you are required to sell complex technologies, your sales force needs training to keep its motivation to sell. This is time consuming and costly. Yes, I had a small organization before and managed a few sales people and know this at firsthand.
Clemens said that he would emphasize partnership with companies that already have a large customer base. His complex technologies could be incorporated with partners’ solutions and deployed to partners’ customer bases without explaining them to each potential customer.
When I was involved with startups, I was often told that any successful startup needed an unfair advantage over others. Of course, it is a necessary condition but not necessarily a sufficient condition. Tier44 acquired all the technologies PowerAssure developed. Clemens said PowerAssure raised and spent more than $30 million. I asked him how much he paid for the acquisition of the technologies. Although he did not mention the number, he said with a smile that he and his team got them at discount. They are very familiar with the technologies. After all, they developed them in the first place.
They are now after the customer base PowerAssure was cultivating. As of this writing, I do not know if they acquired any customers yet. But if they could do that in the near future, they have unfair advantages like existing technologies and paying customers. As for outside funding, Clemens and his two other cofounders are paying expenses now. Clemens said he would balance between fund raising and business development. If they could acquire customers and get enough revenue infusion from them, they could defer or do without external funds.
It is exciting to see a new startup (or shall I say a reincarnation of an old one) going with a lot of hope. But I also know it is a tough business. It remains to be seen how Tier44 does.