SUPERCOMM:
Switch & Data Charts Its Own Path
Bottom-line focus has 12 facilities operating in the black

June 6, 2001 -- By SuperComm standards, Switch and Data's booth wasn't the flashiest or largest on the trade show floor.
But it reflected the broader sensibilities of the Tampa-based colocation provider, whose focus on performance rather than flash has helped it weather a sharp downturn in the industry.
"The players who are going to win are the ones who manage their cash wisely," said Lesley Bateman, Switch and Data's vice president of marketing. "We've been careful. We've always had a conservative management and a conservative board. We haven't been in the spend, spend, spend mode."
That sharp eye on the bottom line has left Switch and Data in an enviable position: fully-funded, with 12 of its 34 facilities already cash-flow positive.
The company has forged a leadership position in the industry while bucking much of the prevailing conventional wisdom. While many colocation providers are moving aggressively into managed services and targeting large corporate "enterprise" customers, Switch and Data has pursued a more measured approach in both areas.
The company's recent entrance into managed services has been largely due to requests from customers, Bateman said.
"We are starting to see more interest in managed services," she said, noting that Switch and Data is now starting to "move up the food chain" with service offerings included expanded tech support and network synchronization. Additional service packages are in the pipeline, she said.
Many colocation providers were hit hard by failures of tenants in the dot-com and DSL sectors, and have shifted their attention to larger business customers with longer-term horizons.
"We definitely felt" the dot-com fallout, Bateman said. "But our customer base has always been spread across the whole spectrum. When the market fell out, we had spread our risk."
While it has some large corporations as customers, Switch and Data is not targeting that market in any particular way."We don't actively pursue (enterprise customers) now," said Bateman. "The people who are in our facilities are serving those customers."
Instead, Switch and Data sees opportunities in the market for content distribution, especially since those service providers typically lease a number of sites to bring mirrored web content closer to end users.
Switch and Data has received more than $136 million in private equity funding from investors including Deutsche Bank, BancBoston Capital and American General Life Insurance. In January, the company closed on $50 million in senior debt financing.
Analysts expect further consolidation in the colocation industry as stronger providers buy up struggling competitors. So is Switch and Data ready to go shopping?
"That depends upon the customer demand," said Bateman. "We have 34 sites today that we want to manage well to get them cash-flow positive as soon as possible. You'll see us expand as we need to. We'll do what makes sense and try to be smart."