Listen: Next in Tech | Episode 135: Hosting and Cloud Transformation Summit is back!

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Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for Technology, Media and Telecom, S&P Global Market Intelligence. And today, we're going to be talking about the Hosting and Cloud Transformation Summit, our long-running conference that's going to be turning up in New York on the 10th of October. And to discuss it, I have with me 2 returning guests, Kelly Morgan and Brian Partridge. Welcome back to you both.

Brian Partridge

Hey, Eric. Great to be back on the pod.

Kelly Morgan

Thank you. Glad to be back here.

Eric Hanselman

And great to have you both here to talk about what is this year's version of Hosting and Cloud Transformation Summit, lovingly referred to as HCTS. There's a lot that's going on this year. I think one of the big differences in this year is that we've come back from the virtual editions. We've come back from Las Vegas. We're going to be in New York. And a lot that's going on in terms of the content, a condensation of the event itself, an awful lot that's happening. But both of you are leading panels at HCTS. So can you tell me something about it, right? And what are you going to be doing at HCTS?

Brian Partridge

Yes. Thanks, Eric. So just to introduce to anybody that doesn't know me, my name is Brian Partridge. I actually have the pleasure of serving as the Head of Research for S&P Global, the TMT Research practice, and that includes 451 Research. And I've been in the role for about 6 months but been with 451 for 10 years in various roles.

And I'm really excited for HCTS next month, and it's really going to be the first time we've been back live with HCTS as a platform since 2019. And so at the highest level, we look forward to getting HCTS back. We had a run of 15 years straight prior to the pandemic.

And this show has been extremely popular with attendees. And this year and in previous years, it's been all about addressing the issues directly impacting digital infrastructure, so cloud, colocation, the data center industries.

And when we went through the pandemic, we had done some virtual events that went a little bit wider but a little less deep. And now that we're back live, we're really listening to what attendees have told us, which is they really appreciate that deep dive specifically on digital infrastructure and especially this year, where we've had sort of this massive transformational event in the AI space with large language models.

It's really made sense for us to bring it back to its roots and double-click on all things related to the data center public cloud. And so AI is clearly going to be a big topic of discussion at the show.

Eric Hanselman

I've heard about that AI thing, and we might have talked about it once or twice.

Brian Partridge

Absolutely.

Eric Hanselman

But to your point, there are so many different pieces to the whole AI question. And of course, the foundation of it all is the digital infrastructure on which it all rides. And we talked a little bit about this with Dan Thompson a couple of episodes ago. Dan actually is going to be back with Nick Patience talking about what 2 of them are going to be talking about in their sessions at HCTS on the next episode, but there's just a lot that we're going to be covering in the show really all together. What can attendees expect from the show really across the agenda this year?

Brian Partridge

Yes. I mean, they're going to hear from great experts like Nick and Dan and Kelly. And we always strive to build an agenda that's packed with relevant and timely insights and really driving the market for digital infrastructure and services globally.

And so in this year's addition, you can expect a deep dive on the most important issues. We mentioned AI. We'll also be talking about edge computing. We'll talk about how sustainability issues are framing both the supply and demand side of things. We've got our latest and greatest trends around hybrid IT and sort of the movement of workloads and of course, your session, Eric, which is going to turn our attention to the future.

We've got Kelly on today. She's going to be talking about the M&A environment. We're going to be looking at key indicators and drivers there. We'll also be bringing in some of the S&P Global macroeconomic data impacting all of us in enterprise IT and be joined by quite a few special guests from digital industry leaders like AWS and Snowflake.

And importantly, what I want to mention is that we provide ample opportunity for networking with industry peers, and we consistently receive feedback. This is one of the most valuable benefits of actually attending.

And as part of that networking built into the program, attendees also can request one-on-ones with our 451 Research experts, so those that are going to be on stage and those attending. So really, it's a combination of all those ingredients that made HCTS so successful in the past, only this time, we're doing it in New York City and not Vegas.

Eric Hanselman

Well, it's the networking piece that certainly I've always found is particularly valuable. It's that -- the hallway time, the face time. And it's going to be so great to actually be back in person for this event to be able to do that, to be able to connect with people and to be able to really make those networking connections that have always been such a strong part of the history. But what are you going to be talking about in your session?

Brian Partridge

Yes. So I'm going to be running, actually co-leading a session with Kelly and Tiny Haynes on edge computing, which will cover the lower levels of the cloud-to-ground architecture of modern IT. And so the context of edge as a concept, it really entered the mainstream IT conversation about 5 years ago. But as you would know, there's always been some computing capacity to edges.

The difference is that today, the scale and orchestration required between edge and cloud platforms and really the total number of edges that we expect to be deployed globally. And those legacy edge systems were typically on-premise. They were air-gapped from the rest of the enterprise IT estate or they were dominated by industry-specific systems like think about things like Pro PLCs and MES, which is found on manufacturing floors.

And then fast forward to the 2000s, early 2000s, and we had this birth of the public cloud. And over the next 10 years, we started creating this massive gravitational pull of data towards regions, massive data centers operated by hyperscalers.

And we actually remember a time in the industry where we started to believe that many or most workloads were going to be destined for the public cloud. We like to call that the sort of all-in on public cloud era.

But I think cooler heads prevailed here, and we started to learn that not all workloads can or should travel all the way to 100-megawatt data centers, especially in the environment we are today, given the total growth and data generated from enterprise assets that sit on the edge. And this is especially true as latency-sensitive workloads in areas like AI, AR, VR, autonomous systems coming online.

Eric Hanselman

And as we've always addressed, it's that other issue also of just if you look at the data volumes, there's so much work you got to do at the edge. You can't backhaul everything back to the data center just simply because of the volumes of data you're dealing with for a lot of applications. And that winds up being a huge part of this decision about where do those workloads need to live, where are you going to place them, how are you going to manage them, a lot that's going on there.

Brian Partridge

Absolutely. And there's also regulatory and legal requirements to keep data close to where it's generated. So Eric, we've been all over this topic, as you know, at 451 for many years. And we love HCTS because it's a point in time for a platform for us to share our most important insights.

Eric Hanselman

Well, it's a great forum to be able to bring all this information together and great ways to be able to actually discuss it in ways that look beyond just some of the surface issues that are out there. Although speaking of some of the dynamics of this market, Kelly, you're going to be looking at the M&A side of this market, which has certainly not been quiet in the recent past either.

Kelly Morgan

Yes. We always have a very popular panel in the M&A discussion that we do at HCTS and looking forward, again, as always. So this year, it's got the backdrop of not great M&A for a lot of other tech segments, I guess, you could call them.

Eric Hanselman

Yes. We've had the M&A knowledge-based team on being pretty dour about what's been going on and especially when you think about the data space, the data center sphere but again, capital-intensive environments. Now that capital costs some money, some challenges there.

Kelly Morgan

Right. Well -- and that is what makes this so interesting because, in fact, data center deals are not down that much, I think, compared with the rest of the tech sector. The number of deals is slightly down but pretty similar. It's in the same range as it's been for the past 4 or 5 years. So that's not too different.

And the deal value has been down quite a bit, but that's partly because in the previous year, and I do an October-to-October calendar so that it lines up for HCTS, we had some really big taking private huge companies like Switch and CyrusOne and CoreSite. So they made the news, and they bumped up the numbers quite a lot.

But the interesting thing going on this year, which maybe that hinted at those past take private is that for the first year, private equity and investment funds have outdone strategics in terms of the number of deals that have been done in the sector. So there's a lot going on.

There's a lot of interest from these funds, from both typical private equity, I guess, and then also the real estate investment funds that have come in and have been buying data centers like crazy. So we'll be looking forward to talking about that.

And I usually try to have some special guests. So we definitely have a lender joining us. And we also usually try to get an investment banker and an equity analyst to join as well. So we're hoping to have a good discussion, as always, with the experts and get their inside scoop on how they're seeing this develop and what trends are driving the activity.

Eric Hanselman

Well, it's really interesting to see the dramatic difference between -- especially when you talk about private equities' levels of activity because, of course, on the tech side of the coin, private equity has really shifted gears pretty dramatically. I think Brendan was just talking about the end of what had been the golden age for private equity. And yet, in data centers, it seems to be business as usual.

Kelly Morgan

Yes. Although it's interesting, too, because a lot of the most famous private equity tech investments were often with a relatively short-term horizon, right? So they had this vision of getting in, buying something, getting out within a certain number, maybe 5 years, maybe 7 years, right, and perhaps building a package and then selling it off.

What's interesting perhaps now is that the investments in the data center sector tend to be longer term. So they're buying data centers that have tenants that are in there for the next 20 years. They're putting together packages with what seems to be a longer-term time horizon. So yes, maybe their approach to investing is a little bit different in this sector or they're looking for a little something else from this investment than perhaps in some of their other tech investments.

Eric Hanselman

Maybe going for steady returns rather than the slot machine pull that has often been the case in -- on the tech side.

Kelly Morgan

Right. And I'm sure that's -- we often do have discussions around what's going on in the equity and IPO world that can impact this. So I'm sure that's part of it. Obviously, as you were mentioning, capital costs are a huge factor. So there could be quite a few firms for sale for various reasons because it's becoming harder to do this. But we actually have seen a nearly record level of capital raises in the sector. So somebody is still interested in giving these folks money, but there's lots to discuss, that's for sure.

Eric Hanselman

Well -- and maybe that's sort of the tone that characterizes the shift from Las Vegas to New York in terms of maybe a little less gambling this go.

Kelly Morgan

Exactly, yes. Maybe more lending, more long-term finance and a little less gambling.

Eric Hanselman

Well, we'll have to see how that shakes out and the realities of where this market is headed. But as you had mentioned, this is always one of our most popular panels and especially when we think about a lot of the information that gets conveyed around that but also giving a little more view of a lot of your research interests and some of what you've been pursuing in your research practice. Are there highlights that our attendees should be aware of and what you've been working on recently?

Kelly Morgan

On the data center side, yes. Definitely, the demand for artificial intelligence in a kind of a bigger picture way, we're seeing a huge change in demand for quantity of power. In the past, if you had data center request, say, in Frankfurt or Phoenix for maybe 10 to 20 megawatts, in the past really -- I guess in about the past year, these requests have gone to 50, 80, 100 megawatts. So massive, massive quantities being sought principally by cloud provider but sometimes other folks as well.

So there's just a lot to discuss and unpack and look at there. There's been a lot of interest in the industry, obviously, about what's driving that, whether it's AI, whether it's just continued cloud uptake, whether cloud providers are worried they're going to run out of space and power and especially if there are moratoriums on data center builds in certain locations. So there's a lot happening in the industry for sure, and we'll be discussing a lot of these at HCTS when we chat. Should be fun.

Eric Hanselman

Dan Thompson had talked about a little of this. It's interesting to see that there is this big push for lots of high capacity. I wonder whether or not we're getting into some of these sort of barbell curve kinds of situations in which there's a lot at the core, but there's also a lot that's focusing at the edge because, Brian, in your research, you spend a lot of time working on edge perspectives. You've been seeing a lot that's been happening at the edge as well with some pretty significant growth, both the technologies, capacity and really what people are trying to accomplish.

Brian Partridge

Yes, no doubt. My history with the topic goes all the way back to my telecom infrastructure days when I worked at Yankee Group. As we've been both following that market, Eric, we know that the edge has become a really critical element of the modern telecom network as the network systems have become disaggregated, now virtualized, now increasingly cloud native. And so for the telecom operators, the edge sort of opens this opportunity not only to rethink their network architecture but also open up platform opportunities for them to actually compete for hosting enterprise media and content workloads.

But zooming out on it, right, the big picture is the entire world is becoming increasingly data-driven. And as a business, your ability to collect and analyze data is potentially your most important differentiator. And because that's true, the edge is going to be a key enabler.

Now the reason to attend my session, though, is that this remains a complex and noisy market. And now there are near and far wait points that are almost innumerable and operating models. And really what we're there to do is help the audience make sense of it all at this point in time.

Eric Hanselman

Well, I think that's one of the big complexities when you think about edge. I mean, people talk about an edge, but in fact, you really have this really a fair amount of variability in terms of what is edge enough, what -- can you run core? What are the requirements? And what are the capabilities that you've got to have? And that really varies pretty significantly in terms of both the application, the workload, all of the variables we typically deal with on the tech side.

Brian Partridge

No doubt, and there's a lot to unpack there. There's the demand side, and then there's the physical and approximation of where the edges need to be. And then there's the question of who actually controls things like the customer in those contexts.

So what we're trying to address in terms of our session is, first of all, understand the demand side. What are the vertical industries that are driving edge demand, and what are the types of edge platforms they need? And of course, that is a private versus public discourse. That is a near-edge versus far-edge discourse.

And that's all very important, specifically for colocation providers and investors because those are questions of whether those are retail opportunities, are those wholesale opportunities or by other northbound operators like public cloud providers? And then what do we think is going to happen around these near and far edges around things like compute capacity and power and cooling requirements?

And not to beat a dead horse, but what's going to be required at the edge around AI and LLM specifically? And what does that infrastructure actually need to look like? And we'll have a discussion with Kelly there to talk about what role for smaller edge deployments and micro data centers. So we've got forecasts, we've got customer insights and data. And we're going to be bringing all that to the table and have a really rich discussion here.

Eric Hanselman

Well, that's always been one of the great benefits of HCTS, which is the ability to bring together this rich set of perspectives and to be able to fully work out what are the complicated dynamics that are working across these various fields that all have such tight interrelation and are bound so closely in terms of how those technologies work and how they have to interact.

And I think also helping to maybe make sense of some of the market claims that are out there. I mean, on the one side, we've got hyperscalers, who I think would be happy to have all of the workloads in their environments. We've got various kinds of edge requirements that, I think at least for the foreseeable future, are still going to need their own sphere in which to operate. And then all the questions about how do you actually, from a practical perspective, make that work.

I mean, the big question that a lot of the generative AI discussions are centering around is, what do we do with data? We've gotten into a world in which now turns out that you actually have to pay money to move a lot of data around. And people are concerned about egress fees and where are you actually going to host data so that you can process it, still use it, access it, have performance access to it.

These are all things when you start to see those intersections of the data center infrastructure requirements and where they're headed, those have got just as big a play in terms of all of these questions in terms of where they're actually going. And those are things that I think when you think about data center builds and data center placement, Kelly, you're talking about a lot of the growth in capacity, the expansion of some of those demands. A lot of that is being driven just simply by this continuing increase of capabilities that are necessary to run a modern digital business.

Kelly Morgan

Absolutely. Planning to discuss, going to be a fun time.

Eric Hanselman

And a lot that will be going on. Well, if we think about what we're looking at in terms of the conference itself, again, starting off in October, there's a lot that we're going to cover in the conference as a whole. But Brian, in terms of overall themes, I think this is a year that we're really going to be bringing together a much more focused set of perspectives around a lot of these key questions around digital infrastructure.

Brian Partridge

Yes, we're laser-focused on digital infrastructure and the key stakeholders around that ecosystem, so specifically data center operators, colocation providers, data center infrastructure providers and cloud providers and managed services. That's really the core sweet spot of where the agenda will be focused. That has been the historical sweet spot of HCTS, and we're very much looking forward to getting back to that focus.

Eric Hanselman

Absolutely. And we think about sort of the targeted attendees. You've identified what are really those key decision-makers around this environment. Again, it's one of the useful things about HCTS is that we're building this useful community that actually is a key decision-making constituent of a lot of these different -- disparate places, but a great place to be to come together to discuss what are really the critical foundational elements of digital infrastructure in a broader perspective.

Well, this has been great. I look forward to being there with you. Brian, as you hinted at, I'll have some perspectives about really some things to think about on the future of digital infrastructure and some of the things that we might consider in terms of thinking a little more further out. It turns out that this actually is Ada Lovelace Day when we're there. So I'll be talking a little bit about how -- Ada Lovelace, talk a little more about the Babbage's Analytical Engine. So a little look back to look forward in terms of where we're going.

Brian Partridge

I'm looking forward to that, Eric. That sounds like a great session. And for our listeners, I think we have a handful of tickets left. So if you like to attend, do a search on HCTS, we would be happy to host you.

Eric Hanselman

Well, and in fact, I'll have a link to the registration page in the show note. So hopefully, we'll get people there. Well, anyway, thank you to you both. This has been great, and look forward to actually seeing you in person at HCTS.

Brian Partridge

Thanks, Eric.

Kelly Morgan

Thanks, Eric.

Eric Hanselman

And that is it for this episode of Next in Tech. Thanks to our audience for staying with us. And I will once again invite them to the Hosting and Cloud Transformation Summit in New York City. I hope to be able to see you there.

But that is it for this episode. And thanks to our production team, including Caroline Wright, Ethan Zimman on the marketing and events teams and our agency partner, The 199. I hope you'll join us for our next episode, where we'll be bringing in Nick Patience and Dan Thompson will be back to talk about what they're going to be looking at. Nick will be talking about his research on AI, what he'll be talking about at the conference and some of the perspectives that are intersectional in terms of what he and Dan are working on. I hope you'll join us then because there is always something Next in Tech.