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Revenues Rise as Data Center Becomes Hospitable Host

For a few years, Norman Jester ran a colocation data center in name only.

Clients hired him to house their computer equipment, but he had no place of his own to put them. So he rented space from competitors.

“We were a customer of many, many data centers across the United States,” said Jester, CEO of Otay Mesa Data Center, which, until recently, was called Suavemente.

Jester started the business in 2004. In 2006, he decided to build out his own self-standing data center in Otay Mesa and spent about two years and $1.4 million renovating the facility, adding environmental systems, waterless fire suppression, server racks and wiring.

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“I did it slowly out of my own pocket. I cash and carried the whole way through because I don’t like owing anyone money,” he said.

Data centers are essentially large, air-conditioned warehouses , connected by multiple Internet lines , that provide a place for clients’ servers. They save customers headaches associated with running an in-house computer operation.

“They come to the data center and we provide the connection,” Jester said.

Clients can also rent equipment from the data center.


The Numbers

Typical customers pay $5,000 to $10,000 a month. Smaller ones pay $500 a month, and the largest customers will pay as much as $75,000, he says.

OMDC has 22 employees in the United States and seven in Mexico. U.S. revenues were $1.2 million in 2007 and are on pace to reach $5 million this year. Revenues from a smaller data center in Mexico average about $1 million a year, says Jester.

The 22,000-square-foot facility is the only data center in Otay Mesa. It’s near state Route 905 and the U.S.-Mexico border to serve South County clients and Mexico businesses, more and more of which are hosting their Web sites in the United States, Jester says.

“I live in Chula Vista. For me to get to the closest data center, it’s a 45-minute drive on a typical day,” he said.

And, those San Diego data centers are filling up. Most are clustered at Scranton Road in La Jolla and Complex Drive in Kearny Mesa, commonly called “telco hotels,” he says.

He wanted to be away from the congestion.

“Those companies in those areas are completely over-saturated,” he said.


Centers Of Attention

Other data centers are seeking room to grow, too.

Castle Access built an 88,000-square-foot facility in Rancho Bernardo, and just signed up Credit Union Business Capital of Florida, which wanted to house servers away from the Gulf Coast as part of its disaster recovery plan.

American Internet Services recently dedicated a new 80,000-square-foot colocation center on Lightwave Drive to handle growing demand.

“The reality is, in today’s overall business environment, an Internet presence is becoming more and more critical to how companies bring in revenue,” said AIS CEO Alessandra Carrasco. “If it’s a revenue stream, they understand that it now has become mission critical. A mission critical application cannot be down.”

Otay Mesa Data Center has a 10-year, $8,400 monthly renewable lease for its building. Jester says OMDC plans to buy it eventually from the owner, who is stuck with a two-year prepay penalty.


Cordial Hosts

Otay Mesa Data Center hosts 260,000 Web sites for 4,000 customers. About 40 percent of its customers have their own equipment stored at the center. The rest rent their equipment.

“When we started out, we were hosting Web sites,” Jester said. “We would sell you a dedicated server and we would have the computer in a data center where we rented space.”

Then Jester started acquiring customers that also wanted to be Web hosting companies , essentially competitors. The company rented them servers too and offered technical support.

“We became a Web hosting company of Web hosting companies, so we started calling ourselves a colocation provider,” he said.

As clients sent more and more equipment to Jester’s headquarters, his business decided to quit renting space and find its own facility.

“What we were doing is exactly what we are doing now, except we were using space in other data centers,” he said.

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