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Why Data Center Financials Matter

December 9, 2014

Implementing a data center strategy, whether you are building your own data center or working with a provider, is an important, long-term decision that requires a significant financial commitment. Data centers are no longer simply cost centers. They have become strategic, revenue-generating assets with significant opportunities for operating and cost efficiencies. Because this investment is so critical for today’s enterprises, selecting a provider with a strong balance sheet and a proven financial track record should be as important as selecting one for its products and services.

Selecting a provider that is a public company enables you to examine their financial and operating performance, since this information is publicly available. Furthermore, selecting a partner that has an investment grade rating offers you an even higher level of financial security.

To achieve an investment grade rating, a company has to go through a rigorous evaluation process by the major credit rating agencies: Moody’s, Standard & Poor’s, and Fitch. This process includes demonstrating a successful operating history with a solid financial track record, leadership by a proven management team, a strong balance sheet that exhibits prudent use of capital and the appropriate debt-to-equity ratios, and finally, a well-diversified portfolio by geography, product, and customer base.

Achieving an investment grade rating gives the data center provider better and more diversified access to capital that offers you three important benefits:

  1. A choice of locations. Building data centers requires significant capital investment. Having a strong financial footing means ready access to diverse sources of capital, and in multiple currencies (USD, EUR, GBP, AUD, SGD, HKD, etc.), to build data centers globally, wherever you need to be.
  2. Building, maintenance, and operational excellence. Access to sufficient capital means that your data center provider has the resources to build, maintain, and operate your facility to the highest standards of quality and efficiency.
  3. A long-term partnership. Well-established, investment grade companies have made a significant commitment to operating for the long term. Partnering with a data center provider that can support your business needs today and into the future is a critical consideration for growing companies.

Last week, several members of Digital Realty’s management team were at the New York Stock Exchange to ring the closing bell in recognition of our 10 years as a publicly traded company. This year also marks five years that Digital Realty has been an investment grade rated company.

No other US data center provider has investment grade status, or 10 years of public financial filings. But it’s not about us. It’s about what we can do for our clients. It’s our clients that are going to drive our future success (and vice versa).

Of course, I’m a finance guy, but I’d recommend that next time you’re writing up a data center RFP, you might want to bump up the priority of selecting a financially stable provider. I’d ring the bell of strong financials any day of the week!

Matt Mercier, Vice President of Corporate Finance

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