SINGAPORE — Banking on its philosophy of carrier neutrality and ability to offer “communities of interest” that bring business value-add to its carrier, ISP, ASP and content service provider customers, Honolulu-headquartered Pihana Pacific has plunged into the local Internet data center (IDC) market with a US$35 million facility in the eastern part of Singapore.
The 15-month-old company has launched its 30,000 square-foot Internet Exchange (IX) data center, network operations center (NOC) and regional headquarters in the island Republic to gain as substantial a foothold in the Asia Pacific market as possible. It will employ more than 100 people to staff its operations here.
Said Richard Kalbrener, Pihana president and chief executive officer, “Pihana offers a business, as well as technology solution, and strategic geographic presence to Singapore’s multinationals and ISPs. We decided to base our regional headquarters and network operations center in Singapore because it is pivotal to our regional strategy.”
According to Pihana, a major drawback of the current Internet model is its inefficient hierarchy, which requires IP traffic to be routed through less-than-optimal paths before reaching their destination. The problem is compounded in the APAC region, where the lack of high-speed bandwidth and broadband connectivity hinders Internet commerce.
Based on this observation, the company has decided to establish a web of eight data centers to take advantage of the burgeoning APAC Internet traffic and resulting need for high-performance routing. In addition to the Singapore IDC, it had also launched IDCs in Honolulu and Los Angeles. IDCs in Tokyo, Hong Kong, Sydney, Seoul and Taipei are scheduled for launch by September this year. Pihana has set aside US$175 million in a “construction budget” for the build out of these facilities this year.
However, Pihana is not looking to provide just co-location to its customers. It value proposition lies in its ability to remain neutral enough to support competing carriers and bandwidth or service providers, and to foster interaction among its customers to create “communities of interest.”
It differentiates itself from SingTel, Singapore’s other IX, based on its ability to maintain neutrality, accepting “the WorldComs, AT&Ts and GlobalOnes of the world, in addition to SingTel and StarHub” into its IX data center, according to Kalbrener.
The company foresees each IDC driving US$30-40 million in revenue every year to its carrier customers, whose main business it says is the sale of fiber. “SingTel will have to come into Pihana’s IDC to compete for the bandwidth, and it will want to be in our other facilities too. SingTel is a great competitor – they’re aggressive but they’re not a monopoly anymore,” he added.
“What’s more, SingTel and Pihana customers will want to cross-connect to both IXs for load balancing.”
The Singapore IDC currently has signed both SingTel and StarHub as telecom infrastructure providers; six to eight other customers have also signed up, according to company officials. It is aiming for a target of 50-60 customers by year’s end.
Apart from its IX business, Pihana will also derive a “significant portion of revenue” from its managed and professional services offerings (which it outsources to a third party), as well as the storage capability in each IX data center, Kalbrener said.
“Each IDC should see positive cashflow within 14-18 months of its establishment,” he said, adding that Pihana will go into debt financing – of at least half of its US$236 million in equity financing – after the latest round of fund raising last month.
Pihana’s investors include Goldman Sachs (Asia), Morgan Stanley Dean Witter Private Equity, LoneTree Capital, Mori Building Co., HP, UBS Capital, GE Capital Telecom, PacifiCap Group, Nifco, and seed investor Columbia Capital.