CDW Berbee has broken ground on a new hosting data center and additional office in Madison, Wisconsin. The new facility will have double the cooling and power capacity of the company's existing hosting data centers in Madison and Minneapolis, Minnesota.
The expansion comes as Berbee has reached the saturation point in its existing data centers, due to growing demand for managed services, according to Phil LaForge, director of CDW Berbee's hosting and managed services practice.
Berbee, formerly Berbee Information Networks Corp., was acquired by CDW in October of 2006. The company has provided hosting and managed services for over seven years, primarily in the Midwest region, according to LaForge. Now, the managed hosting and datacenter outsourcing business is booming for Berbee, and LaForge says the reason is twofold—the IT employee shortage, and the power and cooling problems plaguing corporate data centers.
"It's hard enough to get IT people," LaForge said in an interview with Channel Insider. "But it's even tougher to have people 24/7. And as far as the power and cooling issue, CEOs want to focus on their business, not on facilities issues."
Berbee overall has been a rapidly growing business for CDW, according to Brian Alexander, senior vice president of equity research at Raymond James & Associates. "Berbee's business has been very strong. The business grew in the March quarter by 69% year-on-year, and in the June quarter it was up 50%, It's on track to be in the very strong double digits for growth for year." That, in addition to the continued growth in sales in CDW's technology sales units, is clearly one of the reasons that private equity firm Madison Dearborn Partners tendered a private buyout offer for CDW in May; the deal is anticipated to close by the fourth quarter of this year.
Berbee's growth comes at a time when there's been a good deal of consolidation in the managed hosting market, including last fall's acquisition of USinternetworking by AT&T, and the completion of the acquistion of Houston-based Vericenter by SunGard in August. But at the same time, the managed services business model has been taking off, validated by Dell's entry into managed services with its recent acquisitions in the market.
The combination of CDW's reseller channel and Berbee's managed services presents a compelling business opportunity for CDW – and a significant threat to other channel players hoping to bundle managed services with technology sales. This is especially true in the wide-area network and telephone services reseller market,
"Our parent company's sales channel is a very large reseller for AT&T and Sprint and other telcos," said LaForge. "For several, they are the largest reseller. One opportunity for us is to compete for the WAN monitoring that the telcos currently do."
That sales channel also means that Berbee isn't actively seeking agents to resell its hosting services. "We've stabbed at that, " said LaForge. "All hosts like us were out looking for someone to sell data center space a few years ago. In the past, there was not enough profit to have an agent involved. Now with CDW, I don't forsee us taking on any other agent agreements. Would we be willing to do strategic relationships with other people in the hosting service? Yes."
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