Impact Report

ScaleMatrix scales up its business with cloud and colocation

Analyst: Dan Thompson 

26 Aug, 2015

ScaleMatrix entered the colocation market in 2011, and has seen an impressive amount of growth since. Starting with a truly unique colocation product and then adding cloud and managed services, the company has found success being a part of Dell's Cloud Partner Program. Now with facilities in San Diego and just outside of Houston, the company is poised to continue that growth.

The 451 Take

ScaleMatrix has a good combination of products and services to continue its growth. What we would look for next is for the company to diversify its cloud partnerships, and really dig into the Houston market. Also, while we do not have insider knowledge that the company is for sale, we expect that ScaleMatrix would make a good acquisition target for a firm looking to beef up its capabilities in cloud and high-density colocation.

Context

Founded in 2010, San Diego-based ScaleMatrix has been seeing significant growth since its birth. The company began onboarding customers in 2012, and as of 2014 has seen 1,400% three-year growth, posting $11m in top-line revenue last year. At 70 employees, ScaleMatrix is still a small and scrappy company. Founders Mark Ortenzi and Chris Orlando set out to create the 'un-datacenter,' a facility that was missing all the things they hated about other datacenters. Following that design with a solid cloud product, their growth numbers speak for themselves.

Some 70% of the company's revenue is attributed to its cloud platform, TruCore. In 2013, ScaleMatrix was selected by Dell to be one of three providers to its Cloud Partner Ecosystem. ScaleMatrix shared that stage with Joyent and ZeroLag originally; however, now that list has grown to include 10 other North American providers, with names like Microsoft, Google and Amazon joining in. The obvious worry there is that, as Dell adds increasingly more qualified vendors to the list, perhaps ScaleMatrix's business would start to slow from that source. For now, though, the company is showing no such signs.

Along with the cloud products, ScaleMatrix offers colocation services from its two datacenters – one in San Diego and one in Katy, Texas, just outside of Houston. The San Diego facility is its own facility, with 25,000 square feet of datacenter space built out today and the option to expand into another 75,000 square feet of space, spread across two buildings on the campus. Its datacenters are truly unique in that they provide all the racks – custom-built units called Dynamic Density Control (DDC) cabinets that are capable of supporting up to 45kW of power per unit. With that much power potential at each rack, one would expect a noisy datacenter floor; however, its custom cabinets, which are completely sealed, are quite quiet, easily allowing for a normal conversation to be had on the datacenter floor.

Technology

The Dynamic Density Control cabinets are extremely interesting – and eye­catching. Looking like more of a piece of industrial equipment than something you would see in a datacenter, the DDCs offer ScaleMatrix distinct talking points. Dedicated cooling, power, and fire suppression, plus a software package that monitors it all, are some of those points, but the story is about isolation. Each unit is wholly contained, and thus, in theory, reduces the risk of cohabiting space with other companies down to the rack level. There is no need for a cage (although the company has built some out to show that it can do it) because there are no exposed wires, and the enclosures are all secured with fingerprint scanners. You could touch the big green box, but that's really it. That could be big news for customers highly focused on security and compliance, but this all points to the boutique nature of ScaleMatrix's colocation product. It is a little more than just rack space, power and cooling, and the company pitches it as such.

ScaleMatrix is now selling these DDCs to other companies as a stand­alone product. Per the company, it now has deployments at ESET, inside the USS Midway museum, and at one more customer whose name is not being disclosed yet, but is based in the San Diego market.

Customers

ScaleMatrix's Katy facility started as a disaster-­recovery (DR) play to complement its San Diego facility. The company is now seeing successes in thCue Houston market, leveraging that facility as its primary site. Recently, Clear Creek Independent School District in Houston chose ScaleMatrix's Katy location for its colocation and DR needs. The school district plans to leverage dark fiber in the area for connectivity to the datacenter from its various locations.

Clear Creek serves more than 41,000 students in a district that spans two counties in the Greater Houston area. The school district notes that it likes the location – ScaleMatrix is situated for ease of access – and appreciates the DDC cabinet design and the power scalability it offers.

Back in San Diego, ScaleMatrix recently landed a deal with a company called ZitoVault. ZitoVault is a tech startup focused on security for the Internet of things (IoT). The IoT market is headed up, and businesses like ZitoVault are bound to spring up to support it. The company states that it selected ScaleMatrix because of its security and business processes, and because of the design of its DDC cabinets.

Competition 

As ScaleMatrix's product set broadens, so does its competitor list. From a datacenter perspective, ScaleMatrix will see KIO Networks/redIT and American Internet Services (AIS) on deals in the San Diego market. For Houston, which is largely a disaster-recovery space for ScaleMatrix today, the company sees competition from companies like Alpheus Communications, Consolidated Communications, EdgeConneX, FIBERTOWN and Internap.

On the cloud front, ScaleMatrix competes with 10 other North American providers just from Dell's Cloud Marketplace. However, even when competing against names like CenturyLink, Microsoft and Amazon, ScaleMatrix is able to win deals through its sales efforts.

Finally, with regard to its DDC cabinet, there are other providers out there offering similar products, most notably Elliptical Mobile Solutions' R.A.S.E.R. line of cabinets. However, we see this as a bit of a niche product, with a very local focus. So far the customers that have deployed these cabinets are all San Diego-based, so while the enclosures are extremely interesting, we do not believe that the viability of the company will ever hinge on the external sale of the units.

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