June 27, 2002 -- David Taffet is getting used to bucking the prevailing trend. He's done it on both ends of the business cycle in the short life of the colocation industry.
Taffet, the president of MeridianTelesis, decided to enter the colocation business in early 2000, when "build it and they will come" was the operating philosophy for many service providers.
"Our mission was to create a cost-focused, carrier-neutral company premised on traditional economic principles, rather than pursuing market share at the expense of profitability," said Taffet.
That decision is allowing MeridianTelesis to expand in the midst of a dramatic contraction in the colo and Web hosting industry. The Philadelphia-based company just marked its fifth straight quarter of EBITDA-positive operations.
In April it took over the management of Broadwing colocation facilities in New York, Dallas and Santa Clara, Calif. The company is now shopping for additional data centers, Taffet says, including "one or two more acquisitions," which would each involve more than one site.
MeridianTelesis' financial position makes life easier for Bob Gionesi, the company's executive vice president of sales and marketing, an industry veteran who held similar positions at Internap and MCI.
"We lead with our financials," said Gionesi. "The question we always hear is 'Are you going to be here six months from now?' We can point them to a very solid economic foundation."
That discussion goes beyond verbal assurances.
"Under a nondisclosure agreement, we'll go pretty deep into what our finances look like," said Gionesi.
"What we've actually done is provide (potential customers) with our audited financials," said Taffet.
Gionesi said Meridian is finding prospects among international carriers and "CLEC survivors" as well as enterprise customers.
"The demand side is good," said Gionesi, who said that third-party relationships have been a big help. "We've done very well with a number of managed service providers in our markets who are very quick to bring us customers. We also have the luxury of working with the Broadwing sales force."
A common thread among regional providers who are now expanding is a focus on the size of their data centera. Meridian is no different. Taffet likes centers in the neighborhood of 20,000 square feet, with about half built out and the other half available for expansion.
. "We think that's an optimal size," he said. "Once you get into the mega-footprints, your overhead is so significant that it's difficult to surmount."
Unless, of course, your business plan never included that much floor space.
"The traditional economic indicators will always apply," said Taffet. "People thought I was missing the boat back in 2000. I felt discipline was essential. Now there are clearly opportunities for us."