How is COVID-19 impacting the data center business? What can rugby teach us about leadership? How does a company compete with the likes of Google and Microsoft for technical talent?
I discussed all this and more with Chris Downie, CEO of data center and hybrid IT company Flexential. This is his second CEO role, having served in the top job at Telx Holdings until Digital Realty acquired it in 2015. He joined the chief executive ranks after a 25-year career in finance and operations.
Downie has led Flexential for the past four years, overseeing an expansion of its business that now includes 40 data centers spanning 21 markets. Most recently, the company announced that it will add to its presence in Portland, Oregon, constructing its largest-ever data center, and a third one in Hillsboro, Oregon.
Joel: Was becoming a CEO always a career goal for you or did it happen organically?
Chris: “Not necessarily, but I certainly had the aspiration to build something. I didn’t come from any real foundation of wealth or legacy as I was growing up and growing into my career. So I had a strong desire to build a legacy of some form. I don’t necessarily mean money in that regard. Money is an outcome. I wanted to build a reputation and accomplishments that hopefully will last well beyond my time as a CEO.”
Joel: What led you to the CEO role?
Chris: “I started my career as an investment banker and spent about 10 years analyzing different businesses from a modeling perspective. I learned what makes them tick and how they build value from an investor’s perspective. I focused on raising private equity debt capital for a whole host of communications and infrastructure companies. That gave me a foundation for understanding the key considerations for capital-intensive companies in particular.
After that, I jumped into a startup telecom company as a CFO at a relatively young age. That was a great experience, but it didn’t necessarily have the greatest outcome. As any folks involved with communications around the early 2000s can appreciate, telecom went through a pretty difficult time. So I got my feet wet the hard way, if you will. We built the company quickly and had a lot of capital, but then also had to shut it down quickly. It was a good lesson in terms of how the winds of change can impact the result.
From there, I did a bunch of different consulting exercises from the CFO perspective. I ultimately landed in a data center company called Telx in 2007. While I began as the CFO, I graduated to the president role relatively quickly and ultimately became CEO of that company. As I went through each stage, there was an evolution of focusing just on the numbers, to focusing on the operations to then focusing, as CEO, on culture, strategy and how we could grow in the most dynamic, efficient way possible.”
Joel: How would you advise a CFO to prepare for a transition into a CEO role?
Chris: “Financial strategy is key to growth. CFOs who are classically trained in accounting tend to live within highly defined parameters. I came in through a more non-traditional route. I knew corporate finance, but little about accounting. So, as a CFO, I put strong accounting capability around me and was the liaison between accounting and financial strategy. I made sure that the financing strategy supported the business strategy.
My advice would be to ensure that your aperture is wide in terms of how you are effectively managing from a financial perspective. How is that either impacting or impairing growth? Because if you take too stringent of an approach and don’t make resources available in a way that allows the business to perform, then that can obviously keep growth from occurring. And vice versa if you’re too loose with resources.”
Joel: Is there a time you remember switching over from the finance hat and feeling comfortable in the CEO role?
Chris: “As president of Telx, I gained an understanding of all the operational aspects of the company. When I transitioned into the CEO role, it was an interesting time of observation for me, as I was now the decision maker on strategy, direction and so forth. As CEO, obviously you have a board that you collaborate with and a team. From one perspective you might think having this level of responsibility would be more stressful. But I actually found it to be less stressful, because I could influence the direction of the company without having to execute someone else’s agenda.”
Joel: It’s interesting you say that. I have a responsibility gene. If I’m associated with anything and going to be responsible anyway, I’d rather be in charge. How do you explain what you do as a CEO to a new employee?
Chris: “There’s the formal part of it, which is that I help set and guide the strategy. Then, I ensure the company has all the resources and organizational capacity it needs to deliver on that strategy. I can obviously implement a board who can help from a capital perspective. And we have a whole host of constituents who are supporting what we do from an equity and debt perspective.
When I’m out in the field, I try to emphasize with people that, in a lot of ways, I work for them. Obviously we all work together, but their critical input lets me know how to help, such as providing all the resources they need to be successful.”
Joel: How has being a rugby player and fan influenced your leadership style?
Chris: “As CEO, strategy is critical, but infusing strategy into the organization at large is one of the most critical requirements for success. I played rugby both in and after college in clubs for a number of years – I just have a love of the game. It’s not necessarily the physicality of it, but the strategy and teamwork involved.
It’s different from many other sports from the perspective that to make forward progress in rugby you have to pass backwards. That is not necessarily how people normally think. Rugby requires a level of teamwork and solidarity to stay focused on the outcome even if you have to take a step back to move forward.
There are some key principles that are important parts of how I look at leadership and development. USA Rugby has tenets built around integrity, passion, solidarity, and discipline. I try to infuse all these into how I engage with our leadership and the company at large. I’ve done a few videos at Flexential with a rugby ball in my hand, so I think our employees as well as our customers appreciate how the game’s key principles relate to business.”
Joel: What made you excited to join Flexential and stay in the data center industry?
Chris: “I believe it’s very much early innings for the data center industry, and Flexential is on the leading edge of that. Telx was my first foray into the data center landscape. The whole concept of the data center was relatively new at that time. Companies had data centers, but in 2007 the industry was just growing up in terms of an investment vehicle for public and private investors. So, after nine years in the space, I certainly became an expert in some regard and gained an appreciation of the forward opportunity.
There’s a tremendous amount of infrastructure outsourcing that continues to occur from the enterprise. Obviously, we all appreciate the advancements of internet-based applications and technologies that have revolutionized how we go about our day-to-day business and personal lives. And our business operations revolve around the infrastructure that Flexential provides.
I like to say we’re the home by which the infrastructure that supports digital transformation resides. It’s our job to keep it secure, give it room to grow, and also provide all the utilities it needs to live and breathe. What I mean by that is power and network and cloud and compute resources, otherwise known as cloud, that enable the infrastructure to flex when it needs to.”
Joel: You mentioned the word utility. Customers today expect everything to always work perfectly, similar to turning on a light switch or faucet. How do you meet that high standard in the data center business and deal with challenges?
Chris: “Our value proposition is 100% uptime and redundancy for when there is an interruption. We built the business for that. To your point, nothing’s always one hundred percent perfect, but we’ve got redundancies built into our platforms on all fronts.
There is obviously the security, facility, and the power that supports it. There’s the networking that allows it to federate or communicate with the outside world. All of that has built-in redundancy.
Where we see that in real time is during a crisis. I’d say, fortunately and unfortunately, a crisis can take many forms, so we are prepared during times like this with COVID-19. We have a lot of facilities in the Southeast where there are storms and hurricanes and tornadoes. We are very mindful that those things can happen every year. Our environments are built with redundancy, but we also have people and procedures to respond to these disaster situations.
We’ve got “Go Teams” that come in when there’s any indication of a pending crisis, and that’s extended to this time period. Clearly, access to on premises infrastructure is a challenge for enterprises today. We are helping customers effectively manage that through this crisis.
There are also instances where failure of client infrastructure creates an issue with cloud services, for example. At Flexential, we have procedures to get those back up and running as quickly as possible. So while we have SLAs with our customers, we’re always reminding them that the responsibility is sometimes as much on their side of the equation as it is on ours. We work as a team to ensure that their applications have all of the uptime that they need for the rest of the time.”
Joel: Speaking of COVID-19, how has it impacted your workforce?
Chris: “Fortunately, our people have been safe and secure through this. As COVID set upon the world, that was our primary focus because people are our most important asset. While our infrastructure is built to be resilient, it’s the people who keep it secure. There are a lot of moves, adds, and changes that go on every minute of every day, so our employees are vital to ensure that the mission-critical infrastructure for our customers remains intact.
We took some immediate actions to enable our corporate personnel to work from home, but our data center personnel can’t work from home. As a result, we had to make sure that they were safe and secure. We implemented access restrictions and other measures that our customers certainly could appreciate since this pandemic has impacted everyone.
We remain focused on our front line personnel, because there’s a level of complexity now on what returning to work means. It’s a new normal for everybody. We have to think about access and collaboration on a go-forward basis, because there’s a fair amount of activity in the facilities themselves, such as sales tours and all those kinds of things. We’re actively working through those plans right now.”
Joel: What about from a customer perspective? Have you seen increased demand for data center and hybrid IT services?
Chris: “Yes, definitely. Clearly from a networking perspective there is a lot of increased usage during this time period. That will probably normalize at some point, but there’s clearly a recognition from our customer base and their customers that they must have the ability to network far beyond the office and the structure.
There are also a lot of queries about disaster recovery and backup. Customers are realizing that they don’t necessarily have the right recovery capabilities in their companies when they have to go through situations like this. It certainly heightens everybody’s awareness of whether they’re prepared or not. One of our core competencies is to increase preparedness via customer IT infrastructure through our solutions and applications.
So there’s immediate growth. But I think that it also will lead to long-term growth.”
Joel: You are one of the industries that has a growth prospect in 2020. However, you may lose some customers or business as they suffer losses. How do you plan in this time for what to expect?
Chris: “There was a lot of uncertainty early on with this virus. We’ve had prior experiences confronting crises and other situations, like the financial crisis, so we appreciate the resiliency of our business model. Unless a company is going out of business, they need to have that mission-critical infrastructure. But since COVID-19 is unprecedented, we had to keep a very watchful eye on areas of risk. We have active customer risk assessments going on including in-depth communications with our customers.
I reminded our organization that while we might be fortunate to be more resilient, some of our customers are being impacted materially (think about airlines and hospitals and so forth). The sectors that are less impacted, such as technology and SaaS, support a lot of how we communicate and interact today.
So I think we need to keep a watchful eye as we assess the impact of it. Obviously it’s not quite over yet. It may not be over for an extended period of time. We need to honor that and ensure that we’re managing our liquidity if we’re going to be impacted from a revenue or profit perspective. Because, as I mentioned earlier, part of our value proposition is having the capability for our customers, and their customers, to grow. That takes the form of facility expansions, network augmentations, and also just general meetings of our environments. We need to make sure that we have the resources to maintain that.”
Joel: Your biggest challenge six months ago was probably finding employees. I bet that’s flipped now. Do you think you’re going to be hiring in 2020?
Chris: “Well, I think that’s right. There’s certainly a lot of competition for talent and, in particular, technical talent. We’ve done fairly active assessments about how to procure and retain talent for the long term. Given some of the advanced technical things that we work on, we compete for resources with folks like Google and Microsoft. Because those are fairly dynamic organizations, we have to have an active strategy on talent and retention.
With COVID-19, the expectation is that attrition will go down significantly. I would say it has, but as I mentioned, the companies that are most resilient right now are technology companies. While we might have a brief period of lower attrition this year, I suspect we will continue to have those pressures in the relative near term. We’re hiring where we need to, but don’t want to overextend our expectation of growth in this uncertain time. So we’re keeping a watchful eye on that as well.”
Joel: You have a unique view in your industry. What data center and IT trends should CEOs be paying attention to now?
Chris: “We’re focused materially on what’s next and the advancement of technology, which is happening at much brisker pace than ever before. I think with the COVID-19 situation, there will be a lot of requirements for low-latency edge applications. 5G is a technology that’s going to enable things that, quite frankly, have never been possible in the past. AI is going to infuse itself into just about everything that we do.
I would recommend that businesses pay attention to those things, because there’s been evidence over the last decade in particular where long-tenured, strong enterprises have been disintermediated fairly quickly by the types of advancements I just mentioned. I think that’s only going to accelerate as companies try to figure out new ways to collaborate and conduct business in a post-COVID world. It’s important to pay attention to how it might impact your own business model.”