VPS CEO Dean Nelson on Flipping Data Centers’ Wasteful Status Quo

After 30 years leading technical infrastructure strategy at some of the largest tech companies – Sun Microsystems, then eBay, then Uber – Dean Nelson last year took an entirely different role. He took helm of an innovative data center technology startup as CEO.

The startup, Virtual Power Systems, automates power distribution in data centers with the goal of matching the amount of power provisioned to a rack of servers with the needs of the applications running on those machines. A new feature the company is rolling out will add the ability to also orchestrate power management to match applications’ reliability requirements. Both capabilities are aimed at the data center industry’s perennial problem of overprovisioning to compensate for unpredictable demand fluctuations, resulting in massive resource underutilization.

In this interview for The Data Center Podcast, we talk with Nelson about his first year on the other side of the corporate data center budget – complicated immensely by the pandemic, which took hold just as he started at VPS – the product’s recent re-platforming, the data center industry’s largest players’ accelerating efforts to get to net zero carbon emissions, and the work of Infrastructure Masons, the association Nelson founded, to attract more young people to an industry with an aging and shrinking talent pool.

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Transcript: VPS CEO Dean Nelson on The Data Center Podcast

Yevgeniy Sverdlik, EIC, DCK:
Hey guys, this is Yevgeniy, Editor-in-chief at Data Center Knowledge. Welcome to The Data Center Podcast. We have today Dean Nelson, he's CEO of Virtual Power Systems, and a few other things. Dean, thank you so much for joining us.

Dean Nelson, CEO, Virtual Power Systems:
Yeah. Thanks for having me on. It's been a long time, Yevgeniy, so I'm glad to be here.

Yevgeniy Sverdlik, EIC, DCK:
Yes, it has. Yes, it has. VPS has a novel take on power distribution in the data center. The software pushes power dynamically, on demand, to where it's needed on the data center floor. That's the best way I could describe that in one sentence. Dean himself is very well known in the data center industry. He's ran data centers at Sun, then eBay, then Uber, he's founded Infrastructure Masons, the industry group, and now, for more than a year, he's been CEO, CEO of a data center tech company. You took the role at VPS last year.

Dean Nelson, CEO, Virtual Power Systems:
Mm-hmm (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
You were pretty busy already. You were doing [IMason 00:00:57], spending time with family, you had a data center consultancy, which, with your resume, has the potential of a goldmine these days.

Dean Nelson, CEO, Virtual Power Systems:
There's a lot of demand. Yeah, you're absolutely correct.

Yevgeniy Sverdlik, EIC, DCK:
I figured. So what was it about this role that made you say it's worth taking the time away from all these other things?

Dean Nelson, CEO, Virtual Power Systems:
Yeah. Let me back up a little bit. Just in summary. So I've been doing this for 31 years now. So I started at Sun Microsystems on my 21st birthday, and then I left Uber on my 51st birthday. So 30 years exactly. Right? You probably saw my-

Yevgeniy Sverdlik, EIC, DCK:
Mm-hmm (affirmative).

Dean Nelson, CEO, Virtual Power Systems:
... post I put out just of now taking some time. My daughter got signed to RCA Records and started doing touring, and it was just incredible. So one of those life moments that there's no way I was going to miss. So, my wife and I followed her on tour, and so we spent six months, and I was doing advisory work in the middle, and those kind of things, so I wanted to do something totally different, because I had been on the operation side, the buyer side, for 30 years at that point. I'd got advice from a lot of really cool people that just told me, if you're looking for a shift, there's a lot of opportunity, as you mentioned, and boy, has it... it actually blossomed in the last year-and-a-half. The pandemic has exposed so many other weaknesses, but opportunities at the same time. So, what happened in that interim period of time, I started doing advisory work for private equity Fortune 50 companies, that kind of stuff, and it was really eye-opening to me.

Yevgeniy Sverdlik, EIC, DCK:
This was investors? Institutional investors looking for advice, because they see this hot growing space, and they want to-

Dean Nelson, CEO, Virtual Power Systems:
Yeah.

Yevgeniy Sverdlik, EIC, DCK:
... to see how to best invest in it?

Dean Nelson, CEO, Virtual Power Systems:
Yeah, and just people exploring, should they get into it? If they are going to get into it, how should they get into it? Are they acquiring a company? Are they starting a company? What area, region are they going to do this? For what reasons? So it was just great, a business and tech effort from the private equity side, and I really enjoyed that. And then I've joined some boards and advisory council on a number of different areas, and it really resonated with me. The reason was, I like playing with a lot of cool stuff. I like being in the middle of it. I think you and I met at the opening of Project Mercury, I think it was.

Yevgeniy Sverdlik, EIC, DCK:
That's right. In Phoenix.

Dean Nelson, CEO, Virtual Power Systems:
Yeah, in Phoenix. I remember that, because we were putting containers on the roof, and it's 120 Fahrenheit outside [crosstalk 00:03:21].

Yevgeniy Sverdlik, EIC, DCK:
We had all the coolest stuff.

Dean Nelson, CEO, Virtual Power Systems:
Yeah. It was just neat to be able to play around with that cool, disruptive stuff. So I started doing that with a number of different companies, and one of them was Virtual Power Systems. I'd known of them for a while, and matter of fact, we'd done an evaluation of them at eBay. Eddie Shooter, who I pulled out of AT&T, he came in to work for me at eBay, and then I had him take over when I left and went with my daughter on this stuff for when she was looking for colleges. But in the middle of all that, what I was finding is that the market really wasn't ready, and the product had the right idea, but the market couldn't embrace it.

Dean Nelson, CEO, Virtual Power Systems:
When I say that, it's... Just think about data centers today. Where is software applied? It's mostly in automation, reporting, alerting, those kinds of things. But it's [crosstalk 00:04:13] not... Yeah. DCIM, to control systems, to sustainability, to reporting systems. There is software, but it's not applied in the same way in which the other layers of the stack apply software. Orchestration, and letting software actually make decisions. Because there's still a lot of fear inside of the data center industry, because we can't let software control this thing, because it can make a mistake.

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
So the market wasn't really ready at that point. Also, I think that I learned a few things in the last couple of years here, too, where the market also had a very specific structure, from a financing standpoint. Real Estate trusts. What they do is, they're a real estate focus company that is primary looking at occupancy. The occupancy basically says, I'm going to build this thing with X amount of megawatts, I'm going to contract all of that, and the utilization underneath it is secondary. So here we're building data centers with... a 50 megawatt data center with 25 megawatts used, 50% utilization, yet, it's an effective data center from a real estate-

Yevgeniy Sverdlik, EIC, DCK:
The investors are happy.

Dean Nelson, CEO, Virtual Power Systems:
Yeah, everybody's happy. And then if they need to do some other things, they just build another one, because there's so much money pouring into this, because now, of course, data centers are an asset class, and that's why private equity and infrastructure funds, and everybody are just pouring money into the space, because they see the long term benefits of digital infrastructure when it comes down to their returns. It ticks all the boxes. So we start looking at thinking, "Okay, there's a massive opportunity in this, yet, there's a mismatch between the demand. What's the burning problem?"

Dean Nelson, CEO, Virtual Power Systems:
So, all this to say, I had joined the board of VPS in 2019. And then the investors and the board asked if I would step into the interim CEO role, and I just honestly said no five times, because I really enjoyed my advisory work and what I was doing. I said, "I can help. I'm on the board already. You got me. I can just go do this." But then I talked to our lead investor, and he was saying for us to continue to propel this forward, we really need... we need your help to step in and do that, and I said, "Okay. So let me do that." And then I did that right before the pandemic.

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
February 2020. Announced that enroll, and then bam, the world changed. But that was a good test, honestly. It was a test on, how do you deal with issues like that, that are like company-killing issues? Revenue, runway, investment, customer attraction, all those things. So it was a crash course really quick, and I honestly really enjoyed it. So got a good team of people, we have a good idea, we have a problem in the industry that we can go solve, yet, we just got a mismatch in a couple of things like this. So-

Yevgeniy Sverdlik, EIC, DCK:
But I guess it didn't hurt that when the pandemic started. There was a little bit of freakout in the data center industry, but then things really picked up, right?

Dean Nelson, CEO, Virtual Power Systems:
Oh, yeah. Yeah.

Yevgeniy Sverdlik, EIC, DCK:
So it wasn't like you had to start laying people off, or something like that, I imagine.

Dean Nelson, CEO, Virtual Power Systems:
You got to make tough decisions in that to make sure that you're doing the right thing for the company and for the employees. So everybody had challenges within that time.

Yevgeniy Sverdlik, EIC, DCK:
Yeah.

Dean Nelson, CEO, Virtual Power Systems:
But-

Yevgeniy Sverdlik, EIC, DCK:
Did you have to make some tough decisions, like layoffs, when-

Dean Nelson, CEO, Virtual Power Systems:
We did.

Yevgeniy Sverdlik, EIC, DCK:
... when [crosstalk 00:07:36].

Dean Nelson, CEO, Virtual Power Systems:
We had to furlough workers, we had to keep our burn rate at a certain point to make sure that we would have the runway, because customers weren't making decisions as fast.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
So in the end of it, you still have to... you got to balance the business. Those challenges, I just... I'm really thankful to my investors, to the board, to really all the employees in the company. Everybody was in it to make sure that we were going to do the right thing and win it. So we were able to survive through the pandemic, and then start to thrive during the pandemic, because we did the right hard choices to make sure that we could do that. And-

Yevgeniy Sverdlik, EIC, DCK:
So there were temporary furloughs, and then those roles are back now?

Dean Nelson, CEO, Virtual Power Systems:
Yeah. We had a couple things. We did furloughs, but also we did have some layoffs that we had to do. We just did the right things to help the people during that period. So, these are basic things, I'm going to too much detail. But most people care about the health care aspects of it, especially in the middle of a pandemic. Because there are other ways to go back and support while you're looking for a job. So we extended our health care all the way through the end of the year. We like-

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
We did those things to make sure that if you're on the other side of that note, that receiving, that note, would you be getting the things that you would hope you would get?

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
Just keeping it human. Very, very important. Just gracious, wonderful people in all that. So, again, tough decisions to get through those things. Now, when you think about all the demand that was going on, you mentioned before... We had an IMasons event, where... the first virtual one in there, and I had Noel Walsh, who runs all of the infrastructure for Microsoft on. I don't know if you remember that, but she said that... she dropped this little bomb in the middle of my conversation saying, "Oh, yeah, we turned up 100 megawatts in two weeks."

Yevgeniy Sverdlik, EIC, DCK:
Yeah, I heard that.

Dean Nelson, CEO, Virtual Power Systems:
I was like, "Well, hold on, hold on, hold on. 100 megawatts in two weeks?" Because Office 365, to Azure, to... All of those things were just exploding through the roof, just like Zoom and all the other properties. So yeah, they just did some amazing things.

Yevgeniy Sverdlik, EIC, DCK:
But for much for you guys... So there was demand, obviously, from hyperscalers, and that still continues. Has-

Dean Nelson, CEO, Virtual Power Systems:
Mm-hmm (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
Are sales back to where they were?

Dean Nelson, CEO, Virtual Power Systems:
Yeah, things have moved forward. The thing that I focus on the most is the market opportunity that we have is still there. Nothing's changed. We now have more money pouring into the industry, and more capacity being built, yet we're still perpetuating the same problem.

Yevgeniy Sverdlik, EIC, DCK:
Inefficiency.

Dean Nelson, CEO, Virtual Power Systems:
We still have data centers that are inefficient. Yeah. This isn't PUE, this is the left side of the decimal, this is the one. But it's the capacity built for the one, and the one is not actually consuming at all. So we actually shifted part of the focus, too, to go back and enable software-defined power capabilities to utilize all that capacity. Because in the opening, you were talking about, you can move power where you need to. In the end of it, you've got stranded pools of power across the data center, and what you need is software that's actually identifying those elements, the constraints within those elements, the activity within those elements, so that you can make informed decisions on policies that are pushed to devices that unlock that capacity. So when you think about software-defined power, it's orchestration of power elements to enable that optimization to drive that utilization up. What that ultimately does is lower your cost, from an enterprise standpoint, or increase your margin from an actual colo standpoint.

Yevgeniy Sverdlik, EIC, DCK:
[crosstalk 00:11:07]. I do want to talk more about the technology at VPS and what you guys are doing now. But I want to ask a few more CEO business-

Dean Nelson, CEO, Virtual Power Systems:
Yeah, sure.

Yevgeniy Sverdlik, EIC, DCK:
... related questions. So, I'm just curious. So you mentioned 30 years you've been doing this. For the bulk of that, what? All of it, you are a customer of companies like VPS, and you were a big important customer. Sun, eBay, Uber, which means you pretty much got what you wanted from vendors. So what's it like now being on the vendor side? How does it feel compared to what you've been used to, where you called the shots?

Dean Nelson, CEO, Virtual Power Systems:
Great question. When you're on the budget, you can get a lot of things done. When you flip it around, and you're trying to get a piece of that budget, it's a very different problem to solve. But what I have found is that I'm blessed with an amazing network of people. We're a small community, when you think about it. IMasons has got leaders from every colo. We've got a combination of the executives that are pretty incredible. So when we start having conversations about what the next generation looks like in the future and what to do with the business thing, those connections that we do open up lots of doors.

Dean Nelson, CEO, Virtual Power Systems:
So, being on the other side, I've had a lot of... I put an advisory council together of a very diverse group of experienced people, all different types of experience on purpose, so that it can have different perspectives into what we're building. In that, we got input, and we started to shift and adjust and pivot based on that input. This is on the customer side. So I called a lot of my peers, and sat down and said, "Look, this is what we're doing. What do you think? Would you buy this? Would you use this, if it was there?"

Dean Nelson, CEO, Virtual Power Systems:
I was pleasantly surprised that they're all looking for that next level. Here's one of the big things that popped up. Today, there's like one product that's offered in a data center. You get an SLA with a certain amount of capacity at a certain efficiency with a certain cost. There really is no right-sizing of what that is. So what we've actually now tuned in on is the ability to right-size the SLAs for the tenants-

Yevgeniy Sverdlik, EIC, DCK:
What does it mean?

Dean Nelson, CEO, Virtual Power Systems:
... dynamically. So, let's say I've got a five-nine SLA, that's the traditional thing that would go out there. That five-nine, I have at a certain price, let's say it's $125 a kilowatt. So I'm going to go contract five megawatts of capacity and utilize this at 50%. But I don't need five-nines. I actually have a software platform from my cloud modules, or from my Hadoop environments or something, that would allow me to take a lower SLA. But I have no options, no offer for that. The colo industry doesn't offer it. You have a product, you can get any color you want as long as it's this color.

Dean Nelson, CEO, Virtual Power Systems:
So, if you are able to now create a multi-tenant, or a multi-nine product, I can give you a five-nine, a four-nine, a three-nine, a two-nine, a no-nine SLA. All of a sudden, I can now right-size to it. So what's important here is, you have to solve both sides of it. So our product is an m-nine offering, and that is where the tenants have the flexibility to choose their SLA, all the way down to the cabinet level.

Yevgeniy Sverdlik, EIC, DCK:
Yup.

Dean Nelson, CEO, Virtual Power Systems:
With that, they get the associated price reduction based on it. Then you flip it around, you've got the admin view, and that admin element is, I'm creating pools of the nines, so I've got five-nine, four-nine, three-nine, two-nine et cetera at a certain price based on my utilization and capacity and those things, and offer that up as inventory to my customers. But they have to make a choice from their revenue models, their capacities, their appetite for over subscription, and taking advantage of those inefficiencies to enable it. That's the stuff they need to do. But you start to marry those together, pretty incredible things start to happen.

Dean Nelson, CEO, Virtual Power Systems:
Look, this is the punchline for me. The industry is ripe for disruption. The data center industry is ripe for disruption. The reason I say that is, right now, all of these amazing colo companies are creating this product that's extremely efficient when it comes down to PUE, et cetera. But they're getting to the point where the cost, the margins are getting really low, and the cloud players are pushing that, because they're getting things at 60 or $70 a kilowatt. You can't go lower unless you sacrifice something else. Redundancy, service, something, which means you're going to have more risk.

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
So, we've reached that forcing function. As soon as company comes out and starts doing these lower price elements, people are going to look at it one of two ways. They're buying the business at a loss leader, or they've come up with a better mousetrap.

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
That is going to disrupt those markets.

Yevgeniy Sverdlik, EIC, DCK:
Yeah. And so-

Dean Nelson, CEO, Virtual Power Systems:
That's what I mean.

Yevgeniy Sverdlik, EIC, DCK:
So the play is, too, to enable colo operators to offer that lower costs, maybe a lower redundancy product-

Dean Nelson, CEO, Virtual Power Systems:
Mm-hmm (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
... and still not sacrifice their margin.

Dean Nelson, CEO, Virtual Power Systems:
And not sacrifice the SLA. This isn't like I'm going [crosstalk 00:16:23] to go risk it, like they do right now. So the benefit is the margin that comes back.

Yevgeniy Sverdlik, EIC, DCK:
Yeah. So kind of a more sophisticated, more intelligent approach to infrastructure, what your application actually needs, and how close can we get to that.

Dean Nelson, CEO, Virtual Power Systems:
This is a natural progression. If you think about cloud, you can right-size what you want in cloud. I can go back and do reserved instances, I can do spot instances, I can do a lot of things inside of it. And what are they doing? They're orchestrating everything underneath to optimize their oversubscription and still meet what they're delivering to their customers. So there really isn't anything different. You're pushing it down to the power plane. That power plane now is using software-defined power capabilities to now enable this approach. The industry wasn't ready for this three to four years ago. They just weren't. There wasn't the forcing function for it. Now, we are.

Yevgeniy Sverdlik, EIC, DCK:
Now, I'm curious. So you mentioned you first got acquainted with the technology when you were at eBay.

Dean Nelson, CEO, Virtual Power Systems:
Mm-hmm (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
I mistakenly assumed maybe that was while you were at Uber, because right around the time you were running things there on the data center side of things, Steve Houck, the former VPS CEO who you replaced, he told us on this podcast that Uber was one of the companies trialing the technology. So were you involved with that trialing there?

Dean Nelson, CEO, Virtual Power Systems:
Yes.

Yevgeniy Sverdlik, EIC, DCK:
... at Uber?

Dean Nelson, CEO, Virtual Power Systems:
Yeah. So I did two evaluations, so at two different times of my career. The first one was at eBay, and that was a pretty extensive one to go back and roll this into Salt Lake City. So there was analysis done, they'd rolled in the hardware and other elements to do power bursting and switching to enable similar things like this. Right?

Yevgeniy Sverdlik, EIC, DCK:
Mm-hmm (affirmative).

Dean Nelson, CEO, Virtual Power Systems:
But it didn't line up when it came down to the product. It wasn't ready yet.

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
Plain and simple. Again, I'm a very straightforward guy. So, Shanker and team went back to that, they continued to do development. If you look at it, Eddie shooter was the one that was leading that exercise, we had James Monahan, who used to be at eBay, and now he's over at Facebook. We had a lot of good, powerful minds looking at what this was, and providing really good feedback into what VPS needs to think about and how to do it. Because there were challenges. Not just software, but also hardware integration and how this was going to be done. So that was the first evaluation.

Dean Nelson, CEO, Virtual Power Systems:
And then I stayed in touch with Shanker over the years and just kept providing feedback, as did Eddie and others. And so then, when I went into Uber, we did the similar thing, because we were in colos. At eBay, it was owned facilities. So at colo, it was like, what could we do? So Jim Weinheimer, who ran data centers for me at Uber, his team was doing the evaluation with the next generation of VPS. So the timing didn't work out with Uber. So the evaluations are going on, there's, again, great input, great things that were happening, but the timing didn't work out. And then when I came over and started doing this... By the way, I hired Jim Weinheimer out of Uber.

Yevgeniy Sverdlik, EIC, DCK:
Oh.

Dean Nelson, CEO, Virtual Power Systems:
Jim is leading the stuff on the other side, because... He's loving it. We're having a great time.

Yevgeniy Sverdlik, EIC, DCK:
When [crosstalk 00:19:35] was that?

Dean Nelson, CEO, Virtual Power Systems:
Last year, mid last year or something, he came in.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
So, yep. What's great is the... again, the learnings that were happening within that evaluation, now are woven right into the product that we're doing now. Over the last year, we replatformed, so every line of code that has been written since the company started was replaced in the last year. Everything has been actually replatformed and up leveled into an enterprise piece of it, because we spent the time during the pandemic focused on how to build a scalable product.

Yevgeniy Sverdlik, EIC, DCK:
Okay. Can you explain that?

Dean Nelson, CEO, Virtual Power Systems:
And that-

Yevgeniy Sverdlik, EIC, DCK:
Can you explain that? So rewritten for an enterprise, what is-

Dean Nelson, CEO, Virtual Power Systems:
So think of it as... Okay. When you buy a piece of enterprise software, you have certain expectations. Right? That it's going to be able to now have all the hooks to be able to now interface with any other system, stability, scalability, all those [ilities 00:20:31] that come along with an enterprise product. Salesforce, Oracle, et cetera. You have to put some real muscle into the underlying foundation to make sure that you've got something that can be stable and can scale.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
And then there's the other part, consistency, architecture. When you look at how these are put together, the scalability comes from repeatable elements, and not that you're hard-coded in a certain way, that you've chosen certain things that would not allow you to be able to change it in the future. So a lot of flexibility built into the actual platform, too. So we brought on new talent, and they were helping with the rearchitecture and the replatforming. It was great. The pandemic hit at the perfect time for us to be able to do these kinds of things. So, now we're coming post-pandemic, and we've got the new platform, the new scalability elements of it, and now we've got an even more focused effort on this multi-nine product, because that's what's getting traction with the customers, because it's interesting on both sides.

Yevgeniy Sverdlik, EIC, DCK:
So what's the [crosstalk 00:21:31] new platform? What do you mean by replatforming? What was the old platform-

Dean Nelson, CEO, Virtual Power Systems:
So-

Yevgeniy Sverdlik, EIC, DCK:
What's the new platform?

Dean Nelson, CEO, Virtual Power Systems:
We think about it from a software standpoint. You have a certain selection of how you architected, languages that we use. So we basically went and replatformed that whole thing. When I say we wrote every... rewrote every line of code.. All modules, everything else, they looked through them, is something we want to keep? Ultimately, they said, "We should start it again." So they did that over the last year. The new platform, it's the same capabilities, it's just a much more solid platform, a scalable platform.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
Those are the investments that, from a product standpoint, are the tough ones, like, when do you replatform? There's never a good time to replatform.

Yevgeniy Sverdlik, EIC, DCK:
So, I guess-

Dean Nelson, CEO, Virtual Power Systems:
Right?

Yevgeniy Sverdlik, EIC, DCK:
... a pandemic doesn't happen every-

Dean Nelson, CEO, Virtual Power Systems:
Right. So you take advantage of it, you sink your teeth in and go. That was neat. It's so cool. By the way, I don't know... For people that may have been involved in this, they will know what I mean. That when you get engineers that have... you give them the... I guess, the openness to go after something, and the approval to do it, they just jump in and do it. I just love watching engineers work like that. So it was neat to watch the process, and then see it come up-

Yevgeniy Sverdlik, EIC, DCK:
Well, I have yet to meet an engineer who [inaudible 00:22:46] to remake all of the code that they're working on to their own liking.

Dean Nelson, CEO, Virtual Power Systems:
Yeah, true. Uh-huh (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
That's usually what they prefer, and they don't get to do very often.

Dean Nelson, CEO, Virtual Power Systems:
Very true. Mm-hmm (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
You mentioned this element a little bit. So VPS doesn't do much direct selling, from what I understand, it's more of a play where the technology is sold as part of a broader solution. Is that a correct assessment?

Dean Nelson, CEO, Virtual Power Systems:
Actually, we do both. So we have direct sales that we're doing with our own specific customers. So think of colo companies. We're focused on two areas right now, core colo, and edge, and we have deployments in both. So when you think about it, it's the same concept, this m-nine concept, just in the core and at the edge. It's still about over subscription management, SLA enforcement, and ensuring that you're going to be able to meet those SLAs to drive that optimization and increase that margin, or lower the cost.

Dean Nelson, CEO, Virtual Power Systems:
So we've got partnerships that we put together, and I think this is public. Yeah. We did an alliance with ITRenew and with EdgeX. That edge module, an easy edge, is how do you bundle all these things together and enable people to participate in the edge easily?

Yevgeniy Sverdlik, EIC, DCK:
Yeah. ITRenew-

Dean Nelson, CEO, Virtual Power Systems:
And that's-

Yevgeniy Sverdlik, EIC, DCK:
... is an interesting company. They take hardware that hyperscalers have used for a little bit, and hyperscalers are famous for having much shorter it refresh cycles than everyone else. So once that hardware comes out of their data center, the rest of the world can still use it for many years. So they'll repackage that hardware into these full stack solutions or full rack solutions with rack scale.

Dean Nelson, CEO, Virtual Power Systems:
Yeah. Ali Fenn is the President, and she's on our board for VPS, as well. This alliance was really... Really, it lined up really well, because first off, circular economy equipment. Like you said, they're taking a waste stream from hyperscalers, waste stream. So think about OCP version two hardware coming out of a data center from Facebook, goes into this, it gets refreshed, renewed, and then it's repackaged to be able to be resold like HP, Dell, and Supermicro. But it's full hyperscale integrated racks already, and it has a three-year warranty, just like you get from the other suppliers.

Dean Nelson, CEO, Virtual Power Systems:
Yet, the big punchline is, it's less than 50% the cost for the same performance. Because of the circular economy equipment, it's 70% less carbon. And then another thing that's been really important in the pandemic, they have a supply chain that can deliver in less than four weeks. If they took all the inventory that they were getting in and sold it, they'd be the fourth largest OEM in the world.

Yevgeniy Sverdlik, EIC, DCK:
Yeah. [inaudible 00:25:36] right. I talked-

Dean Nelson, CEO, Virtual Power Systems:
So it's-

Yevgeniy Sverdlik, EIC, DCK:
... to them a few months into the pandemic, and they said business has been just bonkers.

Dean Nelson, CEO, Virtual Power Systems:
Yeah. So here you've got ITRenew, and then you've got EdgeX, is the other partner that we have, and what they're doing is creating this marketplace on their platform that's enabling CDN, serverless, mobile capabilities at the edge. So when you bundle all this together, you've got the most cost-effective, sustainable solution at the edge. It's not just a data center that's empty, that you will fill with something, or hardware that's going to land somewhere, it's a module that lands in a location, and you can turn up the edge and be on the marketplace doing a revenue share with EdgeX. So what we do as VPS is help them orchestrate between the facilities and the IT. So the prioritization of equipment, those SLAs, I now can pack 20 kilowatts worth of compute in a 10 kilowatt box.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
Because I'm oversubscribed to managing all this right. Right?

Yevgeniy Sverdlik, EIC, DCK:
Uh-huh (affirmative).

Dean Nelson, CEO, Virtual Power Systems:
I can get my utilizations at 95%, like crypto mining.

Yevgeniy Sverdlik, EIC, DCK:
Okay. How big are these edge modules that we're talking about?

Dean Nelson, CEO, Virtual Power Systems:
They're all the way down to three-rack modules-

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
... that would have... Just think of it this way, where there's a colo rack, there's infrastructure rack, and then you've got an EdgeX rack.

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
The colo rack is a five-nine, and the EdgeX rack's a two-nine. Because at the end of it, you're going to have the 5G radios or other other edge infrastructure that a tenant would want in that way with their custom equipment, just like a colo, but then you've got the standardized ITRenew equipment that's scalable. I can keep adding into it, because it's hyperscale already, and I can oversubscribe that one. If I need to shed load to make sure I keep this SLA for the first rack, I do that via VPS's software.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
We're watching this to oversubscribe all the time, because then you can say, either throttle the CDN traffic into the node, or shed the node by dropping a number of nodes down, or actually power that whole rack off, because we can't compromise the SLA for the colo tenant. It's the same concept there that you would do inside of a colo-

Yevgeniy Sverdlik, EIC, DCK:
Mm-hmm (affirmative). Just on a smaller-

Dean Nelson, CEO, Virtual Power Systems:
... it's just an m-nine at the edge. Yeah. So that that's been a really interesting project, and getting great traction. Because, man, the money, again, that's rolling into this space from edge and core, unrepresented.

Yevgeniy Sverdlik, EIC, DCK:
So what's-

Dean Nelson, CEO, Virtual Power Systems:
Never seen this much [inaudible 00:27:58].

Yevgeniy Sverdlik, EIC, DCK:
What sorts of companies are buying this edge solution?

Dean Nelson, CEO, Virtual Power Systems:
So, it's from established companies. I'm under NDA, so I can't-

Yevgeniy Sverdlik, EIC, DCK:
Just the type.

Dean Nelson, CEO, Virtual Power Systems:
... really share the specific names of-

Yevgeniy Sverdlik, EIC, DCK:
I'm just curious-

Dean Nelson, CEO, Virtual Power Systems:
... the companies.

Yevgeniy Sverdlik, EIC, DCK:
... about the type of companies-

Dean Nelson, CEO, Virtual Power Systems:
But-

Yevgeniy Sverdlik, EIC, DCK:
... verticals.

Dean Nelson, CEO, Virtual Power Systems:
The traditional things, you hear about tower companies, you hear about fiber companies. You think about traditional data centers that actually want to do distribution, like that. There is also enterprise companies that want to have things that are in their parking lot, ironically. So, there's a lot of people... Look, they're from startups that are doing brand new internet connectivity, to smart... I can't share all the elements, but just think of that things we keep talking about, smart things, companies that are focused on elements of those IoT. Transportation, 3D modeling of cities, data replication, orchestration of autonomous vehicles, all the things that could be driving edge demand, they all have to have commonality in, I need to have compute, I need to have some GPUs, I need to have storage that can handle that thing that's proximate to where that load is. So, I can't sell the specifics out, but that there is a ton of those out there that the demands coming in and such creativity. What I can share with you, though, is... Have you heard of the Autonomy Institute? Have you talked to them?

Yevgeniy Sverdlik, EIC, DCK:
No.

Dean Nelson, CEO, Virtual Power Systems:
Okay. So the Autonomy Institute is a consortium of 80 companies now, I think it is. You should bring on Jeffrey DeCoux. He's the chairman of the Autonomy Institute.

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
What they're doing is creating a standardized element for smart cities. So this is called a pin. So it's a public infrastructure network note. Just picture this, we're on sound here, or audio, a light pole. That light pole has a base to it, and then that base, there's 22U compute. Then it has a mast, and then that mast is 5G, LIDAR, weather, radar all types of sensors. So, this is woven into the actual landscape in cities now, instead of 5G towers and all the technology blight that's going to be coming out because you need 10 times more towers for 5G

Yevgeniy Sverdlik, EIC, DCK:
So [crosstalk 00:30:17] a standardized-

Dean Nelson, CEO, Virtual Power Systems:
Yep.

Yevgeniy Sverdlik, EIC, DCK:
... unit for everything, for wireless connectivity and compute.

Dean Nelson, CEO, Virtual Power Systems:
Right. So now you start putting those on every street corner, and then you've got compute 100 feet away from you. Now you can think autonomous vehicles, to just smart vehicle orchestration for traffic management, to coffee shops and everybody else being able to leverage localized compute for engaging experiences for their tenants that come into... or their customers to come into their shops. All of a sudden, you've got compute right where you need it. And then you get 5G that's opened it back up and to 100 times more bandwidth and 10 times faster.

Yevgeniy Sverdlik, EIC, DCK:
So can-

Dean Nelson, CEO, Virtual Power Systems:
It's right there.

Yevgeniy Sverdlik, EIC, DCK:
So can you share, by chance, how many of these edge locations have been deployed now by customers with VPS technology running?

Dean Nelson, CEO, Virtual Power Systems:
I can't share the number, but let me tell you-

Yevgeniy Sverdlik, EIC, DCK:
Maybe the ballpark.

Dean Nelson, CEO, Virtual Power Systems:
... total.

Yevgeniy Sverdlik, EIC, DCK:
Total, okay.

Dean Nelson, CEO, Virtual Power Systems:
I'll tell you the total, how's this? So the pipeline that we've got going on right now, there are tens of thousands of locations, and I'm not exaggerating, tens of thousands in the pipeline from just a small number of companies, because they already have these locations, they exist in those locations, they just don't have this solution in the right place.

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
Then you think of-

Yevgeniy Sverdlik, EIC, DCK:
You're talking about total edge nodes, right? Or edge location of this?

Dean Nelson, CEO, Virtual Power Systems:
No, locations, because the nodes is now multiply that times five to 20.

Yevgeniy Sverdlik, EIC, DCK:
I see. [crosstalk 00:31:44].

Dean Nelson, CEO, Virtual Power Systems:
Locations, I'm saying about individual units.

Yevgeniy Sverdlik, EIC, DCK:
Oh, nodes meaning like individual compute nodes? Is that what you mean?

Dean Nelson, CEO, Virtual Power Systems:
Actually no. So you've got a node, and then you've got a location, and then you've got a metro. So, the nodes multiplied by how many nodes in a location, like a pin, right?

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
Or a micro data center-

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
... or a metro data center that's got these edge nodes in it, and then you've got a metro that has the sum of all that.

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
Just one element there. Those micro data centers, there's tens of thousands in the pipeline. This is that chicken and egg everybody has been talking about, it's like, well, I don't need compute at the edge because I can do it in the core. Well, it's not there, so I can't use it. Well, you start landing it there, and you have 5G that opens up that performance, all of a sudden, guess what, it's just like the app store. If the app store didn't exist, nobody would be creating apps. If the app store exists, and you have millions of people writing apps, they're going to use the app store. So when you start to have infrastructure in the right space, and the speed in which to use it, and an appetite, a voracious appetite like us from these devices, and from the machines that are going to use it, it's going to get consumed. So-

Yevgeniy Sverdlik, EIC, DCK:
Sorry, go ahead.

Dean Nelson, CEO, Virtual Power Systems:
When you think about the consortium we put together, what is really neat for me is that when you think about a micro data center, it's going to land in these tens of thousands of locations. That's going to have circular economy equipment that's highly performant highly cost-effective, that is highly utilized, day one, which means you suddenly can have a very, very sustainable deployment in there, because 70% of the carbon's removed already just because of ITRenew.

Yevgeniy Sverdlik, EIC, DCK:
Right. On the core side of things, where do you see what the most traction? Is it colos? Is it-

Dean Nelson, CEO, Virtual Power Systems:
100% with colos.

Yevgeniy Sverdlik, EIC, DCK:
... hyperscalers? 100%-

Dean Nelson, CEO, Virtual Power Systems:
100%. I would say that I see this as kind of a three-step process. So we're going after the colo market, because that's where really the biggest stranded pool of capacity is. The math that I've done, and I've actually done this through IMasons and other folks, we're pretty confident there's at least 35,000 megawatts of data center capacity globally. I think it's more towards 50. But there's 7 million data centers classified. Now, data center definition is a lot of different things, but 7 million locations with at least 35 gigawatts. Now, think about it, 10,000 megawatts of that is stranded, not used, ever.

Dean Nelson, CEO, Virtual Power Systems:
So where is it stranded? The majority it is that the colos are at the mercy of their customer. So for example, at Uber, we would contract this capacity, and then we would build in additional capacity, because failover, bursts, whatever else. But we would never use the contract, the full contract. In a lot of cases, it depends on the maturity of the customer, they use a lot less than that. That's why we're saying less than 50%. When you start matching those up in a colo, they can't do anything. They have to build the capacity, sign for the contract, and then in the end, they're using less than 50% of the capacity.

Dean Nelson, CEO, Virtual Power Systems:
So, that is our target market. So first, how do you go enable the colos to offer this up and compete in that space? The second is, how do you get the tennis to go in to start to leverage this? And the third is, how do you get more advanced the actual hyperscalers? Because in a number of IMasons events, they've said, we are highly optimized in our built data centers. We can get 80, 90% utilization all the time in our built data centers. Why? Because they own the entire stack from concrete up. But, they can't do that in a colo. Why? Because the contracts are limited, and they don't have direct access to be able to do the same kind of things. So we see ourselves in the middle to enable that same capability of right-sizing applications for hyperscalers in colos, which makes colos more attractive, which means it's going to be more investment and their market is going to grow. So that's [inaudible 00:35:46].

Yevgeniy Sverdlik, EIC, DCK:
Well, obviously, that requires some quite sophisticated thinking on the customer's side, colo customer's side about their workloads, and some analysis, maybe, that they haven't done before. Do you guys try to address that part in any way, or do you just say, "Okay, well, here's the capability. Now you guys have to just figure out how to best use it"?

Dean Nelson, CEO, Virtual Power Systems:
Yeah, good question. I don't think it's as complex as people think. It's mostly business process and operation hooks. So, how do you sell a multi-nine product? You sell a five-nine, everything's very consistent today. I can go back in, and I can be consistent in how I actually deliver to a customer. They're going to buy five megawatts of capacity, it's going to be at this efficiency, this price, and I've got a five to 10-year contract. So when you go back and say, "Now I'm an offer flexibility in there to attract more customers, I'm going to do oversubscription inside of that," how do I ensure that I never compromise my SLA for any customer? That's where software has to be in there, to be able to do that. But they need to have the business process to say, "I know what I'm selling, I know my policies, and then I have the mechanisms," which is VPS, "to enforce those policies."

Dean Nelson, CEO, Virtual Power Systems:
Because in the end, if you do need to shut down a one-nine SLA, how do it? Software has to go physically shut it down. So the actuators have to be in place to go do that. So we've got our smart switching to enable that to happen. That's a physical thing that allows us to be able to say, we can go enforce that SLA with that customer who is signed up for a one-nine SLA, and give them that 30-second grace period to... right?

Yevgeniy Sverdlik, EIC, DCK:
Mm-hmm (affirmative).

Dean Nelson, CEO, Virtual Power Systems:
Drain their racks do a graceful shutdown.

Yevgeniy Sverdlik, EIC, DCK:
Yup.

Dean Nelson, CEO, Virtual Power Systems:
The mature customers can do that. But, it's tying those together with the actual colo, to say, "Okay, now I have a new thing that I'm selling. How do I do that?" So we work with them to go figure out that model going to market, and also, the comfort level for the operations teams for how this hook is built into it, where they get confidence. Because remember, there's not a lot of software that orchestrates like nine-

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
... inside of data centers today, and that's our expertise. That's why we're going in, and that's why it's going to disrupt this. But we got to help the customers, both a colo tenant side, colo and the tenant side on this journey. Because it really is... It's a different way of approaching the problem.

Yevgeniy Sverdlik, EIC, DCK:
Yeah. Which is why I sense there's a lot of resistance from colo providers, because it's such a different way... Well, A, it's just different, radically different from what they're used to, and B, obviously, it's not great for all the investors that would like to see more data centers built rather than less.

Dean Nelson, CEO, Virtual Power Systems:
So that, I would disagree with a little bit, because the demand is so high, it's going to continue to happen. There's gigawatts worth of pent up capacity, because they don't have it. [inaudible 00:38:43]. I've seen Greenfield in India, Latam, right across the EU. There's tons of capacity that has to be built. In a lot of the mature markets, think of Virginia and Phoenix and a lot of those, there's a lot of stranded capacity that can be unlocked. But they also still need to build more capacity. So, this tide is lifting all those boats, it just comes down to how they're going to compete. Because in the end, it's going to be cost. The tenants care about the cost. And if you can align to the SLA, and they will take the lower cost. They will, every time.

Dean Nelson, CEO, Virtual Power Systems:
I've tested this with big companies on the tenant side. Because they have the maturity today, they do this already. This isn't like, oh my god, I have to write all this. Now I have web hooks and API's that I can just go use today. Great. So you send me this one, give me my grace period, and et me go. Yep, I can drain my rack. Just give me the alert. Give me the signal and I'll do it. And then if you're going to shut off, I'm already done. Great. It's orchestration that's the most important part here.

Dean Nelson, CEO, Virtual Power Systems:
The colo, I think, is... We have a lot of smart people in the data center industry. We have a lot of business savvy people in the industry, and they just get... they just needed to get their head around, what does the financial model look like? Because the technology can be implemented. It's not rocket science to go back and make it all work. It's just orchestration to make sure that what I'm building from a business policy can be enforced inside of my physical environment that does not compromise my customers. So that alignment and the elements we put in place here... Because there's some really novel, simple things that are enabling that to happen. The actuators, the grace period, and the software orchestration. Those three elements enable this to happen, and give the confidence for people to deploy.

Yevgeniy Sverdlik, EIC, DCK:
So what's next on VPS's Technology Roadmap? What are your engineers busy doing today? You've replatformed.

Dean Nelson, CEO, Virtual Power Systems:
Mm-hmm (affirmative).

Yevgeniy Sverdlik, EIC, DCK:
What's the what's the next problem?

Dean Nelson, CEO, Virtual Power Systems:
Our number one focus right now is rollout.

Yevgeniy Sverdlik, EIC, DCK:
I see.

Dean Nelson, CEO, Virtual Power Systems:
Get more customers, and making sure that we can deliver on all the pieces that are going in parallel. There's lots of work going on, which is really exciting. But in parallel to that, we also have another opportunity that we've been exploring I didn't think was going to be real, and that's crypto mining.

Yevgeniy Sverdlik, EIC, DCK:
Okay.

Dean Nelson, CEO, Virtual Power Systems:
You'd never think that okay, this no-nine [crosstalk 00:41:08] deployment... because they have nothing. It's basically street power and... These crypto miners man, I visited a number of those facilities and worked with a number of people, and they really have... they've got their business down. Now. It's no longer this wild west element. It's a business. And they've figured out how to do this to optimize. So they're deploying two megawatt containers in two days. They're turning up to megawatts in two days. And they've figured out the cost elements to keep these down to less than $200,000 a megawatt. Think about that compared to colo. Right? [crosstalk 00:41:45].

Yevgeniy Sverdlik, EIC, DCK:
Obviously, they don't have all the redundancy, right? Because they don't read-

Dean Nelson, CEO, Virtual Power Systems:
Right. So, of course, yeah. But in the end of it, they can take the hits. So when we look at it... But they're also at this 95 to 98% utilization of power all the time. We thought, well, what could we actually offer to that? Well, the thing is, when you get close to the red line, and there's no power conditioning, or safety nets, they trip, they have outages, they lose. And when you're down, you're not doing hash rates. So, if you are enabling them to be able to say, "I can hold you up..." Because we have basically power bursting, that allows them to start to go above, so you don't trip. You can hit that 100% and go above that 100%, because we're clipping all that. We're enabling that injection of energy in that period.

Dean Nelson, CEO, Virtual Power Systems:
And then the other one is their three-phase systems. So they have phase imbalance. So I've got one phase that's higher than the other, and that phase is going to trip my circuit. So since you've got an uneven distribution of the machines, you get imbalanced no matter what, just comes down to how much. So we can now correct that phase and balance at the same time. Then you start to orchestrate that with the actual gas pedal on the Bitcoin machines. Because they have these overclock capabilities, they can do more, but they're usually constrained by power.

Yevgeniy Sverdlik, EIC, DCK:
Hmm. So-

Dean Nelson, CEO, Virtual Power Systems:
So if you [inaudible 00:43:03], you could. And then there's another layer of this, too, which is around the demand response. They get Texas. $9,000 a kilowatt hour. Anyways. That orchestration is another opportunity that works-

Yevgeniy Sverdlik, EIC, DCK:
Yeah. You said you didn't believe there was opportunity in crypto for you guys. What was it that made you... What made the light bulb go off?

Dean Nelson, CEO, Virtual Power Systems:
When we dug into the data. Because we kept thinking that okay, right now, the Bitcoin just industry today is anywhere from nine to 15 gigawatts. Nine to 15 gigawatts of capacity is consumed. Okay? Daily.

Yevgeniy Sverdlik, EIC, DCK:
Yeah.

Dean Nelson, CEO, Virtual Power Systems:
By crypto mining. Sorry, that's just Bitcoin.

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
So there's a site that actually shows all the hash rates, and they're able to actually accurately predict what it is that's being consumed. We looked at that thinking, Okay, first off, there's just this massive amount, and it's not slowing down. Blockchain is here to stay. Whether it's Bitcoin or [inaudible 00:44:06], there's going to be the way that these ledgers are going to be computing in the same manner. So this is going to continue to grow. So then, if there's that much, there's got to be some way that you can help optimize it, and that's the way I was explaining before with the phase imbalance and the power bursting elements of that. Now you could drive these things from 95% to 99%. And then your amount of kilowatt hours consumed to be able to do the work goes up at the same time.

Dean Nelson, CEO, Virtual Power Systems:
So even at these low costs, when you think about it... It's five cents a kilowatt hour to run these machines, but they're making anywhere from 21 to 48 cents a kilowatt hour when they actually land the coin. So there is an opportunity there. If I can do more hash rates, I could actually make more money. So when you think of it from the mining side itself, you can optimize to help them do more mining.

Yevgeniy Sverdlik, EIC, DCK:
Have you guys-

Dean Nelson, CEO, Virtual Power Systems:
So we didn't expect that to be there.

Yevgeniy Sverdlik, EIC, DCK:
So have you had any traction there yet, or is that-

Dean Nelson, CEO, Virtual Power Systems:
Yeah, yeah. So we've got an engagement going on right now, which is proving out the concept, because this is a new thing that we thought we explored. There's two parts of it. One is traditional stuff with air, but there's also liquid cooling. Liquid, because they are exploring this... The containers we're looking at their two megawatts, they've got, each container probably... 1,400 machines in them or something like that.

Yevgeniy Sverdlik, EIC, DCK:
Wow.

Dean Nelson, CEO, Virtual Power Systems:
So the inlet temperature, it's outside... it's 94 degrees. The outlet temperature is like 160 Fahrenheit. And they're handling it.

Yevgeniy Sverdlik, EIC, DCK:
With liquid?

Dean Nelson, CEO, Virtual Power Systems:
You put liquid in there... No, that's just with air. You put liquid in there, all of a sudden, just like the other liquid promise... When you get something that highly utilized, the length of the machine, the performance itself, this... You don't get all these things that actually degrade the performance because of heat. Bitcoin has really tuned the machines to be able to do that in high heat. Now, all of a sudden, you remove a high heat element, and have liquid that's extracting the heat 100 times or 1,000 times more effectively, interesting. So, less power to move those fans, more power for mining, more efficiency in the mining. So it's a really, really interesting space. If you want to get your geek on, go dive into that stuff.

Yevgeniy Sverdlik, EIC, DCK:
I will, immediately.

Dean Nelson, CEO, Virtual Power Systems:
Right on. Buy some machines in your garage, and a fish tank.

Yevgeniy Sverdlik, EIC, DCK:
Oh, yeah. A fish tank. Yeah. With engineered fluid.

Dean Nelson, CEO, Virtual Power Systems:
Yes, yeah, [inaudible 00:46:45].

Yevgeniy Sverdlik, EIC, DCK:
So, I want to talk a little bit about those bigger issues. Well, you mentioned environment already. So there is a growing push by the largest players to shift to zero carbon from nearly carbon neutral. The goals are quite ambitious, zero carbon by 2030. Both Microsoft and Google have those goals. Well, do you think they can get there, given the massive constraints? There's technology problems, like grid-responsive data centers, workload shifting, battery technology is not quite there yet, and there are regulatory market structure roadblocks, just pure renewable availability problems are all over the world. So how optimistic are you about these companies' ability to get there?

Yevgeniy Sverdlik, EIC, DCK:
To me, it feels like they should have started this a decade ago, instead of just shuffling green energy credits around. The second part of it is, even if the largest players do get there, they represent a minority portion of the total data center capacity in the world, and a few other operators have the will or the resources to do these moonshot projects. I want to hear your thoughts on it. How do you see the zero carbon... they've recognized that publicly that hey, we need to actually figure out how to do zero carbon, not to do the carbon neutrality thing. How do you see this playing out, especially in the rest of the industry?

Dean Nelson, CEO, Virtual Power Systems:
So, I'm actually pretty bullish about this. The reason I am... I'll give you a few reasons for it. So first up, at IMasons, we are uniting the builders of the digital age, and we have a focus on sustainability. We created this sustainability vision based on these companies. Every click improves the future. Sounds like a simple statement, but underneath that, every click, that means everything that goes across the internet, improves the future. So how do you define improves the future? You take the goals that these companies have come out with.

Dean Nelson, CEO, Virtual Power Systems:
Like 2030 is about getting neutrality, but 2050 this is where Microsoft really upped the game, repaying all carbon emitted since 1974. That's a goal. That's incredible. So, first off, what's different today... Because remember, back in 2008, we had, at Sun Microsystems, a very big focus on sustainability. More than a decade ago. The appetite wasn't there, there was no structures in place, there was no ESG investing. This was a new, a new approach on things. So you're right, it should have happened a decade ago, but the companies, the industry, the world wasn't ready on how to deal with it.

Dean Nelson, CEO, Virtual Power Systems:
Now we have a crisis on our hands and the only way this is going to work is not just about hitting neutrality, we will not solve the problem. We have to reverse it, which means... that's why goals like what Microsoft has done is very critical. Pay everything back. The other thing that they did, as did Amazon and a number of other companies is created these sustainability funds. So Microsoft's got a billion dollar sustainability fund. They want companies to pitch ideas because they don't have all the answers on how to actually meet this.

Dean Nelson, CEO, Virtual Power Systems:
So Noel Walsh, Kristin Bollati, Mark Monroe, all the people that are really leading this inside of Microsoft, they're in it to win it. It's really impressive to watch. So that's one company. Amazon's doing the same, Google, Microsoft, as well as Apple, Facebook, all the big players are in it. If you just think of those big five, they do represent a very large portion of the industry. Right now, half of the actual power draw is hyperscalers, and the majority of that are the big five I just mentioned when you think of the industry. So, they are real movers in it.

Dean Nelson, CEO, Virtual Power Systems:
So there's one other element, too. First off, they have this at the corporate level C suite, buy in to do it. Secondly, ESG investment is at an all-time high. BlackRock will only do ESG investments now. That was a massive shift. They're only sinking money into ESG-based companies. [crosstalk 00:50:59].

Yevgeniy Sverdlik, EIC, DCK:
Right. That was one of the things that... I don't know, I don't want to say inflection point, because it's such an overused term. But that letter, the famous letter from BlackRock CEO to-

Dean Nelson, CEO, Virtual Power Systems:
Mm-hmm (affirmative). Exactly.

Yevgeniy Sverdlik, EIC, DCK:
... announce that two years ago, that was... Definitely, it was a big turning point. [crosstalk 00:51:18].

Dean Nelson, CEO, Virtual Power Systems:
Right. And then that started the cascading effect through all these other ones that are going at it. Think about Tesla and its impact on the auto industry, and now all of the major manufacturers have a plan to get to all-electric vehicles by 2030. All of them. Think about five years ago. Not even a glimmer that that was going to be that way. So here, you had somebody disrupt, and that happened. So what I'm saying is that I'm bullish, because first off, it's at the executive level. Secondly, they made public commitments about what they're going to do, that's not just about me too, right? Or I'm going to follow on-

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
... with somebody else. It literally is, I'm going to go make game changing things, like what Microsoft did, and what Google's doing with our-by-our matching for all of these things. Then, the next one is, they're putting money out. So that is going to drive a whole bunch of innovation from startup companies, et cetera, who want to participate, because they can get part of that billion dollar bounty to go after it. Then there's one other element. I think it was Cisco, HPE, and Microsoft, if I remember correctly. They've opened up all of their patents. If you're going after sustainability, you can use their patents. That's massive, as well, because suddenly, the world has the ability to leverage something like that without fear of being sued. That will drive innovation and drive things forward.

Dean Nelson, CEO, Virtual Power Systems:
I also think that what... the ESG goals that are coming back from the United Nations, that's aligning a lot of companies. Or sorry, SDGs, this sustainability development goals. That's kind of anchoring a lot of people in what has to happen. But in our industry, we have the biggest companies in the world that are all focused on it.

Yevgeniy Sverdlik, EIC, DCK:
Okay. So you're quite optimistic. You're saying basically all the rights, at least in the private sector, all the right moves are being made, and all the right people are paying attention, which gives you-

Dean Nelson, CEO, Virtual Power Systems:
And they're going to be publicly held accountable to it.

Yevgeniy Sverdlik, EIC, DCK:
Right.

Dean Nelson, CEO, Virtual Power Systems:
Because they've made public statements.

Yevgeniy Sverdlik, EIC, DCK:
Yeah.

Dean Nelson, CEO, Virtual Power Systems:
That's another big deal.

Yevgeniy Sverdlik, EIC, DCK:
Now, to go back to the data center industry, another... obviously, another big problem in this industry is the aging and shrinking workforce. It's been well reported that the pool of qualified people is shrinking, because more people are retiring than joining and getting trained. Also, the people who are qualified are getting huge... they're getting huge salaries, and they're expensive, because of their seniority and there's high demand, so that makes it even harder for companies to hire. You guys at IMasons have looked at this issue for a while now. What do you think will be the most effective solutions to this problem?

Dean Nelson, CEO, Virtual Power Systems:
Well, we got to get out of our own way. Because right now, I think that the way people are trying to solve it is by poaching from other companies. It isn't going to work. We don't have enough supply in the industry already, and so if we just keep posting from each other, we're not going to backfill. Because Uptime Institute, I think put out that there's another 300,000 jobs that are needed, and then we've got 40% of the workforce, it's graying out. So we have to source from other pools. So what we're focused on at IMasons is to help educate the broader community about opportunities, and then offering the scholarship opportunities for bringing other people in.

Dean Nelson, CEO, Virtual Power Systems:
The pandemic was one of those things that people... a lot of people lost their jobs, yet, we had more demand than ever in digital infrastructure. So, we kept introducing people, "Hey, look, go train yourself, we'll pay for it." We need talent in here. We need to be thinking about this differently, we need more resources. So I think companies are doing a lot of that to say, they've got to expand the pool, they've got to go back and get more people coming in. So that's one element.

Dean Nelson, CEO, Virtual Power Systems:
The other is just education within the schooling systems. So we've got a program right now with HBCUs. So historically Black colleges universities, and we did a capstone project. And in that capstone project, we basically charged them with a learning exercise, you need to start from zero, learn about data centers, and design a data center infrastructure deployment based on an application with a growth of x. We just gave them the parameters, and they had to go figure it out.

Yevgeniy Sverdlik, EIC, DCK:
That's pretty cool. What kind of-

Dean Nelson, CEO, Virtual Power Systems:
This was-

Yevgeniy Sverdlik, EIC, DCK:
... people was this problem presented to?

Dean Nelson, CEO, Virtual Power Systems:
So it was electrical engineers, mechanical engineers, computer science architects, and... so civil. A mixture of those at this first college is called Hampton University. It was so fun to watch, because I was on the first advisory stuff, and then we pulled in more advisors that were part of the project throughout the year, it was a year-long capstone project. And then they presented, and we pulled in all the big players from the big hyperscalers and other companies. So we had CEOs and others from the colos, and they... All of the students in that program got hired.

Yevgeniy Sverdlik, EIC, DCK:
Wow.

Dean Nelson, CEO, Virtual Power Systems:
All of them.

Yevgeniy Sverdlik, EIC, DCK:
How many [crosstalk 00:56:31].

Dean Nelson, CEO, Virtual Power Systems:
There were 20 students. We had two cohorts. They went and presented, and all of them got hired back into the industry. We've given all of them scholarships. So we came in, and we said, "[inaudible 00:56:45] of the project. If you want to do this capstone project, we will give you a scholarship." They all took us up on it, they all delivered on it, and in the end of it, they got jobs. That's the kind of traction we're looking for. So, we took this, and now there's 13 colleges and universities across the HBCUs. So we're expanding this out to four of these this year, and we want to do it for all of them the following year. And we want to give scholarships to everyone who participates. Because it just suddenly opens the eyes for students. And boy, it was just... Think about it this way. There's a diverse pool of talent that all of us have been looking for, and it's been right in front of us through these colleges. It was more than 50% female, and there was one Caucasian male on the entire group.

Yevgeniy Sverdlik, EIC, DCK:
Hmm.

Dean Nelson, CEO, Virtual Power Systems:
That, to me, is like the diversity... It just really nailed so many things we're going after from an education standpoint, from a diversity and inclusion standpoint, from a talent shortage standpoint, from a... even the digital divide. One of the students, when they were presenting, said, "I had no idea how important digital infrastructure was until I did this project. I realized broadband in my community is... not having it is limiting all the people that are there." That was a realization that a student had based on the project. I'm like, "That's going to go so far.

Yevgeniy Sverdlik, EIC, DCK:
Yeah. So no-

Dean Nelson, CEO, Virtual Power Systems:
That's kind of the stuff that we're working on.

Yevgeniy Sverdlik, EIC, DCK:
... no magic solution here, it's... the basics is spreading awareness and education.

Dean Nelson, CEO, Virtual Power Systems:
Yeah, yeah. You make it sound not sexy. [inaudible 00:58:19].

Yevgeniy Sverdlik, EIC, DCK:
I figured Dean is a smart guy, he's been thinking about this for a while. If he's going to tell us, he's figured it out.

Dean Nelson, CEO, Virtual Power Systems:
It's just good old hard work and connections, and getting people aware. Yeah, yeah. Absolutely.

Yevgeniy Sverdlik, EIC, DCK:
Okay. Dean, thank you so much. Thanks for your time.

Dean Nelson, CEO, Virtual Power Systems:
Yeah. Of course. Thanks for having me on. I really appreciate it. It's great connecting with you again.

Yevgeniy Sverdlik, EIC, DCK:
Likewise.