QTS Offloading 200 Customers to Partner GDT as It Shifts Strategy

QTS Realty Trust is planning to offload about 200 of its customers to a partner as it moves away from providing support for highly customized customer architectures that require a lot of hands-on management and toward providing services through its new highly automated platform.

The platform is at the core of the restructuring QTS is undergoing, first announced in February. The company’s management expects the restructuring, which also includes a stronger focus on hyper-scale customers, to result in significant operational cost savings.

The February announcement caught Wall Street by surprise and was seen by some as QTS belatedly conceding that there’s little reason to continue competing with the likes of Amazon Web Services and Microsoft Azure for cloud market share. The company’s stock tumbled immediately after the announcement, falling more than 20 percent to about $34 per share. Today, more than two months later, it has yet to regain much of the lost ground.

In an interview with Data Center Knowledge this week, QTS executives argued that the restructuring announcement has been misunderstood, and that while the company has had multi-tenant cloud services for enterprises, it’s never offered an AWS-like experience, where a client can spin up virtual machines almost instantaneously, using a web browser and a credit card.

QTS is planning to stop providing a number of services in its legacy portfolio, including several cloud services, but the move is about reducing the amount of highly customized customer environments that are costly to manage, CTO John Greaves said in the interview.

Services being replaced by the new platform include Enterprise Cloud, GovCloud, DRaaS, and Tailored Hosting, among others. The company refers to them collectively as “managed hosting,” Greaves said. Many of these were tailored to each customer using a complex mix of storage, compute, and network vendors.

The services will continue to be available to QTS customers, but they will be provided by its partner GDT, a managed IT solutions provider. The 200 or so customers using these services will be transitioned to GDT, and QTS will collect a channel-partner fee of 15 to 20 percent of revenue GDT generates from them.

GDT will support the infrastructure used to serve these clients as a QTS colocation customer.

The new platform, called QTS Service Delivery Platform, is designed to enable hybrid-cloud architectures for customers, which combine their own infrastructure hosted in QTS colocation space with a variety of cloud services (including AWS) and software-defined connectivity, supported by Megaport and PacketFabric.

The platform is up and running, Chris Ortbals, executive VP of product and marketing at QTS, said. “This isn’t vaporware,” he said. “We have customers running on these platforms.”

QTS reported first-quarter earnings Wednesday. The company saw net loss of $0.3 million for the quarter, down from net income of $5.6 million a year ago. Core revenue was $100.4 million, up 16 percent year over year.