Emerson Network Power (ENP) is one of eight divisions of Emerson, a global manufacturing and technology company which achieved group sales of $24.8 billion in 2008. ENP recorded sales of $6.3 billion in 2008, an increase of 23 per cent over 2007, with a margin of 12.6 per cent. ENP offers a range of products and services for critical power applications particularly in datacenters, including power systems, UPS and power distribution products, precision cooling and cabinets and enclosures.

Kris Holla was formerly EVP at Knurr, a German-based manufacturer of enclosures acquired by Emerson in 2006. He is now EVP and Chief Sales Officer for ENP/Knurr. Frost & Sullivan caught up with him on a recent visit to our Sydney office.

Frost & Sullivan: what has been the impact of the global economic downturn on ENP's business?

Kris Holla: the impact has differed by industry sector. A lot of our client base is in the financial services sector and this has been impacted the most. We have seen a lot of projects for new or upgrading of existing datacenters postponed or cancelled, with an overall negative impact of maybe 10-15per cent on sales in this sector. However we have seen some signs over the past couple of months of some of these projects coming back to life.

Telecoms is another important sector for us, and in developed markets we have seen a similar downturn of maybe 20-30per cent, with many projects also put on hold. However the impact with developing countries such as the BRIC countries (Brazil, Russia, India, China) is nowhere near as marked.

On the bright side, the impact to date on the public sector has been minimal with significant investment still occurring in public sector facilities such as emergency response locations, datacenters for social security organizations, security organisations and so on.

We are also seeing growth in third-party datacenter operators who offer co-location facilities to clients. These are companies like Digital Realty and Equinix. As clients increasingly postpone or defer internal investments, they are increasingly outsourcing their hosting to these kind of companies, so this sector is showing growth.

Frost & Sullivan: can you describe the rationale for Emerson's acquisition of Knurr?

Kris Holla: ENP's overall strategy is to offer a complete solution to our clients and move away from sales of individual components. Cooling in datacenters is shared between room cooling, rack and row cooling and chip cooling. Knurr was important because it added racking / enclosure products to ENP's product line especially in rack and row cooling. Racks have also become an important part of datacenter solutions where most integration is done. We now offer complete coverage across the power spectrum, what we call "Grid to Chip". Clients are increasingly looking for integrated solutions for both new and upgrading of existing datacenters, and we have the broadest range available.

Frost & Sullivan: how is the competitive environment developing?

Kris Holla: increasingly the industry is becoming dominated by two global majors, ourselves and Schneider Electric with brands such as MGE and APC, who Schneider acquired a couple of years ago. Both companies are offering complete solutions to datacenter owners and both have been acquisitive in broadening their range. I see it a little like the commercial aviation industry which is now dominated by a US company, Boeing, and Airbus in Europe.

ENP traditionally is strong in the large datacenter market. For example most of the Fortune 500 companies are our clients. We are increasingly moving to attack the smaller datacenters and computer rooms market. Schneider on the other hand, through their APC acquisition, is starting to focus on the smaller computer room segment with some success, but they have had no real penetration to date in the larger computer rooms and datacenter market.

Frost & Sullivan: how would you define a datacenter as opposed to a computer room?

Kris Holla: that's a good question, and in fact there is no agreed definition. Traditionally some people might have based the definition on size, e.g. a datacenter needed to be at least 100 square meters. But now with higher power servers, containment architecture and higher capacity racking you can fit a datacenter into a much smaller floor space. Perhaps the way I would define it is that a true datacenter would have a raised floor, whereas a more basic computer room would not. It's really a semantic question, but Emerson would view anything over 500kW as a datacenter.

Frost & Sullivan: what are some of the major trends amongst your datacenter customers?

Kris Holla: we see four major trends occurring that impact our business.

The first is the growing importance of efficiency in the datacenter, with the rapidly increasing cost of power driving new thinking both in datacenter location and in design. In terms of location, for example, we are seeing datacenters increasingly located in areas where power is reliable and relatively cheap, as opposed to traditional urban locations. We are even seeing datacenters installed on ships, so they can be moved from one location to another. In terms of datacenter design a major trend is the move from an open architecture, where the entire room is cooled, to a "contained aisle" architecture where hot or cold air is contained. Emerson recommends the cold aisle containment approach whereas some vendors have opted for hot air containment. The impact on power consumption from a cold aisle contained approach can be dramatic: for example an installation Emerson undertook for UBS resulted in a 85-90 per cent reduction in power consumption. We recognise the 'containment' architecture is likely to become mandatory requirement in some jurisdictions, and is already policy in the EU code of conduct for datacenters.

The second trend is to consolidate to larger and more automated datacenters. As an example, within Emerson we are consolidating our four global datacenters into a single state-of-the art facility in St Louis, USA. This is driving a requirement for higher-end products such as cooling and racks, and also new offerings such as monitoring products such as our iCom product which enables a datacenter operator to remotely manage and control aspects of the datacenter operation. Remote management and predictive analysis is the gamechanger. Two tears ago, communications was the most costly component and energy tariffs were reasonably negotiable. Now in 2009, dark fibre communications and cross-connect pipes are relatively cheap but power is spiralling in cost and availability is not guaranteed.

The third trend is the move to integrated rack