A 10-Hour Data Center Outage Is Testing the Ambitions of KKR, GIP

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Will Brilliant, GIP’s global head of digital infrastructure and a CyrusOne board member, echoed Szlezak’s remarks in a separate statement.

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“We fully support CyrusOne, as we have done throughout our ownership, to invest significant resources to maintain a leading position as a provider of critical data center development and operations services for its customers,” Brilliant said.

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Key Focus

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For Wall Street, the stakes are high.

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Data centers are a key focus for KKR’s infrastructure business, one of the fastest-growing and best-performing strategies for the firm, which is led by Co-Chief Executive Officers Joe Bae and Scott Nuttall. GIP, which announced in October that it was making a bet on developer Aligned Data Centers, is central to BlackRock CEO Larry Fink’s ambitions to expand the $13.5 trillion money manager beyond its stock-and-bond roots into more lucrative realms. 

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In backing CyrusOne, KKR and GIP took on a dot-com-era company with a complex history. 

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Cincinnati Bell acquired the firm from Abry Partners, before spinning it off. CyrusOne then made strategic takeovers of data centers from other companies through deals with firms including Cervalis, Sentinel Data Centers and Zenium. The Aurora data center, acquired through a sale-leaseback transaction with CME, gave CyrusOne a foothold in financial services. 

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Knitting together assets from various deals was a complicated undertaking. As a public company, CyrusOne was wrestling with activist investor Jana Partners and leadership turnover. 

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After longtime CEO Gary Wojtaszek departed in 2020, the company was run by a variety of successors with short tenures. They include Tesh Durvasula, an interim CEO for less than a year; Bruce Duncan, who had no prior data center experience; and David Ferdman, a co-founder who was asked to return to lead the company through the latest ownership transition.    

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While CyrusOne received interest at various points from about a dozen parties, some prospective investors were discouraged by the management churn. Blackstone evaluated the company but never entered serious discussions, according to people with knowledge of the matter, who asked not to be identified because the talks were confidential. Blackstone declined to comment.  

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After KKR and GIP swooped in, they took board seats and installed Eric Schwartz as CEO. Schwartz was comfortable maintaining a lower profile than other data center CEOs, industry associates said. And he stuck with decisions that had been made before him, including one to outsource facilities operations at roughly 50 North American data centers to Jones Lang LaSalle Inc. 

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That move, set in motion by Wojtaszek, divided top executives, according to a person familiar with the matter. Some argued it would help the firm offer a standardized playbook across properties, while others worried it would erode the quality of service, people said. Rivals such as QTS don’t outsource facility operations, other people said. 

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Wojtaszek didn’t reply to messages seeking comment.

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Some would-be tenants opted to take their business elsewhere in part because they weren’t comfortable with CyrusOne having fewer in-house boots on the ground in case of an emergency. 

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CyrusOne maintains oversight of operations at its data centers while tapping third-party personnel for support, another person said. Other data center companies have such arrangements, too.

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Industry executives said the shift showed how CyrusOne was moving further away from its roots as a data center operator to become more of an asset-gathering operation to benefit financial backers.   

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KKR and GIP’s arrival accelerated changes at CyrusOne. The company focused on building from the ground up — and at scale. It benefited from a push by big technology firms to tap data center landlords for infrastructure and power to train AI models.