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May 4, 2016updated 21 Oct 2016 4:59pm

“People are tired of long term data centre contracts” – IO talks supplier addictions, hostage situations and where its $500m is going

C-level Q+A: Data centre operator IO secured $500m in debt and growth capital this year - we ask the UK MD where is the money going

By Sam

In the commercial data centre space the quest for differentiation continues. As anyone who has ever visited one knows, data centres are all different but all the same.

IO, which was IO Data Centres, and which split from its modular manufacturer and software arm (now known as Baselayer) is a colocation company. It builds data centres and rents the space based on tenure, power, space and cooling.
But, says its UK MD Nigel Stevens, it is different from other players in the market.

How so? CEO George Slessman, (who founded IO with his brother Bill who now runs Baselayer and Tony Wanger, IO president back in 2007) spotted the high density trend in technology and saw that to do it in a very controlled environment the traditional container sized modules weren’t big enough and lacked control so it needed a larger module which was higher density, higher security, could be replicated and manufactured at scale, says Mr Stevens.

Then around 18 months ago the company split into Baselayer which manufactures modules and its associated software IO which is a colocation data centre operator.

Stevens says it is easier to get funding for different firms and it helps in the market as IO is more focused on being a data centre operator. In the UK IO operates a 10,000 sq mt facility out of Slough.

Q+A
CBR: Where is IO positioned in the UK market? Is it retail?, Wholesale? A hybrid?
Nigel Stevens:
In the data centre market everyone wants to pigeon-hole you and I think that’s appropriate. We will do anything from a rack upwards. We’ll take one of our modules and sub divide it into racks or we’ll sell in whole modules. Where we’re different in the market is people say are you a wholesale operator? do you do big halls and hand over the keys at the end of it? I think where we are modular makes the whole questions quite different – we’re in the business of selling people less. That is smaller increments over a longer period."

"If you have a big requirements – something greater than a megawatt that’s smaller than a module for use and you may not need a megawatt on day one, you may need 100 or 200 kilowatts. Being able to buy in a step wise fashion makes it quite different and makes the commercial propostion quite different. We can be just as effective cost wise on a cost per kilowatt per square foot as anyone else in the market.

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CBR: Q: Are you seeing at every level a demand for more flexibility in how people engage with the data centre space ?
Nigel Stevens: "We see people very tired of the long commitments, very tired of inflexibility – and I can see a future, we’re not doing it yet, but I see a future where people will want to go down as well as up. I can see that happening. We don’t charge for cross connects, we’re trying not to get onto that drug. We have customers saying ‘we’re sick of being held hostage in a data centre.’
"Because no-one likes to move data centres and equally people are hostages to pricing and other charges in existing environments."

CBR: Is there true flexibility in the market. It used to be the customer commits to space and time and if they don’t fil lit up that’s their problem.
NS: Obviously we like long contracts but it’s a bigger piece of business – but actually we want people to take one module and then when they grow we will expand with them. It’s a model we’ve followed to date. We have a future that is quite different. Think software defined data centre. That’s how a data centre will operate in the future and IO OS (the firm’s operating system for data centre) allows us greater control of the environment than from any other piece of software and you can see that controlling the hardware itself will change.

CBR: What’s your view of the competitive landscape (In the UK IO is located in Slough within yards of UK rival Virtus and international colo giant Equinix.)
NS: Fairly comfortable. Equinix has a great product and network infrastructure and a considerably higher price. Virtus is very much a raised floor white space offering. We can differentiate quite nicely.

 

IO Data Centre, Slough, UK

IO Data Centre, Slough, UK

Q: What about the demand – are you looking at big cloud, public, Rackspace, AWS. Are you competing with those guys?
NS:
We’re all competing with cloud. Its incredibly naïve to say we’re not – but we also know that public cloud is not suitable for everyone. And there’s a bunch of people wanting traditional colocation space. Three years ago the market was awful. There really wasn’t anyone transacting after the crash. Now it is coming up nicely, thanks to pent up demand. It is really started to flush through and take up capacity. It is all expanding. The activity I’ve seen in colocation space is much better.

CBR: What’s the go to market for IO?
NS: "We’re farming our own client base. Doing a bunch of events at the data centre – so we put on great events with topics at the location to show what we have which is quite different.

CBR: Who do you target in the end user organisation and has it changed?
NS: We’re talking much more to IT than to real estate. So in a previous life it would have been a conversation with real estate or the CFO who wanted to get out of real estate and now it is very much we have an IT requirement. They are saying things like ‘we have a scaling requirement, we’re doing this much with cloud, we want to this much in a colo, we want diversity.’ Those conversations are much more IT focused."

CBR: Some colocation players have invested heavily in in vertical market domain expertise, in for example, financial services, is that a way IO will go?
NS: We’re letting that flourish. We have a a super secure facility and offering and Financial Services likes security. Another good experience is with doc management. For auditing customers like the security and we’re gaining expertise. So rather than say we’re going to go after gambling or gaming or go after media , we’ll let that develop."

CBR: In February IO announced the securing of a $500m investment. Where will it go?
NS:
"We’ll spend in the way we always have. We’ll look to go to new places with customers. This could mean new geographies, Tier II cities. This is not being ruled out, [there could be] another data centre in the UK and another data centre in Europe. But I’ll do it with a customer. $500m is a significant number. You’ll see us doing lot in the far east which is quite a good place for growth.

CBR: How are you measuring success for your market?
NS:
Judge me for the next 12 months how our differentiator is in a very competitive market. Success is absolute sales rate for us in a busy market – that has be the metric.

 

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