Data centres a natural evolution for telecoms

Consumers and businesses alike have been storing increasing amounts of data in the cloud in recent years, a movement that has precipitated the building of a growing number of secure, air-conditioned, server-filled “clouds” across Canada. The centres storing all that data have some very specific requirements, and they’re ones Canada happens to fulfill — from a cool climate to a low probability of political upheaval — making it a popular destination for data. Building data centres is also a natural fit for telecoms, which is why companies like BCE Inc. and Rogers Communications Inc. have been jumping in to buy existing facilities, as well as building and expanding their own. “The data-centre industry itself is growing in the neighbourhood of 15 to 20 per cent annually. It’s been growing like that for the last three to five years, and it’s predicted to grow like that for another three to five years,” AJ Byers, president of Rogers Data Centres, said in a phone interview. The involvement of telecommunications companies in data centres is a recent phenomenon, Byers said. Rogers started getting into the data-centre business a little more than a year ago, acquiring Pivot Data Centres, Granite Networks and Blackiron Data ULC in 2013. It opened its 15th facility in Calgary, which it said would be its flagship data centre, in February 2014. The company is planning to “continue to invest in this space,” Byers added. Jeremy Wubs, vice-president of product management at Bell Business Markets, said getting into data centres was a natural extension of Bell’s business. The company has seven of its own data centres, and in 2012, it partnered with Ontario Teachers’ Pension Plan, Providence Equity Partners and Madison Dearborn Partners LLC to acquire Q9 Networks, which runs another 14 centres. In the past year and a half, Bell has also expanded several of its own facilities, and is looking at more expansions as well as potentially opening new centres, he added. Wubs said that for many customers, “being able to go to a single provider that can actually both kind of host and secure the application along with the network just makes a lot of sense.” It’s also an area the company felt comfortable in. “We build networks nationally, we know how to engineer, we know how to design, we know how to connect locations together,” Wubs said in a phone interview. The reason telecoms have only expanded into the field recently is due to changing consumer demand, Wubs said, noting that historically, companies who did data-centre work were more “pure IT players.” “More and more — and this is what’s changed — more customers expect the network and the sometimes thousands of locations that they have and the data centre to be connected. They want that to perform seamlessly. They want someone to manage it end to end,” he said. Even five years ago, Wubs said, he wouldn’t have thought the sector would be growing as fast as it is now. It’s a growth that’s underscored by the number of facilities opened up in recent months by telecom companies across Canada, from Telus Corp.’s opening of a centre in B.C. in January, and Eastlink’s launch of its first Canadian centre that same month, to Manitoba Telecom Services Inc.’s announcement that it was building a Winnipeg data centre last December. Some of the challenges around entering this sector also give large telecommunications companies an advantage. “It’s a very expensive business to get into,” said Rogers’ Byers. “And I think that may be one of the reasons for the shift to telecom companies as well. With the massive amounts of data centres that need to be built to satisfy the need and the mass demand in the market, you need a fair amount of capital behind you to truly fund the business going forward.” In addition to the need for capital, Wubs said, companies have to have the skills to understand the security necessary. “Everything from retinal scanning to scanning of servers — you need both logical security physical security skills,” he said. Despite the challenges, there are a number of reasons why data centres are proliferating across Canada. A key one is “the sheer explosion of the amount of data that’s being stored and created in the industry today,” Rogers’ Byers said, which “needs someplace to go.” Another is that a lot of existing data centres Canadian businesses use are aging, and businesses are deciding not to rebuild their own centres, instead transferring their data to centres that house multiple tenants. “And then the last, kind of more recent phenomenon in the last 12 months, has been what’s happened with the NSA and the concept of the security of data if it sits outside of the country,” Byers said. “We’re seeing a lot of Canadian companies pulling data that used to reside in the U.S. back into Canada, and that shift of data back into Canada is causing the need for more data centres in Canada as well.” Randy Borron, a senior vice-president and global managing director of the data-centre advisory group at the commercial real estate brokerage Cushman & Wakefield, agreed that there is “no question” that privacy concerns are driving recent demand. Canada’s stability also plays a role, he added. Cushman & Wakefield annually ranks the risk in countries that host data centres, which accounts for factors like political and economic risk, and Canada consistently ranks in the top five, Borron noted. “From a risk perspective, we can say Canada is one of the safest environments in the world. Our power is relatively cheap, we’ve got a lot of green hydroelectric power in Canada. It’s a very good climate for business. The corporate taxes are relatively low,” Borron said in a phone interview. Bells’ Wubs agreed that Canada’s stability is “a very real factor.” “We don’t have a lot political upheaval or risks, and you don’t see very many natural or man-made disasters, so I think there’s a stability around Canada. I think there’s also a recognition that we take security very seriously,” he said. And of course, Canada is, well, both cold and big. “That means our data centres can take advantage of free cooling days, so essentially they’re cooling their data centres for free, just because of the cold climate,” Borron said. Wubs said Canada’s topography is also a benefit. It’s a vast and diverse country, which allows data centres to be placed in different environments and be situated far away from each other while staying in the same country. Facilities are being built across Canada, though the Toronto area is “by far the dominant marketplace,” Borron said, with many providers building multiple centres in the GTA area before expanding to other parts of the country. Vancouver, Calgary and Montreal also active markets, while there is emerging growth in Edmonton, Winnipeg and Halifax. Borron said that “all indications” are that the strong growth in the sector in Canada will continue. He added statistics have shown that the majority of servers are still housed in office space, which “is now clearly realized that having your servers in an office environment isn’t really the right thing to do from a risk perspective, from a redundancy perspective, from a real estate strategy perspective. So they’re moving out into proper data-centre environments.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Data centres a natural evolution for telecoms

News | March 21, 2014

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Data centres a natural evolution for telecoms

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