Viewpoint. Dmitry Fokin explains the factors that influenced business growth in 2016 in his interview with Comnews.
Article written by Elisabeth Titarenko, ComNews, 27.02.2017
Since the moment of launch in 2012 IXcellerate Moscow One Data Center passed the break-even point in 2016. In this interview with COMNEWS Dmitry Fokin, Managing director of IXcellerate, explains the factors that influenced business growth in 2016, the competitive advantages of IXcellerate and some of the further business development plans for 2017.
Question: Please comment on last year’s operational results of IXcellerate: what extent did the company’s revenue and customer base increase?
IXcellerate showed healthy business growth in 2016. The revenue of IXcellerate at the end of December 2016 had increased twice if compared with the revenue of December 2015. Our customer base more than doubled. In doing so, we have been significantly outpacing market growth. IXcellerate is a start-up project that launched active market operations in 2014, during the first year the business developed slowly. However, over recent years IXcellerate has become a prominent player in the market and as our brand name gained awareness, the demand for our services has grown accordingly.
Last year we achieved an important result in passing the break-even point. It is an important milestone for any start-up company on its path of business development. Additionally, in 2016 we were able to build our final crew at IXcellerate Moscow One Data Center: the team consists of 40 employees. We prefer to have a smaller team of highly-motivated and highly-skilled employees.
Question: How much rack space is currently available at the premises of IXcellerate, how many racks are deployed in the Data Center?
IXcellerate has about 1.500 sq.m. of customer rack space, of which 1.300 sq.m. has been commercially allocated and almost filled up. By the end of 2016 our Data Center had 635 filled-up racks and about 100 racks remained available. That is why we are planning to launch additional rack space in the 2nd half of 2017. Our standard scenario for space development at IXcellerate Moscow One Data Center includes overall customer rack space in the range of 6.000 sq.m. but it is possible to expand this rack space up to 12.000 sq.m. if we decide to expand into the second building at our current campus.
Question: IXcellerate Moscow One is a carrier-neutral Data Center. To what extent is this a successful business model in Russia?
The carrier-neutral character of a data center, in terms of both telecom and cloud services, is not a new business strategy abroad and became a verified model that has established itself very well in the Russian market. We have been focusing on the best partnerships and excellent service for our customers, which also includes carriers and cloud providers. We are not planning to compete with them. Pure play colo allows us to keep direct focus on the quality of service and the technical infrastructure level with the highest reliability. We are selling only colocation services to our partners such as telecom operators, cloud service providers and system integrators. In turn, our partners are utilizing our resources to offer value added services to their customers. Consequently, the end customer receives access to the widest possible portfolio of services and providers in one Data Center while the principle of healthy competition enables customers to receive truly transparent prices and attractive “terms & conditions”.
Question: To what extent has the model of carrier-neutral data center been unfolded in Russia?
There are a few players, who are utilizing the same model in Russia: DataSpace, DataPro, to name two. As competitors we respect them very much. However, most of the data centers offer all-in-one solutions – providing both cloud and connectivity, as their parent companies are either system integrators or telecom operators.
Question: How many customers are currently using the services of IXcellerate and who are these customers ?
We have approximately 70 customers. We are partnering with more than 35 telecom operators, who organized their points of presence and telecom nodes in our Data Center.
Our customer base includes multinational corporations, e-commerce platforms, retail chains, not to forget about IT service providers, cloud service companies and system integrators. Our business model is based on the principle that we are growing while our customers are also growing. For example, in 2016 IXcellerate signed a strategically important 10-year contract with the international service provider Orange Business Services. The approved plan is to install 300+ racks on a working space of more than 600 sq.m. within our Data Center. One of the Russian integrators brought us a major international retail chain while we are providing space and footprint services to a total of 5 nationwide retailers.
We are offering free-of-charge peering services to carriers and content providers. As we grow the Data Center and as the number of content-oriented clients increases, our peering platform will be ever more useful for those clients who decide to install their infrastructure in our Data Center.
Question: What is the ratio between Russian and foreign customers at IXcellerate?
If we do not take into account our telecommunication partners, 2/3 of our customers are international enterprises and 1/3 is of Russian origin. If to count carriers then the ratio between Russian and foreign customers is approximately 50/50. Our foreign customers are involved in banking, gaming, retail, on-services, electronic commerce and content provision. Business areas require fast data processing and content provision.
Question: What countries do your foreign customers originate?
At IXcellerate we are interacting with our customers in 6 languages: apart from Russian we also communicate in Chinese, Japanese, English, German and French. Additionally, we provide permanent customer support in Russian, English and Chinese. This is a reflection of the geographic range of our foreign customer base: USA, Western Europe and customers from Asia, in particular China and Japan.
Question: Are you expecting a growing demand from Asian companies for the services of IXcellerate in 2017?
Since international co-operation between Russia and China is intensifying, there will be many interesting projects coming in. Chinese commercial players are organizing sizeable tenders to support their Russian operations. Additionally, we are communicating actively with a number of Chinese banks and on-line service providers.
I wish to emphasize that our shareholders are American and Japanese companies as well as private investors from Western Europe. So, in other words, since our birth we have had an open mindset to work all over the world and we are ready to expand our business into different markets.
Question: Which events of 2016 impacted the growth of your business?
In October 2016 IXcellerate Data Center was once again awarded as the winner of the Russian DC Awards 2016 for Innovations in lowering TCO = Total Cost of Ownership. Additionally, by the end of 2016 IXcellerate became a member of the International Alliance of Data Centers, headquartered in Asia. It is called D-Infinitum and is run under PCCW Solutions leadership, which is a part of the PCCW Limited holding with headquarters in Hong Kong. Following recent market research data and the respective DC ratings and reviews we have the reputation of being a perceptible and respected market player in our national business. We have gradually shifted from the “newcomer” status to our present position of being one of the leading market players: this is exactly the original goal of why IXcellerate was created.
Question: Which of the latest changes in legislation, endorsed last year, have impacted the business of IXcellerate?
I do not think that the anti-terrorist «Law of Yarovaya» will have an impact on our business. It is obvious that other organizations will be in charge of these state-sensitive security issues. There was a certain business impact resulting from the law on the storage of personal data of Russian citizens by using servers located in the territory of Russia. Over the last 2 years we have delivered about 15 projects that are related to personal data. The fact that LinkedIn was blocked shook up the market consequently we have noticed that a number of serious companies have started making plans to shift their infrastructure to Russia-based data centers. Although this is a time-consuming exercise, in the end companies gain a lot by saving resources and telecommunication services and by becoming a full-fledged corporate player on the Russian Internet-market, which, is the largest in Europe.
Question: In your forecasts for 2017, do you see a growing demand for the localization of personal data in Russia?
Yes, we see the demand growing intensively. We already received some very diverse demands from customers, both from large and medium companies coming from different parts of the world.
Question: Lately there has been a trend on the data center market indicating that supply exceeds demand. Is this also the case for IXcellerate?
It may be that today’s data center market is facing an excess supply in certain segments, where demand is low. We at IXcellerate would rather face the market equilibrium: where demand is in balance with supply. There is another trend, which I see and which has become an inevitable trend at more and more mature markets: business growth and development are more secured for large-sized data centers, with good connectivity, who are being carrier neutral and having infrastructure of a quality and reliability level in the range of Tier 3, Level 3 or in other words – Class 3. A lot of infrastructure projects, which do not correspond to these parameters, are bound either to change in the future or to see their business growth limited.
Question: Will you please explain who is making the certification of IXcellerate Moscow One?
We are audited and certified by IBM: they have a proper system and methodology to audit the infrastructure and align to certain level of reliability.
Question: Russia only recently started introducing standardization and certification of data centers. What is your position in this respect?
We are a member of the Russian Association of data centers. I have a positive attitude to the work they are doing. Standardization in Russia is extremely necessary because the market is not transparent: there have been cases of data abuse due to the lack of strict standards when companies paid only lip service to the levels they are not able to deliver to their customers. So, in theory, standards matter a great deal.
However, practice shows that a qualitative and useful standard is extremely difficult to set up and it is even more difficult to sustain the standard up to its actual level. Standards should be detailed. Additionally, the industry is changing very fast and the question is whether Russian standards will keep up with these global industry changes. Furthermore, it is embarrassing to notice that a lot of things were already implemented as best practice and that it makes no sense to re-invent the wheel. On the other hand, Russia has its own methods of standardization and it is impossible to ignore them. That is why it is not so easy to find the golden middle way and establish an effective, useful and workable system. I can only wish good luck to my colleagues in the Association of Data Centers as they are facing an important and non-trivial challenge.
Question: What are IXcellerate’s plans for 2017?
Some of our plans I have already shared in this interview; some of the other planned projects are for the time being confidential, and will be announced throughout the year.