Dublin’s data explosion

24 Nov 2005

Over a three-year period, some €500m was spent on data centres that were to be the engine rooms that powered the future wave of e-commerce. These facilities, not so long ago dismissed as white elephants, are now once again reconditioned and re-purposed for the current communications revolution. This time round, they are either owned by the big brands or, as increasingly is the case, owned by Irish management teams.

Encouraged by IDA Ireland, companies such as Worldport invested US$70m in building its 100,000sq ft data centre in Blanchardstown Corporate Park in 1999 to cash in on an expected boom in managed services, IT outsourcing, co-location and hosting of websites for some of the world’s biggest brands. The trend continued with players such as 360 Networks investing US$70m in a similar facility in Clonshaugh, Colt spending €25m building a facility on the Long Mile Road, City Reach spending US$30m on its building in Clonshaugh and Metromedia spending US$75m in Citywest Business Campus. Many of these players were also in the process of building similar facilities in major European cities such as London, Frankfurt and Amsterdam. However, by 2002 a telecoms and dotcom downturn that began in the US in late 2000 had hit the shores of Europe and more than half of these data centres went bust. Typically, many of the data centres had failed to reach 15pc occupancy by clients and were burning up to US$5m to US$10m a month to stay in business.

Zoom forward to winter 2005 and at least 12 of these data centres are back in business. Six are owned or occupied by international firms — City Reach’s building has been acquired by Vodafone and Colt’s Long Mile Road data centre is occupied by Google — and a further six data centres are now in the hands of Irish management teams. Eoin Costello, managing director of data hosting firm Novara.ie describes the situation: “In 1999 there was a great foray by IDA Ireland to attract in data centres and this was very successful. However, these companies, backed by international money, had unrealistic business plans on the back of the Irish Government’s investment, Global Crossing. Many data centres had opened in 2000/2001 and closed about a year later. Now Irish companies have moved in, bought the leftovers and lately have struck some very good deals. For example, Data Electronics bought Inflow’s data centre in Clondalkin and Servecentric bought Worldport’s Blanchardstown operation.”

One of the Irish-led teams making defunct data centres viable is led by Noel Meaney, formerly of data communications firm Metromedia, which had spent €650m deploying data centres and fibre infrastructure across various European cities, including Dublin. Before its parent firm fell into financial difficulties, Metromedia was close to completing a US$110m investment in Ireland, consisting of a US$75m data centre and a US$45m fibre ring that stretched for 100km around Dublin City.

Sensing an opportunity, Meaney and a number of Irish executives marshalled their resources and led a management buyout of Metromedia’s assets across Europe. Meaney and his colleagues renamed the company Global Voice and set about putting the company’s house in order by raising finance from private equity investors. “We cleaned the company out, got rid of debts and got into a position where we owned all of the infrastructure, had no borrowings and a clean credit rating,” he recalls. Global Voice listed on the Singapore stock exchange in October 2004 through a reverse takeover of Horizon Education and Technologies. Earlier this year, Global Voice achieved revenues of €20.4m and surpassed forecast revenues by more than 15pc.

The company now has fibre networks across 14 European cities, which provide access to key locations within a city including business and industrial parks, educational centres, financial centres, government buildings and internet exchanges. In a separate venture soon to be entitled International Data Centres, Meaney owns the former Metromedia data centre in Citywest Business Campus, over half of which is leased by Hewlett-Packard for its outsourcing business and is at full capacity (customers include Bank of Ireland and Google).

He explains: “One of the key focuses of our company is on the provision of business continuity services and our core company structure is to have data centre space in all of the key cities we operate in.”

Another example of Irish management teams taking over redundant data centre operations and making them viable is that of Servecentric, a company led by former Xerox Ireland boss Aidan Donnelly, investor Aidan Harrison who had acquired the assets of the former Worldport building in Blanchardstown and chief technology officer Bernard Geoghegan.

The Worldport building, regarded by many as the most opulent of the various data centres with state-of-the-art security, private boardrooms for individual customers and a private gym for its staff, and certainly the largest with some 100,000 sq ft of space, lay unused for almost a year before Servecentric came into being. As Geoghegan recalls: “After we had bought this place it was not unlike the Marie Celeste. We are now in a situation where for the first time in three years the next 12 months could see us run out of space. The market for hosting, application service provision and managed services has come full circle to the point that in the next 24 months we will have to consider building a new data centre.”

Servecentric’s operation handles all the managed services requirements of IBM as well as providing services to companies such as Novara.ie, Strata3, Rock Solid, Red Sky, Ask Jeeves and Q Logic.

Many people view the data centre phenomenon as something of a recent trend, but few realise the data centre business in Ireland is decades old. Established 30 years ago, Data Electronics is Ireland’s oldest data centre operator. The company has invested €13m in its facilities over the past five years and has grown its staff base by 40pc. In recent weeks the company revealed it had invested €2.5m into expanding its Kilcarbery-based data centre — the data centre formerly owned by Inflow Systems — by an additional 13,000sq ft, bringing total capacity at the data centre to 21,000sq ft.

The company’s CEO Maurice Mortell says its network operations centre can monitor and support businesses’ IT needs on a 24/7 basis for a fraction of the cost of running it themselves in-house.

Mortell explains the company now operates five data centres in Ireland: two in Dublin City, one in Ballycoolin in west Dublin; the newly expanded Kilcarbery data centre and a centre in Belfast.

“What’s happening is the whole data centre model has matured,” explains Mortell. “What was planned for four or five years ago has come to fruition and demand for data centres has increased. There is a well-educated business market out there that knows what it wants and the value of outsourcing IT to a provider.”

Mortell concludes by saying that in terms of plans to build its own data centres to cater for decentralisation, the Government should look for available capacity in the data centre market before making a costly investment.

“The infrastructure is there to support it. Investing in a new building and paying for the management of it would be costly in terms of taxpayers’ money. It should look at the available infrastructure in the marketplace.”

By John Kennedy