Three years ago, to say you were in the data centre business was to admit that you had the business equivalent of terminal cancer: it was not a question of whether you would survive but for how long. Today, the prognosis for the industry is much improved and there are even plenty of survivors that have lived to tell the tale. One such is Maurice Mortell (pictured), managing director of Data Electronics.
With his boyish looks, Mortell seems the epitome of the slick young CEO who came to symbolise the technology industry during the dotcom years. But where others fell by the wayside, his company – the last remaining Irish owned and operated player in the sector – has survived intact from this troubled period.
Part of the reason lies in the origins of the company. Established 25 years ago, it was around long before the concepts of outsourcing and managed services became part of the IT lexicon, building a roster of customer that includes Aer Rianta, Bloomberg, Equant, Global Crossing, HEAnet and Mitsubishi.
It has also built up something of a unique position as a major communications hub. Not only is it an interconnect point for the government-purchased Global Crossing fibre-optic cable (ie, a location where the local carriers can hook into Global Crossing’s transatlantic capacity) but it also runs the internet neutral exchange for Irish internet service providers (ISPs) allowing them exchange and re-route traffic.
Moreover, the Ireland-focused company never expanded at the same dizzy pace as others in the industry that built up a pan-European network of data centres almost overnight but were left with acres of spare capacity when the technology market went into freefall. Mortell argues that if hosting space is all you offer, you have no way of differentiating yourself in the marketplace and it is therefore much harder to avoid being dragged into a price war with other large-scale data centre outfits.
For this reason, while the data centre market may be a lot more stable than it was, Mortell believes that further consolidation could well be on the cards, particularly among the larger pan-European businesses. “I think there are some entities out there that are still struggling, still burning cash. I don’t know how their Irish models are working for them because… all the players that came into the market ended up turning their eyes to the Irish market and there was never going to be enough business to sustain them all from a return on investment perspective.”
Today, the Irish data centre market is a mix of specialised firms such as Telecity, Interxion and Data Electronics and broader technology providers such as Eircom, Esat BT, HP, IBM that have expanded into managed services to complement their other operations.
They have all built their businesses on the assumption that, sooner or later, the Irish market will see the value of outsourcing some or all IT and business processes. There are clear signs that this may at last be happening. Bank of Ireland’s decision last November to hand over the management of its IT infrastructure to HP in a seven-year €600m deal is seen as giving a massive vote of confidence to the whole concept.
Data Electronics is not quite in same league at HP or the other large providers: its target customer is the medium sized enterprise – those having between 100 and 250 users. As well as having the industry-standard large data centre – a 22,000 square foot facility at Clondalkin in Dublin – the company also has several smaller sites both in the capital and nationwide. These allow it to provide a flexible and cost-effective service to businesses at a local level, Mortell explains.
“Our strategy involves offering an integrated outsource solution. The data centre for us is just a tool for delivering services.” He added that the growth in outsourcing is mainly in the managed services area. Increasingly, businesses are looking at outsourcing activities such as database and systems administration, security and storage.
Although some pockets of resistance remains, outsourcing has at last reached critical mass, Mortell believes. “There is still that emotional hurdle around outsourcing and letting go of some mission-critical infrastructure and the fear of what that means. But the more people get comfortable with the idea, and comfortable with the providers the more the business will grow.
“I’ve been pushing the message that IT is a service rather than an asset,” he adds. “You don’t need to own all this IT – all your hardware, all your infrastructure, all your people. It’s crazy.”
By Brian Skelly