Data Center Market in Spain 2018
I have been saying publicly for a few months that it is possible that 2018 will be the best year in history for the Data Centers market in Spain and the truth is that I always see people who receive this message, faces of disbelief and skepticism.
Because of the workload that Quark has, I can assure you, it will be so, and in this post I am going to explain the reasons for this situation without giving you confidential information for obvious reasons.
- IMPROVED CONNECTIVITY
The starting shot for us was given during the month of June last year, when we attended a conference organized by Uptime Institute where Penny Jones, analyst of 451 Research, described Madrid as a location that was being considered by different operators of MTDC (Multi Tenant Data Centers).
The reasons behind this interest were the arrival of three new submarine cables to the Iberian Peninsula: Marea, EllaLink and Orval connecting us to the USA, Latin America and North Africa respectively, which makes us a very important communications hub in the global network.
The importance of the arrival of these cables is such that in August, an interview with a director of DE-CIX was published in Data Economy Today stating that Madrid is rising as the new London for Internet traffic. See complete interview here:
A month later, in September the acquisition of Itconic by the American giant Equinix was published, where its president highlighted the importance of this improved connectivity with three additional regions in addition to Europe. See news published here:
- THE GREAT MIGRATION
Over the past year, there has been a major boost in the CSP business (Cloud Service Providers). The use of cloud services is no longer limited to the native start up business in the cloud, but is growing very rapidly in large companies in all sectors. In the USA, Amazon announced large contracts with companies such as General Electric, Walt Disney, Toyota among others and Microsoft for its part did the same with United Technologies, Bank of America and UBS. In Spain, agreements were published between Amazon and BBVA, Openbank and Endesa for example. The consequence of this phenomenon has been that the growth in the business of large CSPs was 40% last year.
The demand for cloud services is such that there has been a change of strategy in most of the large CSPs that were building their own centers to have to call on the Colocation operators, to rent them and ensure the possibility of future growth. It is the only way that they can deploy massively in a relatively short time.
During the past year in the USA, a market that brings about two years ahead of Europe in this type of service, CSPs contracted 350 MW of power from MTDC operators. Below is a list of contracts obtained from North American Data Centers.
This phenomenon has been coming to Europe since last year, as the customers of these CSPs are global and have to serve them worldwide. On the other hand, it is important to remember that Europe is the leading market for goods and services in the world and there is a lot of business to be done with European companies and within the European Union the Spanish economy accounts for 7.5%, is growing at 3.1% and also has a population that accounts for 9%. Too important not to be here.
And what is indicated in the previous paragraph takes us to the next point.
- CONSOLIDATION OF THE PLACEMENT SECTOR
Large North American placement companies therefore need to be able to serve their large multinational clients globally. This deployment must be done as quickly as possible, so as not to lose the business to its competitors. It is clearly a question of Time to Market.
This explains the wave of mergers and acquisitions that have occurred in the sector over the past two years. Specifically, during 2017, M&A was produced in the sector worth more than $10 billion. The most famous were the purchase of DuPont Fabros Technology by Digital Realty Trust ($7.6 billion), the IO Data Centers by Iron Mountain ($1.3 billion), the purchase of Metronode by Equinix ($800 million) and the purchase of Zenium by Cyrus One ($440 million). In Spain of course the aforementioned purchase of Itconic by Equinix ($259 million).
Curiously, until the arrival of Equinix last September, none of these great American giants was present in the Spanish market. It is therefore more than possible, on the reasons given above, to disembark some of them during 2018.
- PUBLIC ADMINISTRATION
After several years of paralysis due to the crisis and political problems, we can see a recovery in the construction of Data Centers in the Spanish public sector. Specifically, Quark is involved in the Data Centers of the AEAT, Ministry of Finance, Supercomputing Center of the UAM, CSIC and Bombers of Valencia. In addition, other companies are also working on the new Data Center of Metro de Madrid and the Ministry of the Interior.
- CORPORATE DATA CENTERS
As in the previous section, the crisis caused paralysis, which finally seems to have come to an end. The companies are improving their results and this implies that they have a greater possibility of investment and this is being reflected in the construction of new Data Centers. For reasons of confidentiality, I cannot give any more information in this section.
In short, these are the reasons that support my opinion regarding the goodness of 2018 for our sector.
Best Regards to everyone.