What are the implications of the recent acquisition of Blue Square Data by Lumison?
Following their own acquisition by Bridgepoint Development Capital in November last year with a clearly stated “buy and build” strategy to grow the business, the newly strengthened Lumison has snapped up Blue Square Data, a company well known to Colo-X and indeed one of the first “new entrant” data centre operators into the UK market.
Blue Square Data opened their Maidenhead facility in early 2006, the first phase of which perfectly suited the needs of many smaller ISPs and hosting companies exiting the Docklands market as prices in that market began to rise rapidly in 2006 and from this piece of perfect timing the Blue Square Maidenhead campus began to grow. This site, now encompassing three distinct phases, offers some 30,000 sq ft of gross space, the more recent phases of which can offer better standards and higher power densities than the first. Then in Mach 2009 Blue Square opened their 25,000 sq ft gross Milton Keynes facility which the company claims to be of Tier4 standard. Sales at Milton Keynes have progressed well and Colo-X estimate the site to now be some 70% occupied, with a final phase of some 250 cabinets becoming available later this year. We also understand Blue Square has achieved a large contract sale of several hundred kilowatts to a single customer, further evidence in our view that the credibility of new entrants continues to become more established in the UK data centre market.
On the other hand Lumison’s own data centre activities are based around their Edinburgh facilities and the former Tiscali/VideoNetworks data centre in Croydon which they acquired in 2007. The Edinburgh site is based in Newbridge, just west of the airport and offers 7000 sq ft of net tech whilst Croydon has some 12,000 sq ft of net tech possible of which half is currently fitted out and available.
Combined Lumision/Blue Square Data Centre Portfolio
|
Net Technical Space |
Expansion Potential |
|
|
Edinburgh |
7,000 sq ft |
|
|
Maidenhead |
17,000 sq ft |
|
|
Croydon |
6,000 sq ft |
6000 sq ft |
|
Milton Keynes |
10,000 sq ft |
7000 sq ft |
|
Total |
40,000 sq ft |
13,000 sq ft |
Besides the combined data centre portfolio, of which its interesting to note nearly 90% of the capacity will be in the south east of England, so perhaps loosening Lumison’s heritage as a Scottish company (Lumison was originally called EdNet) it will also be interesting to note the combination of two very different companies, with Blue Square very much being seen as a pure colocation operator and Lumison’s strengths in managed services. Indeed we estimate that most of Lumison’s Edinburgh data centre capacity is sold as managed services whereas in Croydon they have a much higher proportion of colocation only customers such as Netbenefit for example, who are believed to be one the larger clients here.
Speaking with Lumison COO Aydin Kurt-Elli this week he made it clear that they saw themselves as “building a spine of data centre facilities down the country from which they can offer appropriate scale and reach to offer a fully encompassing IT services platform to the mid-tier market across the country”. So, clearly more activity to come then to complete the spine that Kurt-Elli refers to.
What are the implications for the regional data colocation market?
This is the second major regional colocation operator to have been acquired within the past year following Telecity’s acquisition of Manchester based IFL in July 2010. As the saying goes, two swallows don’t make a spring, but no doubt interest in the regional data centre market would appear strong from the merger and acquisition perspective. And this certainly fits in with our own activities as agents over the past six months, where Colo-X is active for a number of corporate clients all of whom have very similar charactersitics in that they are all looking for the first time at third party colocation facilities to replace their in-house solutions and are all looking for good quality, regionally based facilities that offer relatively convenient access to their staff. Its a cautious first step if you like, though also interesting to note that the discussion with potential providers often strays right up the service stack, ie what else besides kilowatts and connectivity can you offer us? Certainly those companies who can offer a full portfolio of data centre based services look well placed to service the enterprise sector, even if they start off by providing the simplest of solutions to start with. We feel that many of our current client projects are likely to progress far further than perhaps an initial few cabinets to meet a DR requirement.
Major Regional Carrier Neutral Colocation Operators in the UK (capacity outside of central London)
|
Operator |
Locations |
|
Phoenix IT |
Welwyn, Farnborough, Birmingham, Leeds |
|
Iomart |
London, Leicester, Nottingham, Glasgow, Maidenhead |
|
Node4 |
Derby, Wakefield, Northampton |
|
Onyx |
Newcastle, Edinburgh, Glasgow, Redcar |
|
Lumison |
Edinburgh, Milton Keynes, Maidenhead, Croydon |
|
The Bunker |
Newbury, Ash |
|
SSE |
Fareham |
|
Gyron/Centro |
Hemel Hempstead |
|
Blue Chip |
Bedford |
|
UK Grid |
Manchester |
|
InTechnology |
Harrogate |
|
Dedipower |
Reading |
|
UKSolutions |
Studley |
|
Sentry42 |
Norwich (opening May) |
|
C4L |
Bournemouth |
As our by no means all encompassing list above shows, the regional colocation market in the UK currently consists of quite a number of both national and regional operators and this is in complete contrast to the market in central London for example, where 95% of the carrier neutral colocation capacity is operated by just three companies, Telecity, Telehouse and Global Switch. About half the companies on our list of regional operators can be described as new entrants, at least as far as the past few years go, most are expanding and some, namely Iomart and Onyx for example have already demonstrated their role as consolidators. As a result, it is not a hard conclusion to make that further consolidation is likely, but I think its also worth pointing out that the number of new entrants continues to grow, so adding to our list, as the upcoming arrival of Sentry42 at Norwich amply demonstrates.
Outlook for the regional market is buoyant and consolidation not yet a cause for concern
At Colo-X we believe the fragmented UK regional colocation market is a great source of diversity and resilience to the overall stock of UK data centre capacity. Smaller operators does not mean standards are not high, indeed we feel the picture is quite the opposite and many of the regional based facilities are of a higher standard than some of the mega-facilities located in and around London. Furthermore many are very well suited to offer the level of direct customer liaison and support that the larger global or pan-regional operators are sometimes less able to provide, especially for those enterprise customers taking their first step into the out-sourced data centre environment. Finally, pricing is extremely reasonable, especially when compared to the premium market in Central London, with pricing as low as GBP£250 per kW per month (inclusive of power) on a retail basis. for example a 16Amps cabinet for £1000 per month is a typical proposition that we are seeing and works out at £283 per kW per month. This is about half the price you’d expect to pay in the Central London market, as the graph below from Colo-X estimates shows, highlighting the value proposition in the regional UK market for those clients able to avoid the Central London market:
Many colocation buyers in Europe and the UK will not have fond memories of the impact of previous data centre operator mergers. For example the Redbus and Telecity merger at the end of 2005 presaged a massive rise in colocation costs in early 2006. However, in fairness to the newly formed Telecity Group, an overhaul of the Redbus pricing regime in place since 1999 was probably long overdue by then. However, it is no coincidence that many of the new entrants in the market began operations in 2006, Blue Square being one example as mentioned earlier. In the regional UK market though it would appear that we are only at the early stages of consolidation and certainly not seeing enough vendor concentration to cause any concern to the healthy and buoyant market picture, which bodes well for colocation buyers. Indeed the list of new operators and new locations continues to offset the impact of consolidation seen thus far.
As ever Colo-X continues to work with as many of the established regional data centre operators as possible as well as the growing list of new start-ups. To discuss latest availability or pricing please contact us directly.