By Michael Levy; special to InsightaaS.com from 451 Research
InsightaaS perspective: 451 Research is one of the world’s leading sources of insight into cutting edge technologies — especially in areas that are important to InsightaaS and our principals, including cloud, analytics, and sustainable IT.
InsightaaS.com works with 451 Research to bring occasional thought leadership pieces to our readers. In this report, we are privileged to present insight that is of unique interest to our Canadian readers. 451 analyst Michael Levy, who wrote the groundbreaking Canada MTDC Market Assessment: Supply and Providers report in December 2012, weighs in with his perspective on Canadian Colo's launch of a new datacentre in Montreal. This is an important development: Levy's research has identified Montreal and Vancouver as markets with "a severe shortfall of capacity," and as Levy points out, "although supply [of MTDC capacity in Montreal] is limited and growing slowly, all providers have found that strong demand presents itself upon the deployment of new supply." This piece highlights factors in the Montreal datacenter market and the positioning of suppliers to the market, and concludes by predicting success for the new venture.
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A new multi-tenant datacenter provider, Canadian Colo, has opened a new datacenter in the Montreal Stock Exchange Tower (800 Square Victoria). Phase 1 offers 12,000 operational square feet and there is room for a second 10,000-operational-square-foot phase. Critical infrastructure systems are configured with N+1 redundancy and the raised floor is cooled via a chilled water system. Total gross power for phase 1 and the planned second phase is 5.5MW. The datacenter is on a slab floor environment and cooled overhead through Emerson XDV units. Within the facility, the power density ranges from 5kW to 20kW per rack. There are two separate fiber optic entrances into the building and all major Canadian telco providers are already installed within the premises.
Canadian Colo is a sister company to Netelligent Hosting Services, a Montreal datacenter services provider, which maintains 8,000 square feet across 6 datacenter locations. Unlike Netelligent, which offers managed services, Canadian Colo will operate as a pure-play colocation provider. The company believes that Cologix will be its primary competition as its role in the marketplace takes form.
The Montreal datacenter market
Montreal is Canada's second most populous city, home to Canada's second largest financial center, and a traditional Canadian hotbed for the manufacturing and shipping industries. While the provincial government is based in Quebec City, Montreal also has a strong public sector presence. The technology sector is relatively young and still developing, but has a notable number of Web hosting, managed services and SaaS providers. All of these verticals, along with a growing technology-oriented SMB sector, are driving demand for colocation.
Montreal datacenter facilities are typically not equipped with the infrastructural redundancies seen in the primary MTDC markets, nor do providers find them necessary because local customers primarily demand low- to mid-end services and are sensitive to pricing. In fact, providers with premium datacenters face downward pricing pressure and it is common to see datacenter portfolios with varied levels of infrastructure and offerings designed to cater to these different requirements. As more high-quality capacity comes online, providers are hopeful that the severe pricing pressure will dissipate.
Native providers clearly have a cultural edge in cornering local clientele, which represents the majority of the addressable market. In terms of the competitive landscape, Cologix, which acquired native provider Canix, is the largest MTDC provider and also dominates the interconnection market. Also native to Montreal, iWeb Technologies has long been Cologix's primary competition, at least in the mid-tier part of the market, with other providers like PEER 1 Hosting or Savvis Canada playing here as well. In the upper tiers of the market, there is growing separation. Bell Canada acquired Hypertec's datacenter and colocation customers toward the end of 2010, and is making a big push in the Montreal market, targeting larger enterprises, financial services and government. Smaller providers in the market do not pose a threat to the big three, in that they primarily offer managed services (which are stronger in Montreal than other Canadian regions) or have very small colocation footprints. Unlike many other markets, Montreal does not have any carrier hotels, although it is worth noting that most major carriers running through Montreal are housed in a Cologix facility.
Although supply is limited and growing slowly, all providers have found that strong demand presents itself upon the deployment of new supply — from both new and existing customers. We predict that within the next five years we will see significant expansions by Bell Canada and Cologix, which will create demand and attract out-of-region customers in a market where 75-80% of the existing customer base is local. The quality of facilities is clearly going to improve and the size of deployments and power requirements are expected to be larger. Underpinning all of this is the growing strength and acceptance of the outsourced hosting model. In-house IT and server hugging remains prevalent, but the market is starting to chip away at its stranglehold.
There are other benefits for providers in Montreal. Most importantly, power is relatively inexpensive. Hydro-QuÃ©bec offers reasonable rates. In addition, municipal, provincial and federal governments are all pushing to outsource their IT workloads and are leveraging MTDC services. The area is geographically very safe and the St. Lawrence River has not flooded in recorded history.