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The following content is from an older version of this website, and may not display correctly.With growing demand for data center services in Canada, spurred by increasing traction of IT outsourcing, the entry of Savvis into the market supports an already existing momentum.
Savvis expanded into Canada in June by acquiring a mid-size hosting provider Fusepoint. The deal ÔÇô completed on June 16 ÔÇô gave Savvis immediate presence in three key metro markets: Toronto, Vancouver and Montreal. Toronto is by far the largest of the three, being the country's financial center, where many banks and large corporations have located their headquarters.
Entry of another large, relatively well-known player into what some consider an underserved hosting market, is likely to stimulate competition in the three regions, where customers have not had a wide variety of high-profile providers to choose from. While no plans have yet been announced by Savvis to grow footprint of the Fusepoint data centers, the incumbent players' new opponent that will be operating the same portfolio is sure to have more teeth: much larger marketing and sales resources, as well as an infrastructure with a wider global reach.
The existing market leaders, however, also stand to benefit from a boost to confidence in IT outsourcing as an option for enterprises as another reputable provider begins offering the services.
The buyer spent $121m in cash on the deal, gaining three active data centers ÔÇô one in each metro area ÔÇô and more than 300 existing customers. The three facilities offer a total of about 40,000 sq ft of data center floor, providing a variety of offerings, focused mainly on managed services, including hosting and private cloud services. The Toronto data center, housing 28,000 sq ft of raised floor, is the largest.
In early June, Savvis CEO Jim Ousley said in a statement that the deal was a step toward one of the company's key strategic pursuits: geographic expansion. "Our largest customers have been asking us to expand into Canada and the acquisition of Fusepoint allows us to do so in a seamless and efficient manner."
Until the entry of Savvis, the biggest hosting providers in Canada were Peer 1, Bell Canada and Telus. Other important players are iWeb, Canada Web Hosting, Momentum and Q9. There are also numerous smaller players.
Geoff Hampson, who used to be CEO and president at Peer 1 and who is now CEO of the US data center provider CoreLink, said Savvis would be a good thing for Canadian customers, who stand to benefit from increased competition among providers. "The Canadian market is underserved," he said.
A BURST OF NEW CAPACITY IN TORONTO
Savvis is not the only data center company looking to capitalize on demand growth in Canada. Around the time Savvis closed the acquisition of Fusepoint, Q9 announced the start of construction of a 240,000 sq ft data center in the Toronto area ÔÇô the company's sixth in that region. Q9 plans to bring the first phase online in January 2011. The $125m investment in the future data center is the company's largest in the Toronto market to date.
Peer 1 also recently made its largest investment in data center space in Toronto. The launch of its new $40m flagship data center was announced in May. The first phase brought a 7,500 sq ft POD on the market, with site capacity to hold three more similar POD's.
The facility will be used for both colocation and managed services. This is the first time Peer 1 is offering managed and dedicated hosting in Canada. "We are just absolutely so fired up about having a whole lot of space to sell in Canada," Peer 1 SVP of Development Robert Miggins said. "We've got more space to sell now in Canada than we've ever had."
This is Peer 1's third data center in Toronto. The company has one facility in Montreal and two in Vancouver.
Another large player that recently entered the Canadian market by way of an acquisition was Equinix, which gained a 25,000 sq ft facility in Toronto in early May, when it closed its acquisition of Switch and Data.
Miggins agreed that it was a possibility that the competition would toughen in those regions with the arrival of Savvis. He also said outsourcing as a product would gain more confidence with entry of another major player. "If they're going out there talking to more and more customer prospects about outsourcing that definitely helps us."
As is the case in the US, outsourcing is already a key driver for demand growth in the Canadian data center market. "The downturn of the market has accelerated outsourcing because folks are seeing a fixed, or even shrinking, IT budget," while being required to be just as productive, Miggins said.
Fusepoint's 2009 revenue was $41.7m. Savvis reported $874.4m for that year.
Savvis' shares dropped, following initial announcement of the acquisition from $18.66, when the market opened on June 1, to $16.52 the following day. The price jumped up to $17.11 on June 17, however ÔÇô next day after the company announced that the deal had been closed.
Savvis expanded into Canada in June by acquiring a mid-size hosting provider Fusepoint. The deal ÔÇô completed on June 16 ÔÇô gave Savvis immediate presence in three key metro markets: Toronto, Vancouver and Montreal. Toronto is by far the largest of the three, being the country's financial center, where many banks and large corporations have located their headquarters.
Entry of another large, relatively well-known player into what some consider an underserved hosting market, is likely to stimulate competition in the three regions, where customers have not had a wide variety of high-profile providers to choose from. While no plans have yet been announced by Savvis to grow footprint of the Fusepoint data centers, the incumbent players' new opponent that will be operating the same portfolio is sure to have more teeth: much larger marketing and sales resources, as well as an infrastructure with a wider global reach.
The existing market leaders, however, also stand to benefit from a boost to confidence in IT outsourcing as an option for enterprises as another reputable provider begins offering the services.
The buyer spent $121m in cash on the deal, gaining three active data centers ÔÇô one in each metro area ÔÇô and more than 300 existing customers. The three facilities offer a total of about 40,000 sq ft of data center floor, providing a variety of offerings, focused mainly on managed services, including hosting and private cloud services. The Toronto data center, housing 28,000 sq ft of raised floor, is the largest.
In early June, Savvis CEO Jim Ousley said in a statement that the deal was a step toward one of the company's key strategic pursuits: geographic expansion. "Our largest customers have been asking us to expand into Canada and the acquisition of Fusepoint allows us to do so in a seamless and efficient manner."
Until the entry of Savvis, the biggest hosting providers in Canada were Peer 1, Bell Canada and Telus. Other important players are iWeb, Canada Web Hosting, Momentum and Q9. There are also numerous smaller players.
Geoff Hampson, who used to be CEO and president at Peer 1 and who is now CEO of the US data center provider CoreLink, said Savvis would be a good thing for Canadian customers, who stand to benefit from increased competition among providers. "The Canadian market is underserved," he said.
A BURST OF NEW CAPACITY IN TORONTO
Savvis is not the only data center company looking to capitalize on demand growth in Canada. Around the time Savvis closed the acquisition of Fusepoint, Q9 announced the start of construction of a 240,000 sq ft data center in the Toronto area ÔÇô the company's sixth in that region. Q9 plans to bring the first phase online in January 2011. The $125m investment in the future data center is the company's largest in the Toronto market to date.
Peer 1 also recently made its largest investment in data center space in Toronto. The launch of its new $40m flagship data center was announced in May. The first phase brought a 7,500 sq ft POD on the market, with site capacity to hold three more similar POD's.
The facility will be used for both colocation and managed services. This is the first time Peer 1 is offering managed and dedicated hosting in Canada. "We are just absolutely so fired up about having a whole lot of space to sell in Canada," Peer 1 SVP of Development Robert Miggins said. "We've got more space to sell now in Canada than we've ever had."
This is Peer 1's third data center in Toronto. The company has one facility in Montreal and two in Vancouver.
Another large player that recently entered the Canadian market by way of an acquisition was Equinix, which gained a 25,000 sq ft facility in Toronto in early May, when it closed its acquisition of Switch and Data.
Miggins agreed that it was a possibility that the competition would toughen in those regions with the arrival of Savvis. He also said outsourcing as a product would gain more confidence with entry of another major player. "If they're going out there talking to more and more customer prospects about outsourcing that definitely helps us."
As is the case in the US, outsourcing is already a key driver for demand growth in the Canadian data center market. "The downturn of the market has accelerated outsourcing because folks are seeing a fixed, or even shrinking, IT budget," while being required to be just as productive, Miggins said.
Fusepoint's 2009 revenue was $41.7m. Savvis reported $874.4m for that year.
Savvis' shares dropped, following initial announcement of the acquisition from $18.66, when the market opened on June 1, to $16.52 the following day. The price jumped up to $17.11 on June 17, however ÔÇô next day after the company announced that the deal had been closed.