CSF changes data centre business model to adapt

• From large data centres to smaller ones built within 12 months
• CEO excited about Tier III certification from Uptime Institute

WITH data growing at jaw-dropping rates, and all of it needing to be stored somewhere, it is not surprising that data centres are booming globally.
 
Markets insights firm Canalys released research last year that showed the market for data centre IT infrastructure globally, including servers, storage, networking, security and virtualisation, will hit US$128 billion (RM399 billion) by the end of 2012.
 
Malaysia is well positioned to take advantage despite having a big negative when it comes to the data centre sector – our very high cost of bandwidth. The country also came in 16^th out of 30 countries in a Data Centre Risk Index produced by property consultants Cushman & Wakefields.
[Edited to reflect correct ranking]
 
However, the counterbalance to this are the positives – ample land, cheap power, a large IT market, good talent and supportive government policies to spur the sector.
 
Clearly, there are opportunities for local data centre players to grow. One of the more prominent ones is CSF Group Plc which listed on the United Kingdom’s AIM market in 2011. The group designs, develops, maintains and operates data centres in Malaysia and Indonesia, with plans to expand to Thailand.
 
While there is a lot talk about data centres booming, thanks to demand from the likes of Google, Amazon and other tech giants, the reality is that the vast majority of companies do not need a data centre and all the challenges that come with maintaining one.
 
They are much happier just renting space in a ready data centre and installing their own servers and equipment.
 
This is where the likes of CSF come into the picture. The company does not actually runs the servers in its data centres, but acts more as a facilities manager to ensure its clients have no issues with running their servers.
 
Any technical issues are the responsibility of the clients who bring in their own equipment and just rent the space and supporting services that are required to run a data centre.
 
Despite a booming global market for data centres, its UK listing has not given it the boost expected. Since it hit a hit of 80 pence October 2011, it has had a rocky journey with its current share price at 11.4 pence and with a market cap of US$125.6 million (RM391 million).
 
Still, its founder and chief executive officer Adrian Yong (pic) is undaunted and undistracted by the poor share price and even poorer price equity ratio of 2 assigned by the market to his company.
 
He has been busy over the past six to nine months in lobbying to get the cost of connectivity down, to get the data centre industry in Malaysia to speak in a united voice, and to work with government on helping to better position Malaysia.
 
There has also been the matter of changing his business model from building large data centres with over 100,000 sq ft of net lettable space to a more modular design approach.
 
“We will still take a large piece of land but now will build smaller data centres of 30,000 sq ft of net lettable space,” he says.
 
Starbucks-style data centres
 
The idea is that the cash flow from the first data centre will help finance the building of the second one, and so on, with four data centres of 30,000 sq ft of net lettable space in one property.
 
While Yong sacrifices the scale advantages of building one large facility with over 100,000 sq ft of net lettable space, he says he does not have to wait for customers to fill up his data centre. “We want to now build to demand,” he adds.
 
He still enjoys economies of scale, apparently. “We will now build them faster, between nine months and 12 months each with the design almost standardised and with the same look and feel.
 
“This will also make is easy for our support staff when visiting our centres around the region,” he adds. “It’s kind of like the Starbucks concept.”
 
His upcoming data centres in the Iskandar development hub in the southern Malaysian state of Johor, and in Thailand, will be built along these lines.
 
The Thai market however is a few years behind in accepting that it is more efficient to outsource the managing of a data centre.
 
“Bank chief information officers tend to think that because they have the resources, they want to own their own data centre,” Yong says. In industry lingo, this is known as ‘server hugging.’
 
Still, he is going ahead with his expansion there, aided by an eight-year tax-free incentive from the Thai Government. He is hoping to capture some anchor tenants with a pre-development sign-off of 30% data centre space committed to.
 
That would be the trigger to start his Thai expansion.
 
Next page: Getting ‘a big tick in the right box’