The proof is in the pudding
by Michel Boussard

Along with many areas in the Internet industry, the economic slowdown has imposed very negative and, in some cases, critical effects on the data centre market. Uncertainty within the market has caused expansion plans to be ceased, longer sales cycles, less demand in the dotcom area, and capacity issues. Capital is scarce and industry players are seriously re-thinking existing business models - some have gone out of business altogether. Clearly, the boom is over, but who will be the winners and losers in the fight for survival?

Despite the severe market changes, there remains cause for optimism. All market research indicates that great opportunities remain, albeit with revised, more realistic forecasts. Internet use continues to grow exponentially each month, particularly in the business arena.

The need for companies to increase efficiency by focusing on their core competencies continues to result in demand for space and outsourcing of services. Growth in Internet usage should continue to generate business and, in general, outsourcing provides substantial benefit in cost reduction and efficiency.

Managing a successful data centre company within an unstable market partially depends upon how well the capital funds were managed in the past. Companies now facing the biggest issues have overspent and/or failed to secure the crucial basic requirements (i.e. secured power and connectivity). Demand-based expansion of data centres is a necessity; new clients rarely require capacity to be immediately operational, and huge centres become a liability. Furthermore, corporate enterprises will place the most confidence in a company that not only meets their particular service needs, but manages it’s own business effectively.

Basic, fundamental steps can be the most effective ones to ensure survival. In the past, expensive service portfolios have all too often been developed without good market research. Proprietary technology can be a tremendous pitfall. Most clients prefer a proven and established track record of available services. In that respect, partnerships with established players offer a compelling alternative to in-house development. These partnerships can be strategic without being exclusive, thereby allowing various different service providers in one’s data centre. The resulting environment is cooperative - yet competitive, with choice and neutrality being key decision-making criteria.

Regional presence is another crucial asset in the European market. Despite efforts to integrate the European community, country specific requirements, regulatory restrictions, and cultural differences continue to be important. Through pan European presence and local management, clients benefit from the speed by which they can deliver services to an audience beyond the traditionally more accessible markets, such as the UK, Ireland, Germany and The Netherlands. Faster growth can be observed in countries such as Italy, Switzerland, France, Spain, and Austria by virtue of their growth potential and the former neglect of these markets. Short-term growth can be expected of these markets by leveraging best practices and expertise across Europe.

Finally, the proof is in the pudding. In spite of outside observations, companies in our industry segment can be both successful and profitable once they develop a flexible approach to clients’ needs, carefully utilise serious market research and follow strict budgetary policies. While the current market is not as fantastic as predicted last year, it is growing at a rate that can support viable companies. Careful financial planning, creative alliances and flexibility will be the primary methods to deliver a profitable and winning European strategy. The financial world likes profitable companies and is willing to fund new expansion plans; it dislikes over-promising and under-delivering companies with no short-term agenda for becoming profitable.