IXEurope

Source: Stock Market Digital

Date :27/06/2007 11:06:38

EXPANDING THE NETWORK: IXEurope survives the dotcom bust

Launched at the height of the dotcom boom and a survivor of the dotcom bust – IXEurope has emerged as one of the fastest growing datacentre services companies in Europe.

Written by Felicity Landon & Produced by Kiron Chavda

Specialist datacentre company IXEurope scooped two honours at this year’s Data Centre Europe Awards – it was named Best Datacentre in Europe and Best Disaster Recovery Service Provider. The awards were real recognition of just how far IXEurope has come since the dark days when the dotcom bubble burst and the fledgling company fought – and won – the battle for survival.

Today, operating 14 datacentres in four countries across Europe, IXEurope is poised for rapid growth. Last year (2006) the company increased its turnover by 66 percent to £37 million, and in February 2007 placed £5 million of shares on the AIM in order to release capital for further expansion.

Classic outsourcing

This year analysts are predicting IXEurope’s turnover could hit £50 million, and the company is investing £21 million in building its new “London 4” facility. Due to be operational in the summer (2007), it is the first greenfield datacentre to be built in the capital for seven years. To be built in two phases, once it is complete it will offer a staggering 10,000 square metres of net space for servers. It is part of a major investment by the company that has added four new facilities to its network; to put its size into perspective, the next largest centre in the IXEurope network offers 6,400 square metres but could be expanded to as much as 25,000 square metres.

IXEurope’s business is, essentially, to provide the box within which its customers from the enterprise, internet and networking markets can safely and securely operate their IT equipment. “We provide the building and everything that goes with it – power, temperature, connectivity, pipes, coolers, security,” says Chief Financial Officer Karen Bach. “Just under 50 percent of our customers are corporates which need to outsource their IT and server storage, or IT outsourcers who sell on to corporates. For example, one company has 100,000 servers with us.

“It is classic outsourcing. This is our specialism. The CIO of a large corporate is far more interested in SAP or other matters and doesn’t really want to worry about the generator or whether it has been properly tested or oiled.”

IXEurope focuses on very high-spec facilities and a service level which offers power guarantees, a choice of connectivities, and round-the-clock security and support staff on site.

“Rather than having to spend £20 million on building their own datacentre, and then have it on average only 50 percent full, customers can use our facilities; they don’t have to put in the capital cost and they can vary how much space they have according to need,” says Ms Bach. “We tailor packages for them and adapt them as required.”

Independent advantages

Ultimately, IXEurope’s business model is very simple, she says. Contracts are generally three to five years long, although some are ten-year agreements. There is very little customer turnover – once a customer is settled in, it is a major undertaking for them to move.

Customers include banks and financial institutions, web hosters, software on demand providers, on-line banks, hospitals, on-line games providers, paperless air ticketing systems and a myriad of other operations.

“We take the risk by investing in the first place but we have great visibility of revenue,” says Ms Bach. “After that initial cash up front, our income is very stable and regular.”

There are essentially three types of operators in the datacentre market – the independents like IXEurope, telecoms operators, and IT outsourcers.

According to Bach, the advantage of being independent is that customers are not restricted to using just one in-house network and can therefore negotiate lower connectivity costs.

“Then IT outsourcers’ datacentres vary tremendously in their specifications. They have often taken them on as a global outsourcing contract and this is only a tiny percentage of what they do. So there is not the same focus – for us, it is the only thing we do,” she says.

Based in London, IXEurope was founded in 1998 and launched its first datacentre in 2000, at the height of the Internet boom. “At that point we focused on the telco ISP world,” she says. “A lot of people were building datacentres – it was huge over-supply and huge over-optimism on the demand level. Then the bubble burst and a lot of people went bankrupt.

“IX went into survival mode and despite demand shifting significantly, we have increased our revenue every year. We saw that we couldn’t rely on the ISP environment, so took the decision to deliver high quality service and infrastructures to the demanding corporate market.”

However, success in this was never going to be overnight – it takes many months or even years to sign up corporates with their long decision-making processes, and IXEurope also concentrated on raising its level of services, including gaining ISO 9000 accreditation. By 2003, stability had been achieved.

“Since then there has been a market turnaround and many changes,” says Ms Bach. “The oversupply in the market has gradually been disappearing. This was helped because some datacentres were taken in-house by banks for their systems. But at the same time, demand has gone up over the past two years.”

International telecoms and corporates drive growth

There are two sectors influencing this growth, she says. First, in the international telecoms sector, the advance of broadband means a lot more content and connectivity is required.

Second there are two drivers in the corporates field. Regulations such as Sarbanes Oxley and Basle II require all data to be backed up, leading to much higher demand. And the introduction of blade servers, which are much smaller and more powerful than typical servers, is leading to new requirements. Because these servers are very dense and use a lot of electricity, they create a high level of heat – and the cooling mechanisms required are something that banks and other organisations cannot organise. Hence they turn to datacentres.

The biggest risk to a customer such as an on-line bank is that their system goes down. “What they do – and what we always recommend them to do – is to have a back-up somewhere, so they are always running at two datacentres,” says Ms Bach. “If there is a business out there not doing that, then they are not conscious of the risks.”

For its own part, IXEurope focuses on safety and security. Its datacentres are generally located in hard-to-find areas and don’t have nameplates announcing what they are. “Customers say they have had a hard time finding us – and we say ‘good’,” says Ms Bach.

Some customers need only to visit their server once in six months – large corporates with perhaps 5000 servers on-site will probably have their own staff on-site. IXEurope provides office facilities as required, and also has technicians on-site 24-hours, offering a “remote hands” service – they will, only at the customer’s request, reboot a system. “But the data is nothing to do with us – we don’t see it and we don’t have access,” says Ms Bach.

In total, IXEurope employs 140 people. Amongst a series of awards in recent times, it received the Queen’s Award for Enterprise: International Trade in 2006. It has over 450 customers including top names like Merrill Lynch, Deutsche Börse Systems, Network Rail and France Telecom.

Bach says last year’s IPO served two useful purposes – not only raising capital but also giving the company additional kudos. Sixty per cent of the shares remain in the hands of venture capitalists, with 30 percent held by public investors and ten percent by founders and managers, including Guy Willner, who is CEO, and COO Christophe de Buchet.

What makes the company different to its competitors? “Our customers always say it is the people, it is a cultural thing,” says Bach. “Over 65 percent of our increase in revenue last year came from existing customers. It is all about trust, and building relationships.”