Data center giant makes the rounds

Global Switch CEO John Corcoran has performed yet another big switch-on, telling Evelyn Yu the Belt and Road Initiative has been one of their prime considerations in the thrust into the Asia Pacific.

When British billionaire brothers David and Simon Reuben first bought an interest in data center provider Global Switch in 2004, it was a loss-making company.

Over the years, the London-based corporation has grown into a leading owner and operator with nine data centers spread across Europe and the Asia Pacific. Behind the transformation is Chief Executive Officer John Corcoran, who has steered the company into a highly profitable enterprise that's still growing.

There has been a rising trend of companies and governments outsourcing to third-party data centers as the deployment of data center co-location services enables entities to cut their in-house IT maintenance costs, while ensuring higher security and reliability, plus high-bandwidth availability.

"Many customers realize computer rooms in office buildings are not suitable for keeping their data processing and storage. The capital cost of a data center is very high, it takes significant resources to invest in a data center, but sharing the costs of operating a data center among a wide range of customers offers greater economic benefits," Corcoran tells China Daily on a visit to Hong Kong.

It's a very capital intensive business, he says. "One of our sites in London has enough standby power generation capacity on the campus to power the city of Edinburgh, and we're talking about a very large investment."

Over the years, Global Switch has secured more 1,000 clients globally. With notable corporations like IBM and Microsoft in its fold, major clients range from financial institutions, governments and telecommunication carriers to conglomerates worldwide.

Corcoran sees a rising trend of organizations outsourcing to data centers around the world, especially in developing countries and regions.

According to a report by global market research and consulting company Markets and Markets, the data center co-location market is estimated to grow from $25.7 billion in 2015 to $54.13 billion by 2020 at a compound annual growth rate of 16.1 percent during the forecast period.

Corcoran has contributed to perfecting the business model at Global Switch since he assumed the company's top management.

He has been a key adviser to shareholders since 2004, when the Reuben brothers first acquired a stake in the company before going on to own it two years later.

When the Reubens first acquired Global Switch, it had yet to get in the groove. It was running at a loss and its eight data centers were operating like an independent little business.

Satisfying needs

"We standardized all the processes and systems to convince our global customers that we were able to satisfy their exacting data center needs in Hong Kong, as well as in Frankfurt and Sydney," recalls Corcoran.

His strategy then was to establish large-scale, multi-tenanted carrier and cloud-neutral data centers in Europe and the Asia Pacific, exclusively in first-tier markets that are major business and connectivity hubs, close to central business districts.

"It's challenging creating the data center business in those key telecommunication markets because access to power was very difficult, access to connectivity was very difficult and, generally, the price of land was very high. We acquired the land because we took a long-term view by buying land earlier on, by working with power and telecommunication companies. I think this has been part of our success."

Currently, North America is the largest market for data center co-location services, but Global Switch has yet to take on the region. Corcoran has thus decided to position the company in the growing European and Asia Pacific markets, particularly Hong Kong and the Chinese mainland.

Last year, Global Switch recorded revenue of about 400 million pounds ($516.2 million) from its global operations, with the Asia Pacific accounting for one-third of the total.

Top credit rating

The group has so far pumped HK$5 billion into the Hong Kong data center which, on completion, will be the SAR's largest carrier and cloud-neutral data center, taking up 45,000 square meters of space. Another new site in Shanghai is expected to come into operation late next year at the earliest, according to Corcoran.

Hong Kong is the 10th data center under the Global Switch umbrella and five more are under discussion or construction.

Upbeat about the company's financial strength, Corcoran says 5 billion pounds is a "modest number" compared with the company's extensive portfolio of existing data centers valued at about 6 billion pounds.

With a Fitch Rating of "BBB+", Global Switch is the highest credit-rated data center company in the world.

Chinese mainland consortium Elegant Jubilee bought a 49-percent interest in Global Switch last year for $2.9 billion. The consortium consists of a bevy of leading Chinese companies and institutional investors, led by Jiangsu Sha Steel Group - the largest privately owned steel company on the mainland.

Talking about the acquisition, Corcoran reveals they had received many offers over the years. "Elegant Jubilee's offer was attractive in certain ways. Firstly, they're completely happy with our business model, and that is very important as we've been perfecting our business model in the past decade and we don't wish to change.

"Secondly, it's a group of financial institutions that are looking to help the business grow - they're from the capital intensive industry and have access to lots of capital, but the key things Elegant Jubilee has brought to us is significantly improved access to Chinese customers."

What really convinces everyone, Corcoran stresses, is a pipeline of growing mainland customers on the back of the Belt and Road Initiative.

As for future plans, he sees the business effectively doubling in the next 10 to 15 years. "It's not a pipe dream, it's a pipeline development."

Contact the writer at evelyn@chinadailyhk.com

(HK Edition 05/26/2017 page9)