Q9 beefs up outsourcing capability

Toronto company buys 160,000 sq. ft. data centre to meet growing demand.

By Paul Fruitman

The purchase of a massive data centre from insolvent Exodus Communications Inc. will allow Q9 Networks Inc.

to meet growing demand, win larger contracts and better protect customer data in disaster situations, the company’s CEO said Monday.

“”If there is a catastrophic failure, it allows us to have another centre with backup equipment, so the company doesn’t lose continuity,”” Osama Arafat said.

Q9 will announce the purchase of the 160,000 sq. ft. facility, located in Brampton, Ont., on Tuesday. Arafat would not reveal the purchase price of the centre, saying only that Q9 “”got a fairly good deal.””

Mark Quigley, a research director for the Kanata, Ont.-based Yankee Group in Canada, compared the data centre acquisition to the purchase by Telus Corp. of the Canadian assets of PSINet Inc. Telus paid less than US$100 million for an asset package that included 8,600 Canadian corporate accounts, 50 points of presence in Canada, a co-location hosting facility in Montreal and an Internet data centre in Toronto.

“”Not quite pennies on the dollar, but a significant discount from what it’s worth,”” Quigley said of the Telus purchase. “”And I assume this was quite similar. I assume this is a great deal for them (Q9).””

Quigley said the acquisition equips Q9 to meet the demands of what he feels is a growing market. He said the small and medium business markets, in particular, have yet to understand the value proposition of the data centre.

“”Ithink the further down the road we go, there still remains a market that is largely untapped in Canada,”” Quigley said. “”They (Q9) had a fairly comprehensive product set before. This is more preparation for the future.””

According to Jason Bremner, IDC Canada outsourcing and IT utility services senior analyst, the overall systems infrastructure provider market is valued at more than $330 million per year.

Arafat said the new data centre will enable Q9 to participate in this market’s larger deals.

“”(Hosting) deals that are in the 10,000-plus sq. ft. (range) were hard for us to accommodate with the data space we had,”” he said. “”This allows us to bid on much larger deals.””

Arafat also said demand for Q9’s outsourced infrastructure and managed services in the Toronto area is pushing the limits of its 20,000 sq. ft. downtown facility.

“”Clearly, we’re not going to fill it (the new data centre) right away,”” he said. “”But we are coming up to the point where we need to expand operations.””

This growth stands in sharp contrast to the fates of PSINet and Exodus. While Quigley admits a lack of customers contributed to those failures, he stressed those firms built too quickly, while Q9 is a company with a long-term view of the marketplace.

Arafat said Q9 has to date acquired $115 million in equity financing and is debt free.

“”We have all the money we need until we get to cash-flow positive,”” he said. “”We’re doing controlled growth rather than very fast growth.””

Afarat said the new data centre, which will offer a convenient alternative to Q9’s downtown Toronto data centre for companies in the city’s west end and in the Waterloo area, is fully operational. He said he hopes it is only a matter of weeks before the centre is open for business.

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