From Russia with love
Heiko H. Koop is the CEO of Linxdatacenter, an international company specializing in colocation, cloud and connectivity solutions, and one of the largest commercial data center provider in Russia. Having taken over the leadership of the company in 2013, Heiko recently initiated its restructuring by selling its telecom sector business to Hong Kong based CITIC and the Polish data center to EdgeConneX.
He is now focusing on expanding Linxdatacenter’s capabilities, within the fast-growing Russian market, with a doubling of the data center capacity in Moscow, and providing a roadmap for private and public cloud adoption for the Enterprise market in Russia. I recently had the opportunity to spend some time with him in Amsterdam, to discuss the future of the data center business, the opportunities and challenges present in the Russian market and how Linxdatacenter is positioning itself as a leader in this rapidly evolving ecosystem.
BUILD IT AND THEY WILL COME
In your opinion, what are the key trends impacting the data center business?
The main driver of the data center business is the roadmap to cloud adoption. Enterprises’ migration to the cloud is a complex process that needs to be planned carefully and gradually.
But one thing is certain, as companies get rid of their hardware and as software is transforming into cloud licenses, which are both contributing to improved financial and operational efficiency, cloud will continue to be a key growth driver for our business for some time to come.
Another key trend impacting our industry is the growing need for security and data protection and this is partly addressed with the introduction of the General Data Protection Regulation (GDPR), not only in Europe, but also in Russia.
These new regulations are transforming the way we must conduct business from top to bottom and in some way putting strain on our business processes.
But more importantly, they are creating new guidelines relating to where our personal information can and cannot reside and consequently impacting the requirements around cloud and data centers. In some way, this has been very good for our business, as a growing number of companies must now keep customers’ information within Russia.
Our role is not only to help them understand the regulations but more importantly, to make sure they are able to comply.
What do you think is the future of data centers?
Cloud is the fastest growing service in the world, no question about it, and this is not going to stop anytime soon, as cloud adoption is actually accelerating. However, for the cloud to work well, not only must connectivity be faster, but the processing needs must move to the edge, closer to the customer.
Taking this a step further, when IoT becomes part of our daily lives, we will see a move towards households having multiple IP addresses, consequently generating more data and forcing backbone services to be provided closer to the households.
This could mean that satellite data centers may need to be introduced closer to the audience. The Western IoT’s and Global Clouds are not based in Russia and we therefore serve as their Edge and Gateway.
Going forward we also believe that there will be significant consolidation which will create two main categories of data centers. Firstly, there will be the old school hyper-scale data centers, and these will be the carrier neutral data centers used by the large cloud platforms. In this case, their main objective will be to rent rack space and provide power.
Then you will have the second type of data centers who will focus on serving the enterprise business, which will mean offering a combination of rack space, cloud solutions and connectivity. This will be a bit more challenging, as this will comprise of developing tailored solutions for specific verticals and markets.
In addition, when it comes to the large public cloud providers, such as Google, Facebook and Amazon, these players will increasingly build and connect their own data centers in larger markets, while remaining tenants of commercial data centers in smaller markets.
But one thing to keep in mind, going forward the winners in this business will not necessarily be the ones that have a lot of capital and that can build data centers at a drop of the hat, but rather the ones that can build the team to operate and build out these sites into a carrier-hub and cloud-connection point.
You cannot buy that with money, as the key is to be able to motivate your business partners and your team to surpass themselves at all times.
PARTNER TO CONQUER
Are the political tensions between Russia and the Western World impacting the telecom industry in Russia more particularly?
A few years ago, we were expecting Russian companies to expand their business into Europe, while in reverse the US companies were expected to expand into Russia. But with the political uncertainty and tensions that exist, this is not taking place.
Which is actually good for us in some way, as to address their customers’ requirements in the Russian market, American and European companies prefer to use Russian partners, such as ourselves, who speak their language, while having a strong expertise of the local market.
Large public cloud companies, such as Google, Facebook and Amazon, still recognize that there is a lot of potential in our market, but prefer to address this opportunity using partners instead of building themselves.
Realistically, anyone wanting to enter the Russian data center market needs to do so through an acquisition. You need to have a very strong knowledge of the Russian market to succeed and this is almost impossible if you are a new entrant building from scratch.
How fast is the data center business growing in Russia?
The data center and cloud business in Russia is the best industry to be in at the moment, and more particular in Moscow. For example, in our market the demand is growing so rapidly that we almost can’t build data center capacity fast enough.
Interestingly, one of the triggers of this growth has been the recession that took place in recent years. With the devaluation of the Ruble, the hardware required by enterprises to run their business became twice as expensive. This meant that the old mentality of running everything in-house did not make financial sense any more.
As the cloud uses an OPEX instead of a CAPEX business model, the interest in cloud applications grew and continues to grow significantly to address this currency and liquidity issue.
ALL YOU NEED IS A PLAN… AND THE TEAM TO DELIVER IT
What is on Linxdatacenter’s roadmap to capitalize on the current growth?
Selling our Polish data center and getting rid of our telecoms business was part of an overall restructuring plan. We have always known that our cash cow is our data center and cloud business in Russia and to maintain our leader position we had to invest in the most profitable and fast-growing part of our business. So, releasing liquidity from the divestiture of these two entities made sense to empower our future growth.
As a whole, our plan is to expand our Moscow data center and be the partner of choice for enterprises’ cloud adoption. We are there to help their transition to cloud, not only with data center space, but also with our expertise on how to successfully cloudify your business.
In some way we are the telecom hub for Moscow, with 50 of the largest carriers inhouse, such as BT, AT&T, CITIC, Megaport, MTS providing connectivity to our data center. Which means we are the most wellconnected of all the Russian commercial data centers and we plan to capitalize on that going forward to support our enterprise customers’ growing connectivity need.
We believe that we are in a very strong position to succeed in this endeavor. We are small enough to be nimble and agile, while we have money available to invest in our expansion. In addition to that, we have a strong, loyal and knowledgeable workforce.
I am very proud that 40% of our workforce is composed of women and that an impressive 80% of our management positions are filled by female executives, which is unheard of in our industry.
What’s the best advice you wish to pass on to our readers to achieve success in business?
To achieve success at the head of an organization you need to build a team you can trust, treat them with kindness and respect and keep challenging them and yourself. Never stop pushing the boundaries. If you are comfortable in a situation it means it is time to think of the next challenge.
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Linxdatacenter in Saint Petersburg reported ten years of uptime in September 2021. The key task of any data center is to minimize the number and length of downtime periods. Uptime Institute, the global DC expert community, notes positive dynamics in this field: the share of data centers worldwide reporting serious interruptions dropped from 11% in 2020 to 6% in 2021.
With its partners’ assistance, Linxdatacenter conducted a survey of the Russian cloud providers and evaluated their work from the perspective of their initial contact with potential customers.
Linxdatacenter has successfully passed the reassessment of its Saint Petersburg data center for compliance with the Management & Operations Stamp of Approval. Linxdatacenter is currently the only DC operator in Russia carrying the M&O Stamp of Approval by the key industry certifying organization Uptime Institute and having confirmed its compliance with the M&O requirements for the third time in succession.
Global shortage of two key IT infrastructure components – microchips and data storage drives – can lead to an increase in the cloud demand in Russia in the beginning of 2022. According to Linxdatacenter’s estimate, the demand will grow by 15-20%.