The ongoing growth of any multinational company lies in its keystone investments, and as chief financial officer of one of the world’s biggest data centre companies, Andy Power has been involved in his fair share of these.
Digital Realty’s global footprint crosses six continents, 21 countries, 45 metropolitan areas and counting. The data centre business is one of meaningful and strategic expansion, says Power, whose long view of global economic tides comes from experiencing them first-hand. He was part of the lead underwriting team that advised the San Francisco-headquartered company on its initial public offering in 2004 and has served on nearly every subsequent public capital raise to its current market capitalisation of around $39bn.
“The last financial crisis was somewhat of a boon for our industry as it spurred many major multinational enterprises to re-evaluate their core competency,” he says.
Technology has since become an urgent priority in every boardroom, and compounded by the increasingly global nature of the business community, the data centre business has seen exponential growth around the world.
“The bricks and sticks of it is that we are providing space, power and connectivity,” says Power.
Although once considered a straightforward utility, the industry’s critical role in supporting the development of future technologies is now fully recognised.
According to Power, expansions are primarily customer-led, representing foundational pieces in the company’s global puzzle.
“The goal is incremental capacity on the map where our customers want us to be, platforms which are close to irreplaceable,” he says.
Deciding between going it alone and local partnerships is the first step, according to Power.
“From a risk reward standpoint, there are parts of the world we shouldn’t go it alone because there are people who know markets like India or Brazil, for example, much better than we ever will,” he says.
For instance, the firm started building a connective campus in Osaka, Japan, before contributing the campus to a joint venture with Mitsubishi Corporation’s Tokyo campus to form MC Digital Realty, which has a footprint in both cities.
“We brought our design, build, own, operate data centre expertise and they bring 100 years of doing business in Japan, helping us to acquire land sites, securing our supply chain including power from the Tokyo Electric Power Company, and also penetrating the Japanese customer base,” says Power.
The criteria upon which the company bases its expansion plans have not changed amid the Covid-19 crisis.
“We still look at new market expansion through a complex lens of opportunity versus geopolitical, market and partner risk as well as tax volatility and government influence,” says Power. “We are not in China today, but we are in Hong Kong, for example.”
In early July, the firm announced plans for a second Hong Kong data centre despite the US withdrawing the special economic region’s preferential status.
The pandemic has obviously had a ripple economic effect, says Powers, not least a physical impact when acquiring land and constructing new facilities. In Singapore, a resurgence of Covid-19 swept through a worker dormitory, which meant a halt on construction that led to delays.
“We have to think about all the pieces of our supply chain, from the physical infrastructure like concrete and steel to the generators and fibre optics to the labour force, and then look at that as a holistic package,” he says
Despite the pandemic, this summer also saw the firm break ground on its first South Korean data centre in a virtual ceremony in Seoul’s Sangam Digital Media City, a project which will become the country’s first carrier neutral facility.
“It is a truly unique destination for multinational enterprise customers, global network providers and cloud service providers to land, offering something they previously couldn’t get from any other provider,” says Power.
The company has had a presence in South America for the last two decades, starting with Brazil, then expanding into Santiago, Chile, through a local partnership, which served as an anchor into the market. Most recently, the company added two new sites with the same partner in Mexico.
“It is the second-largest country in Latin America and we are still seeing business opportunities we think will rise above the overall economic impact of the pandemic,” says Power.
To the question of whether the data centre business is recession proof, Powers says the CFO in him is loath to make predictions.
“But I would say that our industry benefits from secular tailwinds of growth, whether it is things that we have seen playing out such as IT outsourcing where customers are moving away from on-premises solutions, to more advanced technologies including internet of things, artificial intelligence, autonomous vehicles, augmented virtual reality and everything in-between,” he says adding that these new technology growth vectors lift the data centre business above general macroeconomic themes. With the global economic uncertainty caused by the Covid-19 crisis, this can only be a good thing.