In this edition of Voices of the Industry, Norbert Kutter, Director of Global Business Development for Instor, leads readers through the four most important steps to consider when doing business in Europe in the data center industry.
Perhaps it’s appropriate that much of Europe has been hit with a heat wave this summer, with temperatures nearing the century mark in London in late July. It’s appropriate because the data center market is also heating up on the continent, with no signs of waning. There are a few factors behind this impressive growth, including lower energy costs, attractive tax incentives, new privacy laws and a demand for foreign goods and services.
Partly, this growth can be tied to the increasing appetite within Europe for American products and services such as Netflix, Amazon and Apple. Although the hyperscale players (operating at 10 to 20 megawatts) are leading the way, many smaller companies are also joining the fray. For many businesses, Europe is prime territory for establishing footholds with new customers and brand loyalists. Because these businesses largely live online, it necessarily follows that both traditional and colocation data centers will pop up to fill this consumer demand.
As the Director of Global Business Development for Instor Solutions, Inc., I have witnessed this growth in Europe and other parts of the world firsthand over the past few years. In 2015, we expanded our presence to Europe — specifically Dublin, Ireland — to help implement data center infrastructure solutions and solve power, cooling and scalability challenges while providing rapid deployment to our European clients. Safe to say, a lot has happened in that short time. Here’s what you need to know if you’re considering doing business in Europe:
Step One – Understand the Current Landscape: Traditionally, much of the growth in the European data center world has been centered around the areas we call FLAP, an acronym for Frankfurt, London, Amsterdam and Paris. Thanks to these powerful hubs of commerce, in 2017, Europe edged out the United States in the number of colocation data centers with 2,148 facilities to America’s 2,130. This tipping point underscores how serious Europe is about the business of data.
With Microsoft doubling down on its European presence in the past year, other hyperscale leaders such as Apple, Amazon, Google and Facebook are getting in on the action. Despite the occasional legal setback such as Apple’s scrapped $1 billion data center in Ireland, these companies continue to invest heavily in the United Kingdom, Ireland and greater Europe.
Additionally, there has been tremendous growth in Ireland and the Nordic areas of Scandinavia, the latter of which is appealing due to its cool climate, cheap (and green) energy and cooling. In parts of Scandinavia, some municipalities are taking data center waste heat and pushing it through underground tunnels to heat nearby homes, swimming pools and shopping centers. This innovative approach combined with smart energy means the Nordic region is experiencing significant growth year over year.
Ireland is a particularly interesting case. As a small nation of under 5 million, it is uniquely positioned to be the last primarily English-speaking nation within the European Union once Britain is completely divorced from the EU as part of Brexit. With an attractive corporate tax rate of 12.5 percent, plenty of seed funding for startups, a young, tech-savvy native population and governmental incentives, the Emerald Isle is making a strong case for the acronym to be renamed “FLAPD” to include its capital city, Dublin. With the uncertainty of Brexit, many companies are opting to operate out of Dublin, Frankfurt and other European capitals. As the numbers above show, the current trend in Europe is toward colocation data center space because many companies find it burdensome to find and invest in real estate, especially when the market moves and shifts as fast as it does these days.
With Microsoft doubling down on its European presence in the past year, other hyperscale leaders such as Apple, Amazon, Google and Facebook are getting in on the action.
Step Two – Know the Law: Setting up shop in Europe brings its own unique challenges. The recent implementation of GDPR (General Data Protection Regulations) within the European Union has brought the need for extensive consumer data protections. The laws went into effect in May 2018 and many companies are still scrambling to figure out how to adapt while avoiding being sued. The EU has created a guide to GDPR here to help you navigate the waters of consumer data privacy.
Beyond GDPR, there are numerous legal differences when operating in Europe compared with the United States. In the European Union’s “Practical Guide to Doing Business in Europe,” you’ll find detailed discussions of topics such as VAT (Value Added Tax), excise duties, intellectual property rights, employee contracts, financing, environmental regulations and much more. This is a starting point, but anyone considering doing business in Europe would do well to seek legal counsel on the finer points of the law.
Step Three – Embrace the Culture: There are also the cultural differences to consider. With 23 languages officially recognized in the EU and more than 60 regional languages spoken, it’s important to understand the cultural differences from one region to another. Europe tends to be more formal (but not flashy), both in speech and dress. “Business casual,” for instance, has a different meaning in London than it does in San Francisco. While you might expect to get by with a polo shirt and slacks in the States, the phrase means a suit without a tie in places such as London. Inc. Magazine has more tips on how to assimilate into European business culture.
Step Four: Anticipate the Future
It’s tempting to think of the global data center market as red hot. But even in the event of another economic downturn, we believe the data center market will likely continue to grow. Many companies are choosing to move data to the cloud as a hedge against this possibility because, let’s face it, it’s easier to break a lease than to sell a piece of real estate. Even amidst the Global Recession that began in 2008, imports into Europe continued to rise, showing how strong an appetite Europeans have for foreign products.
From an operator’s perspective, the future of information is likely to be a hybrid cloud model. This is because there is some information that still needs to be maintained in-house, whether for intellectual property reasons or because it contains sensitive company information. However, it’s anything that can be stored in the cloud likely will be kept there.
Look for strong growth in Europe to continue for the foreseeable future. In the first half of 2017, Europe experienced a supply growth of 74 MW, and that amount nearly doubled just before the start of 2018. Some experts are also predicting steady growth in Eastern Europe, Ukraine and Italy over the next couple of years. And, as technologies such as the much-anticipated 5G come online along with more VR, AI, IoT and all rest of the alphabet soup, demand isn’t going anywhere anytime soon.
Norbert Kutter is Director of Global Business Development for Instor, responsible for expanding operations and growing sales internationally.