Q9 dishes out $125M for another T.O. data centre

Toronto’s data centre hosting market continued to heat up on Tuesday as Q9 Networks Inc. announced it will spend $125 million to build out a sixth facility in the Greater Toronto Area.


The hosting provider said the new 240,000-square-foot GTA data centre will offer customers the same features and standards currently found in its existing data centres. This will include outside air cooling capability, biometric security systems, a variety of connections to the Internet, redundant power, fire suppression systems and 24/7 security and support teams.


Q9 CEO Osama Arafat said the decision to build the facility was to address the needs of both existing and potential new customers. About 50 per cent of Q9’s annual growth comes from existing customers who are looking to expand their investments, while the other half comes from first-time customers.


“In order to continue to provide capacity for our growing existing customers and to attract new customers, we need to build more capacity, and that’s essentially the trigger for announcing this new data centre,” Arafat said.


He added that the data centre hosting market is doing fantastically well, as demand continues to get stronger from its customers, particularly from financial services providers in Toronto and oil and gas customers in Western Canada.


Q9 recently secured $210 million in new financing and is backed by Boston-based private equity investment firm ABRY Partners.


The exact location of the new data centre could not be disclosed at the press time.


In addition to freeing up space for their customers, the move also gives the company an immediate response to St. Louis-based Savvis Inc., which entered the Canadian market earlier this month after purchasing Toronto-based Fusepoint Inc. In that agreement, the cloud hosting provider dished out just under $125 million to take over Fusepoint’s data centre operations in Mississauga, Ont., Montreal and Vancouver.


The fact that Q9 is investing the same amount of money to build its new facility is purely coincidental, Arafat said, as is the fact that the company is even expanding its operations so soon after the Savvis announcement.


“The trigger for this facility had nothing to do with competitive issues,” he said. “The trigger for this is purely the demand we see from existing customers and the pipeline that we see from potential new customers. There was really no influence from others.”


For Savvis, the main initiative behind the Fusepoint acquisition was to gain a strong footprint in Canada, and specifically the Toronto-area, for its large customers. Savvis CEO Jim Ousley called Fusepoint a “very well-positioned” company in the Canadian hosting market, adding that Toronto is the financial capital of Canada, which will fit nicely with its financial services customer base.


Following the acquisition, Mark Schrutt, director of strategic sourcing at IDC Canada Ltd., said the deal was not particularly surprising, considering that Fusepoint was being shopped around by its owners over the last several months. He added that a U.S.-based purchaser also makes sense because potential buyers in Canada already have a significant hosting presence in Fusepoint’s major cities.


But while the deal offers some strong opportunities for Savvis, Schrutt did warn that the company might have to expand even more to take advantage of the Canadian market.


“For Savvis, the only unfortunate thing is the Toronto data centre is pretty well full for Fusepoint,” he said.


As for the new Q9 build out, Schrutt does not believe it is directly related to Savvis, but rather due to the overall growth and expansion of the hosting provider market in Ontario.


Q9’s sixth Toronto-area data centre will make 10 in total for the company. It opened the first phase of its third Calgary data centre in August 2009 at a cost of $50 million.


The company expects that the initial charge of capacity from the new facility will be available to customers in January 2011.

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