Geo, iomart, and Cloud picks and shovels

Following on from our recent write-up of Geo Networks accounts, we had a chat with Iomart CEO Angus MacSween about the rationale for Iomart signing a 10-year deal with Geo for dark fibre to link its data centres. The move highlights the importance of capacity, control and security for Cloud services, and the ‘picks and shovels’ role of network providers in the Cloud world.

Iomart has recently announced a multi-million pound investment in a fibre network linking its six UK data centres and into the main internet exchanges, and we were keen to understand the rationale given that in the past the company has tended to focus on its service capabilities and data centre estate than on its network. We caught up with CEO Angus MacSween for a non-financial chat (the company is in its closed period ahead of announcing interims on 27 November, which have already been flagged up as strong).

MacSween noted that, previously, the company’s six UK data centres were connected by a 10GBps leased network from Virgin Media Business but the continued growth in traffic drove the company to consider a doubling of network capacity. To cut a long story short, buying dark fibre from Geo was only marginally more expensive than doubling up with VMB, but the ongoing operating costs will be lower.

In addition, Iomart has invested in fibre and electronics that give it significant greater potential capacity than even the 20Gbps it was planning for. Other benefits of the upgrade include enabling the Glasgow data centre as a connectivity hub, which reduces tail costs for connecting to end customers, as well as enabling Iomart to gain better wholesale prices generally for customer connectivity. MacSween noted that Geo was the obvious provider given that the Geo Network and the Iomart data centres had, in fact been originally built together by the National Grid Transco business, so Geo fibre already flowed past the door.

Megabuyte view

We don’t usually comment on contract wins by Megabuyte companies, unless they are financially significant, but this one struck us as interesting, and is indicative of the ‘picks and shovel’ role of network infrastructure providers in the new Cloud world. Data centre connectivity has been an important driver of the network market, and dedicated fibre provides the ultimate in security, control and scalability.

Looked at from the customer perspective, MacSween noted that the ability to offer Cloud managed hosting services to corporates requires extensive infrastructure, whether it be multiple data centres, storage or network, and having a dedicated fibre network provides another tick in the box. With a new wholesale relationship with BT for network tails, Iomart will also be able to offer a one-stop shop for hosting and connectivity, with benefits in terms of margins and market presence.

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