Why colocation in the UK will survive Brexit

Written by Darren Watkins, Managing Director, VIRTUS Published 2016-09-28 16:31:00

The UK, particularly London and the south east, has carved out an enviable reputation for itself as an international hub in the multi-tenant and hosting market. So will the country’s decision to leave the European Union have a negative impact on all this?

At this stage, it’s difficult to say what effect ‘Brexit’ will ultimately have on all aspects of the economy and society, let alone the data centre market.
According to market-watcher 451 Research, London has been seen as the gateway to the EU, and so the capital has historically been regarded as the ideal base for local, regional and international companies to provide colocation, hosting and cloud services to the rest of the continent.

But speaking soon after the referendum at the end of June, the firm’s research director for European services Rory Duncan said: “This status is now at risk – prompting some providers and their customers to consider other locations such as Frankfurt or Amsterdam for ease of doing business within the EU.”

Of course, such warnings were not new: they had already been uttered by many a doomsayer in the months leading up the vote on 23 June. What’s more, many were basing their views on multinationals such as HSBC indicating that they would consider quitting Canary Wharf in the event of Brexit.

But none of that, at least so far, has happened. Indeed, HSBC (amongst others) have since confirmed that they will retain their headquarters in the UK. And T-Systems, the IT services arm of Deutsche Telekom has reached an agreement to run its private and public cloud operations from VIRTUS’ LONDON2 facility, as part of a five-year plan to close its data centre in Feltham.


And why?

The UK remains the top European location for new inward investment projects with HQ operations at 43%, followed by Germany and Ireland who are jointly second at just 14%. So there is a considerable difference between the money being spent within the UK and in its European counterparts.

No other European country can offer the advantages that the UK can. Our business friendly environment, highly skilled workers, competitive tax regime, global links, excellent ICT infrastructure and supportive stance for innovation all combine to make the UK the ideal location for European Headquarters projects and investments.

Furthermore, in the wake of the decision to leave, there are those who point out that this reputation, infrastructure, expertise, etc., that London built-up in its data centre market over the years isn’t going to disappear overnight.

And with the global colocation market expected to double in value over the next few years and be worth an estimated $50 billion by 2020, the UK’s reputation is unlikely to diminish. The advantages of colocation are well-documented. But for a data centre operator to capitalise on this potential, it has to offer the right kind of proposition.

For instance, one of the concerns that some companies may have is the expense of such an investment and that colocation facilities are aimed at deep-pocketed multinationals. Nothing could be further from the truth.

Among the benefits colocation offers is flexibility – and that should extend beyond just the IT infrastructure offered by the provider. As well as the racks, powers and servers, customers should also benefit from flexible contracts.

VIRTUS believes that if a customer’s IT agility is held back by outdated and inflexible data centre platforms and agreements, this can lead to missed business opportunities and severe IT cost inefficiencies which is addressed through the unique flexible contracting solutions it offers.

The Internet-of-Things and Machine-2-Machine applications will see the global data explosion continue at unprecedented rates with more and more of these application being processed in real-time. Real-time, mission-critical applications deliver optimal performance when located nearest ingress and egress data points which is the concept of edge Data centres that VIRTUS operate in and around Greater London.

Like all organisations who rely on mission-critical IT infrastructure and where downtime is not an option and companies need a colocation provider that offers flexibility and 100 per cent reliability when it comes to connectivity, power and compute resources. Colocating means they get to focus on their core businesses and customers while leaving the distracting tasks of running IT infrastructure to trusted outside experts. Whilst the solution is outsourced to the colocation provider it needs to be accessible to the user/consumer and therefore being located in the country is essential.

Being located in country comes with new concerns after the Brexit decision, around data protection and the US specific Privacy Shield which formally replaced Safe Harbour in July this year. At the end of the day – Brexit or no Brexit – UK Data Centre operators like VIRTUS, that currently offer compliant solutions with regards to information security and data protection will continue to do so under whatever legislation that will then be in place. Just as the EU-US Privacy Shield took just 6 weeks to be implemented for the transfer of US data from EU member states, being based on the ground work of the Safe Harbour regulations, nothing prevents the UK from creating a similar, dedicated Privacy Shield agreement in a similar timeframe post a Brexit conclusion.

Additionally, Convention 108 of the Council of Europe, which the UK remains a member of post a Brexit conclusion, also governs the regulations for general data protection and data transfer to provide customers with any necessary security.

Businesses that have established themselves with colocation partners want reliability and stability – and that is now even more significant given the degree of uncertainty created by Brexit. But those businesses are hardly likely to be now rushing across the channel to Amsterdam, Frankfurt, or any other EU metro that hopes to emulate London’s specialist data centre expertise.

The capital will therefore maintain its role as an important global technical and financial hub, whether that’s for nations within the EU as well as those beyond the union and Europe.

It is also unlikely that multinationals will abandon the UK. They are likely to continue to want to invest in the country (especially given the current drop in the pound that favours foreign investors) and set up here. And that means they will therefore need UK data centre facilities to support their operations.

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