It takes a split second to understand why some of Canada's biggest businesses trust Osama Arafat to store their data. Mr. Arafat may be the chief executive officer of Q9 Networks Inc., a major data centre operator, but even he has trouble getting by its security system.
On a recent tour of a Q9 facility, Mr. Arafat triggered an alarm while trying to pass through two "anti-hostage" doors – a fortified passageway designed to thwart intruders. He later explained the "security access violation" was caused by his hasty attempt to use a biometric fingerprint scanner. "I was off by a second," he said.
Although Mr. Arafat's miscalculation left him momentarily red-faced, it underscores the stringent safeguards that major companies are demanding as they outsource the storage of sensitive data – a trend that has Q9 preparing for its next wave of growth. The Canadian data centre market is worth $4.1-billion and forecast to grow by 7.2 per cent this year, according to IDC Canada.
Data centres have become one of the hottest growth areas in telecom. The rise of the Internet and mobile computing have made companies increasingly reliant on their IT networks. To avoid being left at the mercy of a meltdown, many are turning to specialized data centres to support their "mission-critical" computing systems.
Catering to behemoths such as natural gas producer Encana Corp., payment processor Moneris Solutions Corp. and Indigo Books & Music Inc., security for Q9's 12 data centres extends far beyond burly guards and bullet-resistant glass. Biometric data for every visitor – including reporters – are stored indefinitely. Q9 also keeps a colossal archive of video taken from the canopy of cameras in every facility.
"This is functional security, this is not security theatre," Mr. Arafat said. "We are not trying to just to have a security show. We actually put a lot of thought into designing the system so that it is functional."
In an era of hackers and corporate espionage, five-star security and a reliable power supply are no longer considered frills. Skimping can lead to IT downtime that can dent a company's reputation and bottom line. So, with a list of mid- and large-sized businesses already feasting on its capacity, Q9 plans to spend up to $150-million over the next two years to expand existing data centres in Ontario, Alberta and British Columbia, and to build at least one new site in an undisclosed location to keep pace with swelling demand.
Designed to nearly double its current capacity, Q9 is pulling the trigger on its expansion plan just months after coming under new ownership. Last year, an investor group comprising BCE Inc.,Ontario Teachers' Pension Plan,Providence Equity Partners LLC, and Madison Dearborn Partners LLC purchased Q9 for $1.1-billion. Those deep-pocketed owners then put in place a new financing package to fund more growth. Prior it its ownership change, Q9 had spent roughly $400-million on its existing facilities over a 12-year period.
Q9's competitors are also gearing up for more growth. Telus Corp. is on track to open a new data centre in Kamloops, B.C., this summer, while CentriLogic plans to open two in Canada over the next 12 months. Cogeco Cable Inc., meanwhile, has a Montreal facility in the works and has launched a takeover bid for Peer 1 Network Enterprises Inc.
More acquisitions are also possible for Q9. "There were some particular deals that Q9 had on their radar and Bell had on their radar. And they knew that working together would position them a lot better than working against each other," said Mark Schrutt, director of services and enterprise applications at IDC. Q9 confirms all options remain on the table – including acquisitions, more financing and even a full-fledged takeover by BCE down the road.
For the time being, however, those former rivals have a strategic partnership that gives BCE the ability to resell capacity in Q9's data centres and allows Q9 to leverage Bell's vast network. That's key because Q9's biggest mistake over the years has been underestimating its own growth.
"Sometimes we didn't build fast enough," Mr. Arafat said. "We've just been too conservative in the past, and we need to be a bit more aggressive in our expansion plans."