Exploring International Data Center Development

Callum Wallace is a Consultant in the TMT practice at Berwick Partners (an Odgers Berndtson Co.)

Scaling a business internationally is hard. Scaling a data center business which is mission critical and capital intensive is potentially overwhelming. Fortunately it is also immensely rewarding.

Creating winning strategies for international data center development is not overly challenging. I can, for example, suggest with a high degree of confidence that building a network of data centers across Nigeria’s key cities is a good idea. There is an enormous demand for secure, resilient data centers and a systemic shortage of supply. Executing the strategy, however, is somewhat more challenging.

The usual questions when developing any data center’s assets are also present when expanding internationally: target market, modular or traditional, connectivity and so on. However, the focus soon turns to less typical international questions: geopolitical, language, time difference, tax and local partnerships. The net result being a combination of options so daunting most choose not to pursue.

For the more determined, I wanted to extend my experience in a few key areas of international data center development that deal with organization structure and the finance function.

Organization structure: matrix vs. in-country

There is regular debate around the merits of global matrix reporting structures versus in-country “absolute command.” In a mission critical environment the most successful approach I have seen is a matrix structure with a first among equals “Country Head.” The leadership for sales, operations, marketing, finance and HR would be based at headquarters.

The overarching reason for advocating matrix structures in data center environments is to encourage effective operational systems and a unified sales effort while avoiding silos.

Operational: maintaining operational accountability and consistent adherence to best practice

• In the data center environment, accountability is key. Successfully empowering in-country operational staff to make decisions is potentially challenging. Nevertheless, when done effectively it will encourage rapid decision making in line with global operational best practices. This will ensure timely and effective local operational management without muddying the waters with in-country preferences.
• An additional benefit is that global teams will encourage mind-share around best practice and can make key operational staff feel part of a larger mission critical team.

Commercial: ensuring consistency to clients

• In global data center teams, multiple country heads proposing differing technical and commercial propositions to different parts of the same global client is common but not desirable.
• When selling to multi-nationals, the benefits of standardization and a consistent commercial value proposition will pay dividends. There should be the scope to encompass regional commercial and regulatory demands but in a globalized world the client will inevitably become irritated with wildly deviating services.
• If you grow to a point where creating market vertical teams becomes worthwhile – it is much easier to organize your teams if you are in a matrix organizational structure.

Fiefdoms:

• There are many parts of an in-country operation that need to be aligned to local culture and buying practices. In my experience what should be minor tweaks inside a wider strategy are often taken too far. These can become so extreme that internally and externally the local business loses touch with the core tenants, philosophy and commercial model of the wider organization. A matrix structure should maintain the global vision of the business while allowing for necessary in-country tweaks.
• Matrix management has the added benefit of avoiding the entrenchment of all powerful country MD’s that can become problematic to manage as their influence increases.

A critical component: the finance function

The finance function is a critical component of any leadership team but when international data center expansion the importance of the finance team intensifies.

The complexity of handling business across borders and in emerging economies is potentially intimidating. Developing data centers is a highly capital investment business which will inherently reduce the potential to take a chance. The finance team cannot make mistakes and must have deep and up-to-date knowledge of the intricacies of modelling, investing, tax and recouping in-country profits.

Finding talent that has operated in all of your target markets is not critical. However, they must know who to turn to for accurate advice and place the appropriate checks and balances to avoid unforeseen challenges in new territories.

If there is uncertainty in your finance functions international capability you may want to conduct a review of other available talent in the market. However, due to the importance of finance and the potential risks of ‘learning on the job’ I would typically advocate hiring externally (either on a permanent or interim basis).

Effective strategy to meet demand with supply

The above is a brief synopsis of two areas of importance when building an international data center business. In terms of people and structure there are of course many more questions to answer:

• Should we export known talent or grow and develop local talent?
• If the business crosses continents should we have regional heads, if so who should they report to?
• Within the boundaries of local laws should we have standard contracts for staff?

Every situation and country will throw up different challenges but with the right people in the right place (internally and externally) you can move much closer to executing a simple and effective strategy of meeting demand with supply.

Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library.