Lermontov, rockin’ Russia and building Russia’s Internet
“During those hard times I was approached by our chief accountant and asked if I had read any Tolstoy, Chekhov or Pushkin. Slightly embarrassed I started my journey with a book of Pushkin’s short stories, moving to Lermontov’s “A Hero Of Our Time” and on to Tolstoy, Dostoyevsky, Bulgakov and more recently Zamyatin. This literary detour on my IXcellerate journey has been particularly exciting as it opened windows I never knew existed,” said Guy Willner, Chairman and CEO of IXcellerate Moscow Data Centre, in an exclusive interview with Capital Ideas.
Mr. Willner, back in 2014 you wrote a piece for Capital Ideas about starting up in Russia. Back then, here’s what you said is most attractive about the Russian market:
Russia is now the biggest Internet market in Europe, More than half the investments in Russia’s digital marketplace are now coming from abroad, Russia is pushing for Moscow to become a Tier 1 financial trading marketplace…so many reasons to take a long hard look at the infrastructure that all of this is built on. And that’s exactly what the team did at IXcellerate. Having sold a successful multi-country data center business for $550m to the global leader Equinix in 2007, I teamed up with Cliff Gauntlett and Dmitry Fokin to create one of the first independent Tier 3 data centres in Russia.
So what has happened over the past five years?
Well a lot happened on the way and our story could be a modern version of one of Tolstoy’s novels. We started full of enthusiasm and energy, creating something very new in Russia with an almost totally Russian team. After two years of money-raising and just as we nearly finished our first phase of construction, my business partner Cliff Gauntlett sadly died of a heart attack at the young age of 53.
I found myself in a temporary office building in a car park in Moscow with my business partner in a coffin beside me, sharing a tearful hug with Rudolf Schenker of the Scorpions, one of Cliff’s best friends.
Together with Dmitry Fokin, who luckily joined at this time as my new business partner, we realised we had to move on and from that moment considered it our duty to continue building on the legacy of Cliff’s dream. We finished our first DC and welcomed the first customers as we helped build Russia’s Internet ecosystem.
Then came the problems in Ukraine, the arrival of Crimea as the newest republic in the Russian Federation, the ensuing sanctions and the oil price crash dragging the ruble down with it.
So in 2014 we were again in crisis mode and raising finance was a challenge.
Back in 2000 I had been building a data center company across Europe and had been hit by the bursting of the Internet bubble. We were in crisis mode from late 2000 until 2004 when we finally saw the light at the end of the tunnel. 3/4 of our competitors had gone bankrupt during that time so our survival came at the expense of many. This experience served me well when we were in the same situation in Moscow in 2014.
That must have been extremely difficult. How did you pull through?
Focusing on the essentials – maintaining enough cash to survive, building and strengthening our teams, focusing on customers and sales growth – helped us weather that latest storm.
It all sounds challenging. Were there lighter times too?
Yes! During those hard times I was approached by our chief accountant and asked if I had read any Tolstoy, Chekhov or Pushkin. Slightly embarrassed I started my journey with a book of Pushkin’s short stories, moving to Lermontov’s “A Hero Of Our Time” and on to Tolstoy, Dostoyevsky, Bulgakov and more recently Zamyatin. This literary detour on my IXcellerate journey has been particularly exciting as it opened windows I never knew existed.
We also formed a rock band with some of the staff and launched our annual Rockin’ Russia Summer event which is now in its 6th year. Dmitry is a drummer and I am a bass-player and we share similar musical taste which makes for good times when we do relax.
So now to the future: In February, IXcellerate announced its $260 million investment plan to support growth and expansion across Russia over the next five years. Can you give us more details and tell us what’s driving this move?
Since 2012, when IXcellerate was founded, we managed to build a solid reputation both at home and internationally. We now have more than 50 telecom networks connected to our Moscow One Data centre and this number is growing. But so is the amount of Internet users in Russia, already approaching the 100 million mark, which makes it the largest Internet market in Europe. With that in mind, we felt it was the right time for expansion – both for our clients and us.
In our industry we measure capacity by the number of racks – large vertical cabinets capable of housing up to around 100 servers (computers). As of today, our total rack capacity is 1,835, so about 200,000 servers. According to our business plan, by 2023 that number will be 15,000, making up 25% of the local market. IXcellerate will operate and manage at least 4 additional sites, with the largest campus accommodating up to 10,000 racks. Reaching one million servers hosted in our data centres will surely be a big milestone.
What is the road map for IXcellerate over the next 12 months?
Right now, we are very focused on the delivery of our next data center, IXcellerate Moscow Two, which will be opened this summer. It will bring around 1,500 additional racks, almost doubling our capacity. This is going to be our largest data hall so far and the biggest Russia has ever seen.
This will generate more capacity for us to roll-in some of the world’s major Internet companies as well as bring in more connectivity to expand our customer and partner ecosystem. We are proud that major Asian market players, like Tencent and Huawei, have selected IXcellerate as a hub on their digital journey across the Globe. Key international providers like Orange Business Services, Rackspace and NTT, as well as e-commerce and financial services players from the US and Europe, are successfully operating in Russia with infrastructure colocated with us, making them fully compliant with Russian data sovereignty laws – the equivalent of the EU’s GDPR.
What are the key company values and factors behind IXcellerate’s success?
The main driving principle and the core value, since the very first day, was to set up the best-of-breed infrastructure and well-managed operations, focusing on quality and adhering to global standards. Of course, it would not have been possible without a dedicated team of professionals. And that’s what we’ve succeeded in doing and that’s why we are commercially successful.
Another core aspect of our business is “neutrality.” We believe that the data center should be neutral, both in relation to telecoms networks and equipment vendors, as well as cloud service providers. So our client is like a welcome guest in a fine restaurant, who can look at the menu and order their own perfect dinner combination.
For our “Internet diners,” we also provide great entertainment with our Rockin’ Russia company band!
How would you sum up the journey in Russia so far?
After this eventful trip we have come through to where we are today in very good condition. We now operate two of Russia’s largest data centers, hosting some of Russia’s largest companies together with an array of international companies mostly from China, Japan, the US, and Europe.
Together with our investors we are now looking positively to the future and further growth of our company in Moscow and beyond in the Russian Federation.
It has been quite an amazing journey so far and I am sure the surprises are not over yet.
They never are in Russia!