Russia’s data centre market ‘offers plenty of opportunity for growth’
The Russian commercial data centre market added over 20% in 2019, according to iKS-Consulting. Analysts expect the industry to keep growing at the same pace in the next five years and say there is still room for many new participants including international players, who are not yet present.
Russia’s data centre industry is too small for Russia, considers Data Center Knowledge. The Russian market is set to grow at more than double pace compared to the US and Western Europe over the coming five years, says Guy Willner, co-founder and CEO of IXcellerate. He believes that in terms of revenue, the industry will grow by 22-25% annually in the next few years, which is much faster than in Western countries. Other experts estimate the average annual growth rate between 18% and 30%.
According to iKS-Consulting, a leading research company in the Russian tech sector, the size of the country’s data centre market was about $450 million in 2019. The capacity forecast for 2019 was at least 43,000 racks in commercial data centres. However, it is not enough to serve the growing needs of the Russian economy and the country’s ambitions, Willner considers. The Russian data centre market is excessively centralised, as 65-70% of all capacity is concentrated in Moscow and 15-18% in St Petersburg, which is abnormal for a country with 11 timezones, he adds.
In Russia, there are 15 cities with a population over 1 million, and at least 10 of them are major technology hubs, including Novosibirsk, Yekaterinburg, Nizhny Novgorod, Kazan, Samara and Vladivostok. Future growth engines are outside Moscow and St Petersburg, says Willner adding that opening a commercial data centre near any large city can stimulate the growth of local internet businesses.
Market distribution in the Russian data centre industry is also very uneven. Global data centre market leaders are not yet present in the country, so the industry consists primarily of local players. The top player is Rostelecom, which is expected to own about 25% of the market after the recently announced purchase of smaller provider DataLine is completed. The second-largest player is Ixcellerate with a market share of 8,8% followed by DataPro with 6,9% in 2019. Thus, the top three companies control over 40% of the market, which is typical for very young or very old markets. “In Russia’s case, it’s the former rather than the latter, so there’s still room for many more players,” Willner concludes.
According to Willner, some international data centre brands should be already studying Russia’s market, which offers plenty of opportunity for growth, so he expects a surge of M&A activity in the next few years. The market’s current structure and dynamics can be a cue to major global players to take a close look at Russia as a place where they can build their own business from scratch or through acquisition of local players, he says.