The ROOT data centre at Baie D’Urfe in Montreal. (Image courtesy ROOT)

ROOT Data Center is expanding capacity at its two Montreal facilities as CEO AJ Byers predicts the city’s data centre market could grow by 200 to 300 per cent during the next 12 months.

“The prediction is fundamentally driven by what’s happening in other regions around the world a year or two years post the initial introduction of large cloud service providers in the market,” he says.

In 2016, Amazon Web Services said it was choosing the Montreal area for its Canadian cloud region headquarters, citing Quebec’s lower hydro-electricity costs.

“When a major cloud provider enters the market, the rate at which companies start to transition to the cloud in that region accelerates and there is a 200 to 300 per cent growth rate” in data centre capacity, Byers says.

“Fast-follower” large technology groups tend to come to the market in the wake of the arrival of large cloud service providers, he says.

ROOT’s two Montreal data centre sites

Four-year-old ROOT operates data centres on Dollard Avenue in LaSalle and Clark Graham Avenue in Baie-D’Urfé.

A new 30,000-square-foot building is being added to the original 16,000-square-foot building in LaSalle, which will provide 15 megawatts across the two buildings. The larger 175,000-square-foot, 50-megawatt site in Baie-D’Urfé site will house nine or 10 data halls this year and more are being added on a regular basis.

Byers would not disclose financial information about ROOT, aside from the fact it has raised $25 million from Abry Partners, a Boston private equity investment firm which has invested in a number of data centres, and $70 million from Goldman Sachs.

He would also not name clients, but noted a large share of ROOT’s capacity comes from “the largest cloud and technology companies from around the world.” In terms of the number of clients, “we have more Montreal-based customers – they’re just smaller companies.”

Byers says Montreal’s growth as a data centre hub in the Canadian market “is predominantly driven by lower power costs.”

A 2016 JLL study of North America’s 17 biggest data centre markets indicated Montreal had the second-lowest power rates, behind Atlanta. However, given Montreal’s colder climate, overall power usage is lower, as less energy is needed to keep equipment cool. 

Lower costs, greener power

The environmental sustainability of Quebec’s hydro-electricity is another factor playing in Montreal’s favour, as many large technology companies are choosing regions with sustainable power, Byers says.

In addition, Montreal and Quebec provide “a significant amount” of financial incentives for technology companies to enter the market which far exceed those elsewhere in Canada.

These include a tax credit of up to $25,000 per person for hiring a new IT employee, a 30 per cent tax credit on eligible research and development expenditures and generous capital cost allowance rates for purchasing clean energy equipment.

Although Montreal’s land costs are substantially lower than those in Toronto and or Vancouver, “the biggest difference really is on the power side of things.”

He says savings between Quebec and Ontario are about $1 million per megawatt, per year of operating costs. “If you are a large provider and have 10 or 20 or 30 megawatts, the savings per year on the electricity alone can be $10, $20 or $30 million – those savings alone are driving a lot of interest in the Quebec market.”

Rapidly build capacity

According to Byers, ROOT’s key differentiator, which has driven most of its business, is its ability to build capacity faster than its North American competitors. “We can build multiple megawatt deployment within 120 to 180 days, compared to a traditional build cycle of eight to 10 months.”

ROOT has been able to reduce the amount of time it takes to build by doing its own engineering and general contracting, using a just-in-time method of construction and standardized equipment in all of its designs, he says.

“One of the challenges of some of the largest technology companies in the world today is that they have unknown growth rates and they need massive amounts of demand and need to expand very quickly,” he says. “You can’t plan for that growth and having a data centre provider who could build out more capacity faster than anyone else is a key competitive advantage.”

Byers, who has 20 years of experience in the data centre industry, was previously president of Rogers Data Centres, executive vice-president of Primus, and chief operating officer at Magma Communications.

Byers says ROOT probably has enough capacity at its current sites for the next 12 to 18 months and will then likely be looking for new sites.

ROOT has 58 employees and is so named because the root of all technology implementation is inside data centres, he says.

Although “we think Montreal is the largest data centre opportunity for growth in Canada,” ROOT is considering building data centres in other countries. “There are a number of countries around the world where the cloud providers have not entered yet,” Byers notes.

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