A data center sale-leaseback means that a company that owns and operates its own data center sells the facility and buys back the data center space as a service, i.e. as colocation, optionally including the hardware or virtualization layers as a service.
The driver for these transactions is a consolidation in the data center space; for a number of reasons it may become increasingly unattractive to continue running an own data center. These reasons can include:
- Freeing capital – moving from CapEx to more flexible OpEx
- Thinly spread resources in critical areas and recruiting challenges
- A requirement for more flexibility
- Flexibility in buying smart hands services as needed
- Flexibility in buying colocation as needed, rather than large upfront investments
- Flexibility in purchasing models with possibility to mix and match buying as a service and investing as well as exploiting hybrid cloud with management
- Sustainability – outsourcing to a partner committed to green energy and willing to invest for instance in heat and efficiency
- Increasing requirements in areas such as security and new certifications
- Decrease risks
Pace of data center development drives sale-leaseback
In Ficolo’s case, one main driver stands out for these transactions. Often companies that have previously built a data center business realize that their business priorities have shifted to other areas. It is not viable to operate their own data center as the pace of development is only accelerating and requires huge amounts of focus, resources and investments. Instead of running their own data center at less than full capacity, with sale-leaseback the companies can pay just for the capacity they actually use.
Gartner already predicted a few years back that by 2025 80% of companies would have shut down their traditional data centers. Why? The focus on IT departments is constantly shifting with the range of systems, applications and software solutions increasing. At the same time, the expectation of management as well as interfacing departments are evolving. It is not enough to just be able to run a data center; you need to constantly keep improving in all areas.
As a company specialized in data center operations, when Ficolo takes over a data center, it has the capability and means to streamline and fine-tune processes, cooling, humidity and control the environment. Combined with advanced solutions for ensuring power supply and unique fire protection, the risks of downtime can be managed much better than with traditional data centers. With this, Ficolo can help companies comply with regulations, ensure high reliability, scalability and flexibility in data center operations.
Benefits for both parties
The prerequisite of sale-leaseback is to have win-win situation for both parties. The transaction has to fit both companies’ strategies. For instance, if the seller may have come to the conclusion that maintaining a data center themselves does not bring additional value to their customers. Ficolo can be the right fit as the data center partner with its Finnish owners, Finnish reliable data centers and expertise and environmentally conscious service. For Ficolo, the transactions are an opportunity to grow and to provide services exactly according to customer needs.
For good cooperation it is essential that the responsibilities are clearly defined and agreed. In all cases Ficolo operates as the data center partner and can also take the responsibility for services up to the virtualization layer.
Ficolo’s internationally acclaimed process
Ficolo has completed several of these kinds of sale and leaseback deals and we are actively looking for new possibilities. Previous M&A transactions have received Ficolo international recognition. The sale-leaseback of Fujitsu data center was shortlisted for Global M&A of the year by Data Economy Finvest in February 2020. Ficolo transformed the data center into modern Cloud Delivery Center in which Fujitsu and other customers can enjoy top-notch security, latest fire protection systems, and environmentally sustainable solutions.
In 2018, in the first sale-leaseback deal, Ficolo bought Cybercom’s data center in Tampere. Cybercom operations in the data center remained the same, except they do not need to take care of the data center infrastructure. They can access and work in the data center same as before the acquisition. Tampere data center was named The Deck.
In August 2019, Ficolo announced the agreement between Ficolo and Pinja (at the time, Protacon). Pinja’s data center services were moved to Ficolo’s data center The Rock. With the transaction Pinja received the opportunity to decentralize their data center services into Ficolo’s other data centers as well as ISO certified data center, bringing additional value to Pinja’s customers.
In 2020, Ficolo bought Tietokeskus data center in Raisio. Tietokeskus made a decision to focus on their own customers and delivering more value to them. With the sale-leaseback of the data center, Tietokeskus trusted their data center operations in the hands of a partner who has the latest knowledge and the resources required for optimize the lifespan of data center infrastructure.