Industry Spotlight: Datalec Precision Installations CEO Stephen Scott

Behind the scenes of the data centre and the cloud world are the folks whose hands actually build out and service the infrastructure itself.  So many square feet and megawatts are put into service every year that just keeping up with the expansions requires an entire ecosystem of technical expertise.  Another of the many companies out there making such things happen across a growing footprint is UK-based Datalec Precision Installations.  With us today to give his perspective on things is Datalec’s CEO Stephen Scott.

TR: What are the origins of Datalec and how did you get involved?

SS: The company was founded almost 10 years ago by Danny Keeper and Stuart Richmond, who are still here as group directors. Danny Keeper was a contractor doing electrical fit-out work on the data centre side, mostly subcontracting to larger general builders. He decided there was a better way of doing it, that there was an awful lot of detail left behind and that the attention to exactness just wasn’t there. So, he decided he was going to go off on his own, where he met Stuart Richmond. Between them, they set up Datalec. They started off very small but profitable, and in the years that have gone by has grown to where we will finish 2021 just under £50M in turnover with 120 or so employees.  My own background is in private equity in the data centre and telecommunications space.  I was introduced to the company at a time they were interested in selling the company, and I consulted with them to help with its structure in anticipation of some sort of equity event.  As is often the case with these small, privately held businesses, their engineering was very good but their governance not so much.  As their growth continued, I recommended they hire a CEO.  They then asked me if I’d join and taken on the role, and after not too much thought I did.  I took on the job on the basis that bigger companies don’t just do more of what small companies do. They do different things altogether.

TR: What types of projects do you focus on?  Where do you fit in the ecosystem?

SS: We have gone from handing white space inside the client data centre only to working with clients and landlords to do all sorts of pipework, generators, power distribution, fire suppression, and more. Everything outside the data centre we do, everything inside the data centre we do. The only thing we don’t do now is actually build the bricks. Over here in Europe, which is where we mostly trade, there has been an extraordinary uplift in the amount of data centres built over the last couple of years. The big general contractors are more focused on the $500M+ builds and far less focused on the $50M builds. And indeed, the evidence shows that they’re much better at the bigger ones than the smaller ones, and so we have gotten pulled more and more into these medium-sized data centre builds.

TR: What types of projects are you taking on most commonly in today’s market? Does it tend to be isolated components or just the more comprehensive builds?

SS: We do take on isolated components sometimes.  In some cases we are just going to do electrical, or we’re just going to do cabling and cable containment and whips. We may just go and do some of hot or cold aisle containment and cage work. We have a factory where we build all our own hot and cold aisle containment solutions and our own caging. Sometimes we will just do power distribution or lighting and fire suppression.

TR: Do you focus just on greenfield builds, or do you do brownfield projects and retrofits as well?

SS: We never do brownfield projects, but we would do refurbishment. I think the refurbished data centre market is about to get interesting because there are an awful lot of buildings out there that are just old. With everything now speaking to sustainability and affordability, we’ve all got to find better ways of building and managing these facilities.  I think we’re going to see little data centres getting demolished and new ones built in their place, because there’s still the land and there’s still the power and there’s still the fibre access.  Those are still the key components for building a data centre. Those smaller facilities will go on to become the new edge of our network, and we are looking forward to a great deal of work out of that.

TR: Are you also looking into offering services in North America and other global markets?

SS: We are incorporated in North America, and we are talking to a business there who operates in the same space as we do. They are working hard to develop a presence in Europe and see that we could partner and combine forces a little bit. We might leverage their client relations to deploy some of our service in the US, and they could leverage ours to deploy some of their service here in Europe.  We’re in the early days on that of course.

TR: What new technologies are you putting in place for customers’ data centre builds these days?

SS: It’s not just power, but a lot of it is power and efficiency. Customers are asking for small, power-efficient, modular-based solutions, or medium-sized, power-efficient, modular-based solutions.  And yes, we can do that much, much better than we have in the past. Another area that’s key is operating these data centres.  Large data centres rely on facilities management and security and all manner of stuff which, in the past, have been delivered by massive companies. The cost overhead for doing that across many smaller facilities can be huge. I think the new way is going to be identifying with smaller companies who can deliver SLA-based services to those data centres at a greatly reduced price.

TR: What is shifting in the power markets in Europe to drive change in the data centre sector?

SS: The cost of power is going to increase very significantly here in Europe, and I think it’s going to make us all rethink how we deploy and manage data centres. There are a few drivers. Most importantly, Russia delivers a lot of natural gas into Europe, and some countries like Germany rely on that heavily. Russia has decided they can control Europe a little bit by just turning down the spigot of the amount of gas they’re going to sell and making our own internally resourced gas very, very expensive. Germany specifically has a lot of their power generated with gas and they do a lot of cross-border power as well.  In the UK, we import power from France, we have power from gas-fired and coal-fired generators, and we’ve got a couple of nuclear plants and lots of wind farms. But recently we’ve had no wind, and somebody broke the cable that went to France. That meant that we also had the requirement to improve our reserves of natural gas.  As a consequence of that commodity being shorter supply there’s an increased cost, and it could increase by 30, 40, 50 percent over the next 12 months alongside other commodity increases such as for steel and copper and aluminium. That’s not to say it’s entirely a bad thing, it just means that we’ve now got to think about better ways of executing these data centre builds and their operations. For example, we can use more free air cooling.  A lot of northern Europe is pretty cold, and yet there are still an awful lot of data centres that aren’t relying on free air cooling at all.

TR: To what extent do your customers lean on you to solve those problems for them, and to what extent do they mostly tell you what to do to solve them?

SS: Hyperscalers like Google do tend to do the latter.  But a couple of projects we’re looking at for 2022 are going into existing live data centres and doing a big refurb or rebuild.  That is about looking for ways to exploit cutting edge technology to make it work. We’re advising on that, doing all the design work, and bearing design risk. In this case it’s fairly simple technology that needs to be deployed more: hot and cold aisle containment.  That has the single most dramatic impact on reducing the amount of power you’re consuming in the data centre.  We’ve got design partners we work very closely with to help in the early design phase for these projects to see what operating costs we can extract from just the improved design. And then we do an awful lot of the build off-site. If you can reduce the amount of laborers on-site at the data centre it is more labour-efficient and in today’s COVID world you reduce the number of people who are having to fly around Europe.

TR: Where do you do those off-site builds?

SS: We have a 40,000-square-foot facility where we build hot/cold aisle containment and cages with big C&C machines that are just chopping away day and night. All of our cabling is all pre-terminated there on site also, so when it’s delivered, it’s all labelled up and terminated and ready to go.  That hugely expedites the time needed to complete a project. You still need people on-site, obviously. You just don’t need to have so many doing what are routine and repeatable jobs.

TR: Is that part of your business something you may need to expand further as well?

SS: For us specifically, having just exited the EU we are now the other side of Brexit. That creates some challenges with moving goods across borders now, whereas in the past, we had a dual-tax treaty with every EU country and you could move product and people and all sorts of things around.  The idea of having offsite construction bases around Europe where we can work is very appealing, and we are definitely looking at those alternatives, building up our employee base and building up our capability in Europe to mirror what we’re doing here already in the UK.

TR: Are there any new products and services you plan to add to the mix?

SS: We launched a managed service product, or Intelligent Hands.  We deliver into Digital Realty data centres in the UK, and I think that we will extend that to Europe. It has been very successful.  My experience with Intelligent Hands is that it becomes unsuccessful when you’re not very clear about the engagement rules and you start getting called out because the kettle is broke or the light on the fridge is out.  So, we are very specific about what we offer and careful about how we price it. We have looked at other areas that are not data centre related but are somewhat related in terms of the types of buildings, and the types of controls around the buildings, like pharmaceutical facilities. But we have shied away a little bit so far, keen to first really secure a place for our data centres.

TR: What do you see as the biggest challenges for you in meeting your growth plans?

SS: The biggest is the same as everybody else: building and motivating a management team – properly identifying key roles, finding the right guys to fill them, and keeping them motivated and locked in once they’re there. Then there is a driving a proper sales function. So, we have so far relied just on reputation alone. We have put no outbound sales effort, it’s all inbound sales calls. That has been enough to fill the pipeline. But by building a proper sales function, we can actually drive more initiatives out there.

Another thing we always have to keep an eye on is cash.  A massively growing company consumes huge amounts of cash just because of the growth. These jobs are all front-end cash hungry. We currently operate with no debt and rely on the cash we generate from the business. That’s for historic reasons rather than anything else, but it’s where we are today.

Health and safety obviously keeps everybody awake at night time right now. We work in dangerous environments, and so we have daily health and safety meetings to make sure that we’re all safe on-site. Executing on that consistently well and maintaining a good, clean record for health and safety is very important.

TR: Thank you for talking with Telecom Ramblings!

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Categories: Datacenter · Fiber optic cable · Industry Spotlight