451/ Tier 1 Research Report on Capris Hosting
451research.com
January 23, 2012
Capris Hosting is a colocation and managed hosting provider based in Mississauga, Ontario (a western suburb of Toronto). The provider operates two datacenters in the Toronto market, with one devoted entirely to managed services and virtualization. The primary facility, which offers colocation in addition to managed hosting, has capacity for 10,000 net sellable square feet of datacenter capacity and all electrical and mechanical systems are configured to N+1 redundancy. About 3,000 square feet of operational capacity has been built out and is nearly 50% utilized. The company has introduced capacity to the datacenter in a modular fashion by installing 3,500-square-foot pods as needed. For the past 15 years, Capris has owned and operated this facility and met various compliances including SAS 70, SSAE 16 and PCI DDS.
Capris expects to add an additional 30 cabinets over the next three months and 100 cabinets by year-end. The company's secondary datacenter is located within an undisclosed third-party multi-tenant datacenter (MTDC) in Burlington, Ontario. From that location, Capris has 50TB of SAN storage and 300 cores available for the provision of fully virtualized compute environments. Currently, Capris is in negotiations to acquire up to 50,000 square feet of legacy telco-grade datacenter space that it would refurbish and upgrade upon acquisition in close proximity to its existing locations.
Customers and competition
Capris' offerings are services-heavy – only about 10% of the provider's customers leverage basic colocation with no additional services. The company has developed a strong niche building hybrid cloud environments for enterprises. Customers include large financials, manufacturing companies, and PaaS and SaaS providers. Another strong product line is Capris' business continuity-disaster recovery (BCDR) services that include dedicated and first-come, first-served hot seats available in the Mississauga facility. About 50% of Capris' clients are based in the Greater Toronto Area (GTA), 20% are based outside of Canada, with the majority of international customers based in the US and a small number from Europe and the Asia-Pacific region.
Capris disclosed it does not feel much competitive pressure from providers within the GTA. Part the reason, Capris believes, has been the consolidation of providers in the market. Capris said it used to compete with Fusepoint, for instance, for managed hosting business; however, ever since Savvis acquired it, the competition largely subsided. Another reason could be that Capris does not compete heavily in the colocation market; the provider does not want colocation to consume more than 10% of its available capacity. On the BCDR front, Capris cited IBM and SunGard as competitors.
Toronto's MTDC market
T1R researched the Toronto MTDC market in the North American Multi-Tenant Datacenter Supply: Emerging Major Markets – 2011 report. T1R identified Toronto as the largest city and largest MTDC market in Canada, representing approximately 50% of the market in the country. T1R identified 30 datacenter providers in Toronto, with Q9 Networks having the highest market share in terms of operational square footage. Toronto is a hub for Canada's international business. It is widely recognized as the country's financial capital with its high concentration of banks and brokerage firms, and the Toronto Stock Exchange, the eighth largest in terms of market capitalization. Most of Canada's corporations maintain headquarters in Toronto, along with Canada's five largest banks.
Toronto, and the Canadian datacenter market in general, differs from the datacenter market in the US in that there are few pure-play datacenter providers, with most providers also providing managed hosting services, as does Capris. When datacenter capacity becomes tight, Toronto providers that also offer managed hosting services tend to reserve the remaining space for higher-margin managed hosting deals, resulting in multi-tenant datacenter customers struggling to find available space. With a strong presence of telecommunications firms in Canada, carrier-neutral colocation is also not as readily available in Canada as it is in the US.
T1R take
Although MTDC markets in Canada have exhibited less momentum than major markets in the US, we expect Canada's top markets to receive greater attention as tougher regulation in the US discourages certain foreign enterprises from leveraging American providers. T1R believes there is much opportunity in the Greater Toronto Area, the largest MTDC market in Canada, and that Capris ought to place a greater emphasis on colocation, especially after it acquires additional capacity.
Capris has been in the business longer than most providers – we can clearly see that it has been holding out for customers that demand higher-margin services through the low utilization of its net capacity. Considering the current supply/demand imbalance in the Toronto market, opening up to a greater portion of colocation clients would accelerate Capris' physical and financial growth. Since the majority of Canadian colocation customers opt for additional services at some point during the length of their lease, Capris will still see the high margin revenue it had been conservatively waiting for, albeit to a lesser degree, but contract volume would definitely increase.
