French cloud provider OVHcloud sets sights on expanding in Asia-Pacific

FRENCH cloud services provider OVHcloud is ramping up its investments in the Asia-Pacific to cater to the region as the pandemic forces companies to kick digitalisation into high gear.

The Asia-Pacific presently accounts for 3 per cent of turnover for OVHcloud - which was listed on the Paris stock exchange in October - but chief executive Michel Paulin sees that figure roughly doubling to over 5 per cent within the next 3 to 4 years. The company has sales offices and data centres across Europe, North America and Asia-Pacific.

In a virtual interview with The Business Times, Paulin said: "We are growing at roughly 20 per cent per year over the last 10 years. We are very strong in Europe, and now we have decided to invest in North America and in Asia. Asia, for us, is very important."

At nearly 30 per cent, its growth rate in Asia-Pacific is expected to outpace that of its stronghold Europe as well as its targeted global growth rate of up to 25 per cent.

Data centre growth

Earlier this year, OVHcloud announced it would double the capacity of its existing data centre in Singapore at Paya Lebar. It is poised to add a second data centre in H2 2022. It presently operates 3 data centres in the region, the other 2 being in Australia. In addition to its upcoming data centre in Singapore, it is slated to launch its first data centre in India in the first half of next year. It is also keen on expanding in South-east Asian markets such as Indonesia.

"We've decided to (keep) investing, even though the pandemic has been tough in some regions," he said.

The company is also boosting its headcount worldwide and is recruiting over 100 people monthly. Hiring and retaining talent can be a challenge in the tech industry, he added, owing to a tight labour market. OVHcloud currently has 33 data centres across 8 countries, but plans to add a further 14 data centres over the next 3 years in the Asia-Pacific, North America as well as Europe. It raised over 450 million euros (S$690.2 million) from its recent IPO, which has provided a war chest to help fund that growth.

Most of its data centres are brownfield sites, or old industrial buildings that are renovated and repurposed into data centres. Meanwhile, by using liquid cooling - instead of air-conditioning - to cool the data centres, OVHcloud is able to use less water and energy.

Over the last 5 years, it has already ploughed 1.5 billion euros, or some 300 million euros annually, towards expansion efforts.

Competing in cloud

In Asia-Pacific, OVHcloud counts tech companies - such as those that offer streaming, gaming, and tech management services - among its target customer base. At the same time, it is seeing more start-ups come on board and is expanding its reach by tying up with system integrators that provide additional service solutions to its customers.

With "a few per cent" global market share, the Europe-based group isn't as entrenched in North America and Asia-Pacific compared with the likes of tech giants such as Amazon, Google or Microsoft.

Rather than going head-to-head with the big boys, however, Paulin said OVHcloud brings something to the table by offering customers an alternative: innovative solutions that are priced competitively and transparently, in addition to being interoperable and reversible.

He expects multi-clouds to dominate in the future and sees room for OVHcloud to be a part of its customers' multi-cloud strategy. He added: "It is not good for the market to have de facto monopolies."

According to Paulin, depending on the type of solution, OVHcloud's products could be anywhere between 30 per cent and 7 times less expensive than the hyperscalers.

Data protection - especially when it comes to sensitive data - and data sovereignty are also key areas of focus these days.

"It resonates everywhere in the world. There is more and more attention being paid to where the data is and what is being done with it," he said. "We are fully compliant with local regulations. We do not touch customer data, we do not use data of any kind to improve our own intelligence systems. We protect and respect customer data."

All this comes as the pandemic has overhauled the way companies operate, prompting them to speed up their digitalisation strategies. This has been a tailwind for the tech industry. He said: "On the (first) day of the lockdown in France, the digital channel demand increased by 15 per cent. The pandemic has accelerated the digitalisation of the economy; and for us, it has been a booster. We've seen an increase in demand for cloud solutions across the globe."

Of course, demand varied based on sector and size as hard-hit sectors such as tourism and aviation slashed investment budgets. It also remains to be seen how the fast-spreading Omicron variant will affect businesses.

Still, as a vertically integrated company, OVHcloud builds its own servers and data centres, enabling it to scale up during the pandemic in response to the spike in demand. For instance, it has beefed up the production of its servers by 25 per cent from its earlier output of up to 2,000 servers weekly.

Lockdown challenges

The various lockdowns worldwide have resulted in supply chain disruptions, which have presented a challenge when it comes to sourcing components. But Paulin said that because the company builds it own servers, it has been able to swop components and "provide customers with the same type of capacity".

"We own our own research & development, so we are able to rearrange our server specifications," he said. "It's not easy but it allows us to cope with a tough situation which we believe will continue for the next 18 months."

Supply chain disruptions are also pushing prices of components upwards, Paulin acknowledged, but this is somewhat offset by innovation, which translates to better performing components. "So we do not see a huge increase in price for the end user."

In FY2021, OVHcloud earned revenues of 663 million euros - up 5 per cent year on year. Its net loss, however, widened to 32 million euros from 11 million euros in FY20. The bottom line was weighed down by the impact of a fire, which damaged one of its data centres in Strasbourg in March, as well as one-off costs linked to its IPO. Stripping out the one-offs, pre-tax income worked out to 41 million Euros, up from zero in FY20.

France accounted for the largest chunk of FY2021 revenue at a little over 50 per cent, while other European countries stood at about 29 per cent. The balance came from the rest of the world, including the United States and Asia-Pacific.

Its biggest revenue generator in FY21 was its private cloud business segment, which accounted for 60 per cent of topline, followed by its web cloud & others segment at about 25 per cent. Its public cloud business segment contributed the remainder.

For FY2022, OVHcloud has projected revenue growth on the upper end of the 10-15 per cent range guidance as per its IPO documents.