Exec cites potential in Net data centers

by Setsuko Kamiya

Despite whatever attractive content it may offer, a dot-com firm is doomed to failure if it cannot provide its customers with quick and smooth access to data through its Web site.

Securing a smooth flow of large volumes of data, however, is no easy task, especially for cash-scarce startups. And this is exactly where Yoshiaki Matsuda, president of AboveNet Japan K.K., finds growth potential for his business.

The Japanese affiliate of AboveNet Communications Inc., a Silicon Valley-based major Internet data center (iDC) operator, manages servers and other core facilities for such companies, thereby, enabling them to concentrate their resources on developing content.

Although iDCs are still new in Japan, they already play a major role in the United States, Matsuda, 47, said.

“As dot-com firms began to rise in the U.S., many were venture businesses that had to make money without too large of an investment,” he said in an interview. “Those companies found it much cheaper and more efficient to concentrate on content development and outsourcing infrastructure management.”

Just preparing and maintaining the infrastructure needed for their services could cost a fortune if companies try to do it on their own, whereas iDCs can provide up-to-date facilities at a lower cost, Matsuda said.

Thus, he said, the iDC business in the U.S. has grown in parallel to the growth of overall online businesses. Matsuda, who became president of AboveNet Japan in February, expects the same in Japan.

With more and more dot-coms emerging, Japan, too, has witnessed dozens of iDCs, including AboveNet Japan, launching operations over the last couple of years.

Japan’s iDC-related market — estimated at 48.6 billion yen as of last year — is expected to grow nearly eight-fold to 381.6 billion yen by 2003, according to NTT Data Corp.

In general, iDCs refer to a facility where servers for different companies are collocated, protected under tight security with efficient monitoring and maintenance services. iDCs also provide high quality network connectivity to the Internet.

Matsuda said the coming broadband era will bring both chances and challenges.

“The broadband era will technically enable end users to enjoy more images and sounds on the Internet. This means that online businesses will need to focus more on their applications,” he said. “And to deal with such an increase in data traffic, infrastructure must be ready to support the content.”

Such a prospect, however, is luring more competitors onto the playing field and Matsuda foresees tough challenges ahead.

Having said that, however, he maintains that his firm has an advantage over its rivals in one of iDC’s key services — securing a smooth flow of data traffic, thereby enabling client firms to cope with a large number of users trying to access their Web sites at the same time.

AboveNet Japan, which launched its first iDC in Tokyo in June, can always provide high-speed and large-capacity connectivity by constantly securing network capacity twice the expected volume of data traffic, he said.

As another strength, he cites that AboveNet can provide a smooth and reliable data flow around the globe, having one of the most extensive peering relations, or interconnections, with Internet service providers in the U.S. and Europe.

“Because of our peering networks, our clients can easily hop on to other content providers on the network, which in the end is a merit for their end users,” Matsuda said, adding that some 30 clients here are currently entitled to the firm’s smooth connectivity.

While the number of clients for his firm is on the rise, Matsuda noted that the speed of the expansion of Japan’s overall iDC business is slower than in the U.S.

While citing the slowdown of online businesses as one reason, Matsuda also faults the meticulous procedures in Japan for obtaining licenses for communication network businesses, stricter building and clearing standards as well as the high cost of land and real estate.

At the same time, Matsuda said, the very concept of outsourcing remains unfamiliar to many Japanese firms which, he said, may be another factor impeding the growth of iDC businesses here.

“Perhaps Japanese companies need some courage to entrust their business to outsiders,” he said. “But we’re starting to see more businesses being outsourced. And I believe the trend will continue because you can’t keep up with the changes of the time if you cling to everything.”