Savvis Inc. (NASDAQ: SVVS) is dishing out US $124.5 million in cash to purchase Toronto-based data centre hosting provider Fusepoint Inc.
With the acquisition, the St. Louis-based cloud hosting provider will take over Fusepoint’s data centre facilities in Mississauga, Ont., Montreal and Vancouver. The company said it is following the advice of its large multinational customers, many of which have requested colocation and managed services in Canada.
The acquisition of Fusepoint, a portfolio company of M/C Venture Partners, is expected to close early this summer.
According to Savvis, 50 per cent of Fusepoint’s business is concentrated in managed hosting, which should blend nicely with its core business. The rest of Fusepoint is spilt between colocation (30 per cent) and application services (20 per cent).
Jim Ousley, chairman and CEO at Savvis, said Fusepoint is “very well-positioned” in the Canadian hosting market with a strong footprint across the country. He was also very impressed with the company’s recent investments to improve its three data centres, which now offer more than 40,000 sellable square feet.
“The main initiative was for geographical expansion into Canada,” Ousley told analysts and journalists in a conference call on Tuesday. “Our largest customers have asked us to expand into Canada and Fusepoint allows us to do that.”
Ousley added that Toronto is the financial capital of Canada, which will fit nicely with its financial services customer base.
Through the deal, the company will also look to pick up Fusepoint’s 330 enterprise cloud computing and storage customers. With almost none of these customers in the financial services industry, another favourable aspect of the deal is the lack of customer overlap, Ousley said.
“There is no major customer overlap at all,” he said. “(Fusepoint) worked with major consulting firms that we have not done business with to any extent in the past.”
Ousley also referred to the need for many of its multinational clients to comply with data legislation as another motivating factor for the deal.
Mark Schrutt, director of strategic sourcing at IDC Canada Ltd., said the deal is not particularly surprising, considering that Fusepoint was being shopped around by its owners over the last several months. He added that a U.S.-based purchaser also makes sense because potential buyers in Canada already have a significant hosting presence in Fusepoint’s major cities.
“Fusepoint is a very good firm and their management team is well-seasoned,” Schrutt said. He added that there is tremendous opportunity in the current managed services landscape.
But while the deal offers some strong opportunities for Savvis, Schrutt did warn that the company might have to expand even more to take advantage of the Canadian market.
“For Savvis, the only unfortunate thing is the Toronto data centre is pretty well full for Fusepoint,” he said.
With Toronto’s financial sector set firmly in the crosshairs for Savvis, Ousley did not rule out potentially partnering with or acquiring data centre capabilities closer to the downtown core.
As for existing Fusepoint customers, Schrutt recommended evaluating Savvis’ strengths and weaknesses when their contract comes up for renewal, but added that it is generally easy to transition from one vendor to another for hosting services.
In response to a question from ComputerWorld Canada about whether Savvis will continue to operate the Fusepoint brand, company spokesperson George Csolak declined to comment. He did, however, assure customers that additional details about the acquisition will be made public when the deal closes later this summer.
Savvis said it will continue to grow its hosting business across the world, with India, China and mainland Europe next on its radar.
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