 Up close with E-Structures, Todd Coleman, great place to be here in Calgary and hearing what's going on in Western Canada and the opportunities here, and we now have an investor from the U.S. who has been very active all throughout Canada in the past few years, participated in our Montreal event, participated in the Toronto event, and has explored opportunities in Calgary and Alberta as well as Vancouver. So E-Structure is the company, Todd Coleman is the speaker, is the CEO and president, and we have Barb Johnson from JSA to conduct the interview. Please welcome Barb and Todd. Everyone for being here and welcome to this, the Calgary DS Center Summit here in Calgary. I'm saying that out loud because we're welcoming people here who are in the room but also who are tuning in via Facebook Live, so welcome to you and thanks for tuning in everyone that's there. My name is Barb Mitchell and like Brian said, I'm with JSA. I'm the vice president of business strategy and look after the Canadian business, the Canadian division for JSA which is the PR and telecom company representing tech and telecom across Canada and the U.S. So I'm very honored to be here today with you, Todd, and to introduce Todd Coleman who many of you probably know, he's been around the IT data center and tech space for over 25 years. That sounds really long. And most recently was the COO and co-founder of co-logics. Currently he is the president and CEO of E-Structure data centers. E-Structure data centers is the provider of network and cloud neutral data center solutions. As of today, we'll talk about that later, but as of today with locations and services of customers across Canada. So again, we're honored and privileged to have you. Thank you very much. Happy to be here. So we thought we'd just kick off with get right into some conversation. It's nice to have a sort of a chance to talk one on one but you have a long history through your intro speaks for itself but you have a long history both in Canada and the U.S. So it'd be great if you could give us some of your insights into what trends you see coming sort of north of the border and headed to western Canada out of the states. Well look, one of the benefits of working in Canada is we always have the ability to sort of look at the crystal ball of the U.S. and just Europe's in a similar position typically you're anywhere from 12 to 24 months behind in the trends. And we're certainly seeing that play out in Canada in a lot of respects with a couple of exceptions. You know, certainly over one of the things that has always intrigued me about the Canadian market is in the last six or seven years there's been pretty significant consolidation of the sort of what I would call traditional carrier neutral privately held data center operators across Canada largely driven by the carriers and Robert who was up here from Shaw is a, you know, they're a perfect example of that and you can go on to Bell and others that have sort of played that role. And so there's not a significant platform play in Canada that's carrier neutral. As you said, my former company Collogix would be an example of that. Certainly that is what he structures about. So I look out at this and look at opportunities. If you look at Canadian trends today, the large U.S. incumbents, the Digitals, the Equinexes don't really play in Canada. Yeah, they, you know, they play a little bit in Toronto, but they're not really Canadian focused. I suspect that changes over the next three or four years as Canada evolves and quite frankly, as they sort of capture more and more market share in Latin America and Asia pack. And so we'll start to see some of those trends come here. Certainly we're seeing MNA activity. I hope so. Hopefully we're a prime example of that MNA activity. And so I suspect that we're going to see continued consolidation of the market. We're starting to see, you know, we start to see more and more large block traditional wholesale plays migrating into the Canadian market with a slight difference. You know, typically in the U.S. market, wholesale means you're a pod in the mech and it's an equivalent of bring your own beer party. You've got to bring your own infrastructure, your own engineering, your own redundancy and expertise. We're not seeing that market currently evolve in Canada. Will it? Possibly. But what we're really seeing is when we say wholesale in Canada, we don't really mean a pod in the mech and you bring your own redundancy and your own engineering scheme. It's really what I would call is high-volume co-location, right? And so the pricing model tends to be somewhere more than traditional U.S. wholesale and less than traditional retail. I have fun taking the video. Anyways, technology is a great thing. We can multitask. Anyway, so we tend to see pricing that varies, but what's really fascinating about it is these are customers that would traditionally either build their own or take down wholesale in a large volume, but they want all the accouchments of traditional co-location. They want the security. They want someone else manning the 24 by 7 infrastructure. They want someone else doing remote hands. And while, and we've seen that and we're at the beginning stages that that's largely been driven by the hyperscale cloud providers, but I suspect that that market continues to evolve. It's happened in the East Coast and that has a lot to do with the environment of Canada, right? We like the cool weather. We like the cost of power, particularly in certain provinces. And so that's beginning to attract more and more. And as we talked about in the last panel, the edge has a lot to do with that. And a lot of these markets, no disrespect to the Canadian markets, but we would, from a global or North America data center perspective, we would traditionally consider Canadian markets even Montreal, Toronto, Vancouver as two markets compared to the larger markets in the US. But we're seeing more and more migration of content, the intersection of content and eyeballs to the edge. That edge market doesn't have to be a rural community. It could be a community of three million people or four million people sitting in one of our major markets. So I think all of those things, those trends kind of will over all evolve in Canada and we're already seeing that today. So do you see, so further you were talking about hyperscale developers potentially being interested in the Canadian market, do you see them specifically being interested in Western Canada? Is there, you know, what's appealing about this market to those? Look I do, fundamentally it comes down to a couple of things. First off, cost of power is critical. So we've attracted them to Eastern Canada into Quebec because we have some of the lowest costs of power in North America. However, that's still an East Coast play and eyeballs in content need to be localized. We've seen that trend play out over and over over the years. And so we're going to see those cloud providers want to move their content closer to their end users, which by necessity means that they're going to move to the West. Now they're already in the West. They just happen to be in the Western US, not Western Canada. And the more that data sovereignty plays into their vernacular, the more that they're hosting data and the more that it's critical to their end customers that their data be acknowledged and truly housed with an SLA in Canada, the more we're going to see that develop over time and it's only natural that it's going to move West. Now I think there's a couple of critical factors in that and that is we'll see that migration get expedited to the extent that the power companies in the other provinces in Western Canada decide that they want to keep up with the power trends of Eastern Canada. Ontario's a perfect example. Historically two or three years ago, we'd have tire kickers come through Montreal they would evaluate but frankly because there wasn't a significant amount of capacity that probably wasn't a significantly mature operator and they were concerned about sort of some of the local and cultural elements of being in Quebec, particularly around language, that they found their way to Ontario. But quickly evolving, you're asking the question, why pay 11 cents a kilowatt hour when you can pay sub five and a half cents? And so to the extent that Alberta, BC and others, which I believe they're currently evaluating and about to follow suit, to the extent that they want to compete with Hydro-Coback, particularly for hyperscale deployments, then for sure we're going to see hyperscale club deployments in Western Canada. So you brought up a lot about energy costs and what not. How do you see that, you know, the energy pricing has been obviously fluctuating. How do you see those trends impacting the data center? Well, I mean right now it sort of depends, I mean there's been some news in Alberta about price increases of power that would be difficult for the data center industry because right now, look, I look across most of Canada and I see stable pricing and frankly I see power companies that want to go and target the data center development or data center segment. So while we may see some trends, particularly at the residential area on down to sort of smaller users, we may see some price volatility. I think we're going to see some price volatility in the large deployments but presumably with pressure to go down. You know, sort of, if you look at Hydro-Coback for example, they've gone out of their way to target large data center and high density deployments into Quebec, right? And if you look at their U.S. advertisements, they're advertising, you know, somewhere around three and a half U.S. cents a kilowatt hour. Now the fine print is that's like 100 megawatts and you got to build your own substation at a significant cost but if you look at, for example, we're building out a 30 megawatt data center in the former Montreal Gazette printing building and our costs are right around 4.2 Canadian cents a kilowatt hour. You know, for most provinces and frankly for most of the United States that's unheard of. So to the extent that we can see that come down even a little bit. Look, in data centers every penny, every quarter of a penny counts a lot. So to the extent that we can see the average cost in particularly the western provinces which is probably somewhere between six and a half, seven and a half cents a kilowatt hour to the extent that we can see the power companies bring a penny off of that that would be goodness for the supply of the band chain. So switching gears a little bit because we're in Calgary and I think that goes without saying that the oil and gas energy in the sector is vital to the economy of Alberta. How do you feel that data centers specifically in Calgary are poised to support this industry as they start to adopt things such as industrial IoT and next-gen type technologies? Yeah, well look, IoT is hitting everyone. So I think that's an obvious area that's ripe for growth. You know, obviously fully transparent, I look at Alberta and I question when is oil and gas going to come back and you know look, the Alberta market historically has been tied pretty heavily to the oil and gas segment and the oil and gas segment has tied pretty heavily to the strength of the Canadian dollar. So to the extent that we see either one of those become buoyant, you know, look the Canadian dollar, roughly 80% of its value is tied to the price of gas. And so to the extent that the Canadian dollar begins to strengthen, we've already seen cost of barrels of oil come up and presumably the oil and gas segment is going to recover. I think the real question is one of the data center's supply and demand. I believe that if oil and gas begins to recover and or we see the local power companies change the pricing model such that we begin to attract other industry segments into Alberta, then we're going to see a recovery in this market in a pretty significant way. I think the real question that we all you know the sort of if you're a data center operator the $50 million question is where are you at in the trough and in the uptick? Because as I look out across the data center environment I would say if we get back to norm which was a few years back there's probably an under supply of carrier neutral operators in Alberta. And so I see that as goodness. So you know IoT is one of many applications that's going to drive that. I actually think that there's big drivers if we change the cost elements of doing business in Alberta that will actually drive other industry segments into Alberta and change the way that data centers operate. Cost elements such as? Cost of power being number one. I mean look you know probably not in a good way but real estate's already you know fairly you know fairly inexpensive certainly compared to our brethren over in BC. And so you know there's there's three fundamental costs to a data center. The two are the biggest one is real estate. The other one is power which is the major one and it's certainly the one that tends to attract other customer segments such as the hyperscale cloud providers. And then the third one is the cost of people and it's frankly for us it's less about a cost and it's more about a skill set. But I firmly believe that you know having spoken with some of the universities here and in other industries that that skill set is available or certainly re-skillable. So how do you see then the difference between the major markets in Canada specifically just looking at Canada and then you know take the major cities Calgary compared to Vancouver, Montreal, Toronto. What do you see as some of the differences? Yeah so obviously look not telling anyone anything they don't know. Three primary markets in Canada, Montreal, Toronto, Vancouver and then you know four or five secondary markets but Calgary being sort of one of those largest secondary markets. They all sort of have their own unique attributes and so you know when we look at it from a market perspective it's not about Canadian macroeconomics it's about local market microeconomics. And so you know you look at Quebec you got a balance sort of you know increasing costs of real estate they're not as high as BC yet but they're on the uptick. You got a balance sort of generally speaking historically lack of sort of network and critical infrastructure skill sets against incredible cost of power and then also balance that against the cost of doing business in a French speaking province and sort of the cultural issues that go along with that. And then you look at Toronto and you got the cost of real estate and frankly you have the most expensive cost of power in all of Canada. But yet it's balanced that with it's still being the commercial hub of all of Canada so by definition Toronto still grows no matter what happens. It just be nicer better if they got the cost of power in a line. And then you look at BC and from a distance perspective it's extraordinarily disaggregated. Cost of real estate is through the roof. Cost of power is not bad and hopefully we're hearing rumblings that it could get better. But I look at that market with incredible excitement because it is very disaggregated. There is no significant player. There is no data center today that's carrot and neutral that is more than probably 12 or 15,000 square feet in most of its old or older infrastructure. So look at that very opportunistic Calgary and Edmonton and the like. I look at those markets and say I believe as the province turns around and we see either oil and gas turn around or other industry segments come in that there is an under supply in Calgary and then Edmonton would be an extension of that. So this is probably a good segue into to bring up I mean today is actually quite timely because you just had news come out this morning that e-structure has expanded into western Canada with the acquisition of the backbone data vault. What prompted that move for you and what's the impact of that? Well we're obviously pretty excited to go into Vancouver. It's not my first foray into the Vancouver market but backbone is an incredible niche player as I just got done saying. The market's very disaggregated. There's a number of smallish players but backbone happens to be unique in that they have a two and a half megawatt data center sitting in the Mount Pleasant neighborhood which is also known as Hollywood North or Mount Pixel and it happens to fall in line with a key industry segment that we've targeted in Montreal which is the the VFX industry or the film studio. So over the last sort of five or six years we've seen numerous film studios move from Hollywood California to Vancouver and you know that's been largely driven by skill sets it's been driven by getting some of the processing north of the border it's been driven by where they can find people with skills either coming out of university and places where they want to live and now we're finding because they're doing sort of multi-geographic processing around the world and around the clock that they're moving those studios further east to be closer to Europe as well and so we've seen a significant number of film studios moved to Montreal in the last sort of two or three years. We at E-Structure have probably the largest you know dare I say I don't know this with certainty but I have a pretty good sense that we probably have the largest ecosystem of VFX studios in our Montreal data center. We have a you know a number of studios that moved in double negative for example moved 600 jobs to Montreal and moved into our downtown data center and a number of other key players. So Vancouver was a natural extension both because I like that market it gives us a west coast presence it's disaggregated from a competitive perspective but then it become the challenge of go find a player that fits our model and we have to find one that fit our model extraordinarily well in that it plays to our strengths from a industry market segment of continuing to penetrate the VFX segment it plays to our strengths because we are targeting high power density you know we we sort of joke inside E-Structure we used to walk around and in a prior life and you know we'd say you know think five kW to eight kW that was high density now we walk around and someone walks in and they have a 10 kilowatt cabinet opportunity we laugh like that's not even high density because most of our deployments we've got significant deployments not two or three cabinets but 25 to 50 cabinets of 25 to 30 kilowatts each and the thing when you get to that level of scale you bring in sophisticated dedicated customers it's no longer the retail power game where you sell them a fixed circuit and you believe that they're only going to use 40 percent the rest is margin these are customers that manage all the way up to their 80 percent threshold and so that is part of our value proposition and so this acquisition played into that that strength of ours and then you know obviously as I said it's a it's a niche play we have a significant amount of capital behind us dry powder as I like to call it and we plan to deploy that in Vancouver as well so you should expect to see further expansion news coming from us I was just going to ask and what about and so that's Vancouver do you have plans to expand Intel Bernat? You know we're actively looking at it never say never it's certainly look I walk around with a market expansion in that position unless like most people walk around with the sales funds so you should assume that it's on my list and obviously a benefit to you to have the locations on you know both sides of the country I'm sure that look we we set out when we went live with the structure brand in February of last year we were very clear we are going to be a pan-canadian provider and so in order to be a pan-canadian provider certainly needs to be in more than one Canadian city but we're not done and look we see the benefits of that of building a platform the cross sales opportunity to our customers of being in multiple locations but having a single source to deal with to know how we operate you know at the other day no two data centers particularly if you purchase existing data centers are built the same the look and feel is different the operations made or the engineering may be slightly different the level of redundancies the type of equipment the manufacturers all those things can be different but the way that you operate it and the processes and procedures whether it's your go to market strategy or operational and customer support strategy that's the benefit of dealing with platform and that's what we we aim to build so what's what's what do you see down the road then you know not just for a structure but for the data center space overall sort of a longer range view sort of the next two to three years yeah so the data center market evolves and I think you know picking up on a little bit of what the last panel talked about I'm not sure I fully agree with everything but we're going to see more and more new applications and blockchain is one of those right so we've gotten hit with what I call crypto mania and in Montreal over the last six months and certainly in December and January it was it was mad to say the least I think I uh I think I was probably receiving the equivalent of about 10 megawatts of demand every single week new demand so it was almost borderline stupid um but that said you know we're going to see those types of new style applications and customers the more that you know it's the last and that doesn't mean that tier three data signs go away quite on the contrary otherwise I've made a foolish hundred plus million dollar bet on a data center in Montreal I don't believe that but I think that there's applications within that that requires different types of redundancy and so to in order to be a data center operator going into the next three four five years you better have a flexible plan and your engineering better be flexible and be able to scale now that also means certain size that means certain density that means you gotta be able to house those applications in their own unique sort of sub data center environments within a data center uh but those are important um you know look we're seeing different applications evolve right cool back's gotten hit with the blockchain media but we've gotten hit with AI and and we're gonna see AI play out in other areas I actually think we're gonna see AI play out in Alberta and I think we're gonna see AI play out in BC and so all those new style applications and there will be 10 other applications that we don't know about now some of those will come and go and evaporate as quickly as they were thought of but others will be around so you know for example take cryptocurrency you know I will tell you right now this this probably says it all uh if I were doing a cryptocurrency deal I would have to be paying in dollars um but do I think blockchain goes away I don't think blockchain goes away I think it's a fantastic application that we're only just understanding the full potential and by the way some of those servers that that we're mining currencies with they also play out in the AI environment they're the same server so these technologies are gonna we're gonna see blurred lines and I think it's incumbent upon the data center operator to embrace it to understand it to truly understand it not just at the infrastructure level but at the server and application level so that we can we can evolve our critical infrastructure to meet those needs you mentioned you know when you bring up crypto currencies and and actually earlier you mentioned you were talking about data sovereignty which I think is very important especially you know in Canada and depending on you know the enterprise or government body you're dealing with but how do you approach that with security in general you mean like physical security or more virtual security yeah virtual well look we're we're you know we're really a critical infrastructure provider we do offer managed services and so to extent we have customers that come to us and want an ala cart we're able to offer that we have an incredibly strong balance sheet with incredible backers that are deep pocketed and so we do have customers that come to us and now want to use our balance sheet to purchase their own infrastructure server infrastructure and whatnot so we pay very close attention to what's going on in the virtual world from a cybersecurity perspective because whether it affects our securities it may affect the customers in our data center and when it affects our customers in our data center it could have a knock on effect i'll give you an example very recently there was a an IP exchange that got hit with an attack right and so it clogged a whole bunch of connections okay had no impact on us as a data center operator and you know we do offer a blended bandwidth service and so we had fell over but it clogged a fair amount of bandwidth connectivity within the market for six or seven hours and so those are the types of trends that we see now i actually think physical security is becoming more and more important so despite sort of the thinking of the last panel i see trends where the most sophisticated cryptocurrency providers actually want us to be in a tier three secure data center not because they want the UPS and the generator but they want the security that comes along with it you know we're starting here rambling the more that the value of the cryptocurrency goes up probably less of a current concern at $6500 a coin but more of a concern at $20,000 a coin there's always going to be some maniac out there the things they can back the truck up going into the building raid the servers and walk out with $10 million like the robin bank and that's there have been scenarios of that so i think that you know in some of those instances there are sophisticated providers that are willing to pay uh not for tier three redundancy but to be in a tier three bunkered facility which is slightly different i've asked you a lot of questions and i want to make sure that we have time uh there's a lot of people here that probably have some questions for you as well so if we just take the the last of the remaining a few minutes here and throw it out to the room if anyone has anything they'd like to ask in the back hi there i'm Sean i'm from the University of Calgary i had asked you about video games because an is the third largest player in the global digital games industry and it's a $100 billion global industry in a few years and it's already firmly planted here and as this industry is evolving alliance servers for a bunch of different functions uh do you see that industry making a big impact on the data center industry and if so do you think that will slip over to fulvera in any way or will be uh mainly constrained to the bigger i just i just want to repeat it just for people that are on the line so the question was and i'm condensing it i apologize but the question was uh the video game industry and the impact that that may have on the data center space yeah so i mean the short answer is yes and yes to both of those so we're already seeing massive uh multiplayer online gaming uh have a have an effect on the data center and the demands of it so you know we've we've seen there've been pox pockets of that uh slightly in ontario uh in auto in particular significant pockets in montreal and we we have some pockets of it certainly in in bc and i think al albert is right for it i will tell you i mean it's no no secret uh kubak was out of that game for a long time and then the government offered uh attached rebates and other incentives and voila uh they all showed up so you know i have three kids they range from uh 12 to 19 and the only cool thing they think they they consider about dad's job because they just think i pushed paper is the fact that a whole bunch of online gaming companies that they know the names of actually sit in our data center and i meet with the member once in a while uh so there's no reason why that doesn't play out in alberta but i think it is if you watch where those pockets go they they go where you know three fundamentals inexpensive power skill set and significant uh tax incentives to show up question uh very interesting you said you were like a tier three and putting the bunker i think i've been in those bunkers a couple times in south trying to sort out the blanks and scary but isn't it not even clear by me and your thoughts and opinions about security on that that player data is it not also a center to have convenient servers so that uh we uh we don't have to apply for our data going south there's no borders by the way and um can you clarify that your knowledge uh but is it not better place to have convenient servers than do this server that are working out for the gallery uh because of that security because we're not exposed to that so the question was um just around the data security um in the i don't know you can summarize that maybe so so the the question is one around data sovereignty and the benefit given security and the concerns around being having your data housed south of the border translation in the u.s uh versus having those on canadian servers and housed in canada where things like the the patriot act don't exist and and there was a comment about bunkers so i'll address that one first just this point of clarification so when i meet when i say bunker i don't mean uh underground facilities uh those sometimes scare the hell out of me because that means everything's underground things can flood uh but when i mean bunker i mean quote unquote brick shithouse uh so um that's what i mean by a bunker type facility and and sort of the physical security on it so the answer to your question is is yes i mean that is what data sovereignty is about and you've hit on the crux so the structure strategy you know by the way i have the other blue passport so i am from south of the border and i choose to build a data center platform north of the border because i believe in data sovereignty and i believe in the the reality or the perception of housing your data in the u.s has significant concerns for global players that aren't otherwise domiciled in the u.s if you're a domiciled in the u.s as a corporation then the reach of the the patriot act has no borders but if you happen to be a canadian entity or european entity or from other parts of the world then it for sure does have borders uh and so i think those are those important elements so the answer to question is it's it's part of the reason why we're seeing significant trends from the hyperscale cloud providers because as soon as they started deploying their servers north of the border and being able to provide this the critical piece a service level agreement that says we guarantee that your board your data is north of the border and will stay north of the border all of a sudden their demand curve in canada shot through the roof and we've talked to some of those hyperscale providers where they were deploying capacity of what they thought was their 10-year plan and they blew through it in two and a half years so to your point i think it's absolutely important and it makes total sense and we're seeing that trend play out today and it's frankly what we're betting on. So the second part of that data i want to where do you see this trend going so let me follow this where where where Rick Rack's procedure is a replacement that's one here today to see where this is happening in the future what is the ceo's of the senior providers to make sure that our our space is exact we don't know since i haven't been able to press the truth or not where do you see that going and what can what's your thoughts about this? So the question is just is just a build off of what Todd was talking about in the and the previous question which is where are the trends on that going? Well look it's uh i mean your guess is as good as mine so i have no crystal ball um i mean the real answer is is you know one word is collaboration and and open communication you know in the past i think there's been a complete lack of transparency on data and security risks now things excuse me like SOC compliance and other things particularly driven out of the US has driven a tremendous amount of visibility around data breaches but those are largely with publicly held companies that have an obligation to their shareholders to disclose that as soon as it happens and then it plays out the front page of the wall street journal but i think the more and more that we all talk openly around our trials and tribulations and work together even if we're competitors because the the the real you know as most of you know in the room if you've worked in the telecommunications industry for any period of time it's a pretty incestuous environment your customers are your competitors and your competitors are your customers and the more transparent we can be on what our issues are particularly around security but not limited to that i think the more that will bring those things to the the forefront certainly when you're talking about open architectures that cuts both ways you know i'm a big believer in in seeing benefits to price performance curves and a lot of times that that argue means open architecture but open architecture is also an invitation for others to sort of know how you work those things security is a perfect example particularly on the physical side you know we're we're certified in a number we have a number of different physical security certifications we're actually not allowed pursuant to the the requirements of the certification to to disclose many of those certifications for obvious reasons because if we do we're telling everyone on the outside how we secure our our physical infrastructure which obviously is an invitation for a breach so there is a balance but you know i don't have all the answers and i'm not an expert in cybersecurity but it it definitely starts with open discussions and and sharing information collaboratively even across the competitive set. Let me just say thank you again Todd it was great to have you speak to the room here today and thank you thank you for having me