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Russia set for data centre construction boom

Russia is in the midst of a surge in data centre construction. The country's commercial data centre market has grown by an average of around 25 per cent over the past five years, and this expansion shows no signs of slowing. But what is fuelling this growth, and what opportunities does it present for building materials suppliers looking to sell their goods to the Russian market?

New legislation creates significant demand for data centre space

On Tuesday (September 1st), the Russian government's new law on personal data storage came into effect. Signed into law by President Vladimir Putin last December, it was initially due to be implemented from September 2016, but was rescheduled for this year after passing through the State Duma.

Under the law, all companies offering internet services in Russia must store their users' personal data inside the country - although any information collected before the September 1st deadline can remain on foreign servers. Organisations that fail to comply could see their sites blacklisted by the state internet watchdog and will face a small fine of around $300, as well as being told to comply with the new law within six months.

The legislation is intended to prevent foreign states from misusing Russian data, while also bolstering national security. But it also has the effect of significantly increasing demand for data centres in Russia, at a time when the market is already expanding. Existing centres are unable to cope, prompting the need for more to be built.

Cool climate meets data centre needs

With so many servers in such a confined space, data centres must be kept cool at all times, with temperatures commonly ranging from 18 to 22 degrees C. 

In this respect, Russia offers a significant advantage over major data centre markets such as Silicon Valley and its equivalents in India and the UAE. Both Siberia and Russia's Far East - where construction of a new data centre has just begun - have cold climates that eradicate the high costs of running year-round cooling systems.

The new Siberian data centre, located in Omsk, will take up a total area of 10,000 sqm and boast a capacity of 2,000 racks. Construction is due to be completed in 2018.

Dmitry Butsik, co-founder of the data centre and president of the Siberia IT cluster, explained there are numerous benefits for organisations storing their data on Russian servers.

"Firstly, we have the cost in rubles. Secondly, the Siberian climate allows saving on a re-cooling system, since cooling is required only three months a year," he told Russia Behind The Headlines.

Room for the market to expand further

To date, the potential of Russia's data centre market has only begun to be realised. Its commercial data processing centre market was worth $167 million at the end of 2014, according to a report from Direct INFO, yet Russian data centres make up less than 0.5 per cent of the global market.

Mikhail Anopin, co-owner of Smart Unit, the only commercial data centre in the Russian Far East's Republic of Yakutia, explained demand for storage space has so far largely come from Russian government bodies. "We have not yet received orders from international players, but thanks to the new law, we have been approached by state institutions, which actively began to transfer corporate email and websites from external hosts to our servers."

Data centre construction: The opportunity for building materials suppliers

The relatively small size of the existing market, coupled with the attractive climate and the demand created by new legislation, means there is a huge opportunity for companies looking to build new data centres in Russia. This, in turn, gives building materials suppliers the chance to cash in by selling their products to the construction firms building these data centres.

Russia already imports significant quantities of building materials. According to the MIT-backed Observatory of Economic Complexity, Russia imported $550 million of glazed ceramics in 2012, as well as $286 million of building stone and $197 million of safety glass. What's more, non-CIS countries represent 17 per cent of Russia's brick market, with specifiers and developers often favouring bricks from the Netherlands, Belgium, Germany and the Baltic states thanks to their superior quality. Any increase in construction activity will therefore be welcomed by the building materials trade, both in Russia and overseas.


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Tanya Aleksankina

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