GOT CODE?

How the world is
training a generation
of programmers

FOLLOW THE MONEY
What makes a great digital
business – by the VCs who
fund them

THE STATE WE’RE IN
Data sovereignty:
why your information can’t
be global (yet)

SMARTER COMPANY
A TelecityGroup publication for businesses at the heart of the digital economy

BLUFFERS’ GUIDE

Everything you
always wanted
to know about
virtualisation
GETTING SMARTER

Dr Ben Medlock
explains how
SwiftKey knows
what you’re going
to type next

+

The internet
of everything;
the openness
revolution in IT;
liquid servers

CRUSHING IT

KING.COM CEO RICCARDO ZACCONI
AND THE SOCIAL REVOLUTION
IN MOBILE GAMING

where content meets connectivity

TELECITYGROUP.COM

START SMART
+

ork smarter, not harder. Good
advice, we think, which is why the
title of this magazine is Smarter
Company. Digital-first businesses
understand it instinctively – and that
attitude pervades our digital economy.

W

Telecity Group
Editorial Board
Alexandra Schless
Vice President Western Europe &
Managing Director Netherlands
James Tyler
Chief Commercial Officer
Maurice Mortell
Vice President Developing Markets &
Managing Director Ireland
Niclas Sanfridsson
Vice President Nordics & Managing
Director Sweden
Rob Coupland
Managing Director, UK
Sheji Jacob-Brettle
Group Head of Marketing

>
SwiftKey’s incredible predictive technology page 16 goes
further, automating the process of writing for the users of its
apps. And its commercial success is built on a few big deals
putting its tech in millions of phones at a stroke.
That’s smart.
The venture capitalists looking to fund the next digital
powerhouse page 33 also want to find ways for businesses
to scale quickly like that – where a small, great idea can
exploit remarkable technology infrastructure to transform
into a money-making machine. (Want another great
example? Read about King.com and the $3m-a-day global
obsession that is Candy Crush Saga on page 24.)
The catch? Complexity. The technology works so fast,
the systems are so intricate, the mistakes they make are so
subtle, that managing them becomes more difficult almost
in proportion to their rising value to business. And that’s
before you factor in the regulatory aspects of the digital
ecosystem, which we explore on page 42.
That’s why Smarter Company will bring
together as many facets of the digital economy
as sit on your board agenda. We want to make
it less difficult to take smart decisions
about technology that’s complex –
but also transformative.

Michael Tobin, OBE
CEO TelecityGroup

Contact us
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© Progressive Customer Publishing 2014. All
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03

5m US 2018 25% 48% 70% of CIOs say they’re seen by colleagues as a true business peer admit their IT group is viewed as a cost centre of IT spending is on maintaining and upgrading existing systems 38 151. one in three Indians will own a smartphone – a huge market for app creators The laws of the country in which the cloud provider is based? Or all of the above? 42 21 . INDIA WILL OVERTAKE THE US IN TERMS OF SOFTWARE DEVELOPERS 5.75m 2013 Over the next two decades.+150% 2 5 Ap 0 ril 0m 20 13 Nu m be ro fa ct iv eu se rs TRENDS Ap 0 ril 0m 20 14 contents Why did Facebook pay $19bn for WHATSAPP 33 ? The laws of the country in which the data originated? The laws of the country in which the customer is based? The laws of the country.6m 2013 2.RISING TO 26M BY 2018 m A DI IN BY 2018.798. more than the US.2m 2018 4. says Goldman Sachs 24 $127.WHERE ARE THE PROGRAMMERS? - 21 18.200. or countries. Russia and Japan combined.000 first quarter net income of Candy Crush publisher King Digital 4 04 ISSUE 1 SMARTER COMPANY .2 NUMBER OF SOFTWARE DEVELOPERS WORLDWIDE . China. in which the cloud provider houses its data centres? WHOSE LAWS APPLY? Smartest country? By the end of 2014.793 people played Candy Crush Saga in January 2014 3. India will add about 110 million workers to its labour force.

says Stanford University 47 TELECITYGROUP. Turkey: a vibrant tech start-up scene. stats.COM Frans Johansson on randomness.. Bulgaria: the Silicon Valley of Eastern Europe. No wonder TelecityGroup has invested heavily in the East 55 05 .IN THIS ISSUE IN THE RACKS 04 THIS ISSUE Game changer Mbps Dr Ben Medlock The co-founder of SwiftKey explains how the company is reinventing language average broadband 16 speed in Bulgaria. opinions and topical developments defining the digital ecosystem 06 Janneke Niessen wants to shake up advertising – and inspire women in IT 07 Why Apple might be developing its own content delivery network 08 10 % of global energy consumption may be attributable to the internet. the fifth fastest download speed in the world 16 % of organisations allocate the cost of powering and cooling their hardware to the IT budget Global take Where are the programmers? The countries training a digital elite 06 CONNECTIONS The trends. culture. Sarah Ellis’s new cultural meeting points in a digital world 12 On the Whiteboard: the gathering Interclouds 14 21 The big play Jeux sans frontiers Lessons on the power of the network from the titans of casual gaming 24 Next big thing Rise of the machines Understanding the internet of everything (and we mean everything) 30 Networked Show me the money! What’s in the DNA of digital success? Four VCs explain what it takes for a start-up to be investable 33 Ecosystem Tech glasnost The big trends pushing corporate IT into a new era of openness and empowerment 38 The tangled web Your place or mine? Why data sovereignty is occupying the smartest legal brains of the biggest tech businesses 42 47 IN THE RACKS Cool kit Immersing your servers in liquids is one way to keep them cool.. Other answers lie 150m below the earth. Don’t worry: we’ve got you covered 50 Bus driver How TelecityGroup’s patented power bus is making sure the cloud stays up 54 Look East Poland: one of the fastest growing economies in the EU. 47 Hive mind Virtualisation is the most important technology you don’t really understand.

pushing member states to meet a 20% additional efficiency target by 2020. Smart grids will use data about energy consumption behaviour. then actively manage loading. ISSUE 1 SMARTER COMPANY . It’s unlikely to be as big in Europe (BP thinks about 6% of supply by 2035). They’re also designed to be more resilient and bi-directional. But shale gas exploitation has turned the US into a net exporter of energy and driven down natural gas prices. by 1. says the European Environment Agency. but the global market has already shifted.com/envir 06 1 2 3 4 RENEWABLES EFFICIENCY SMART GRIDS Germany leading the way on solar Potential to curb consumption 44% Minimising the waste in distribution SHALE GAS The EU target is 20% of energy production from renewables by 2020 (from 11.connections TRENDS A tour through the digital economy Eco data Energy policy has risen to the top of the political and business agenda. Governments are encouraged to renovate their own buildings and support business in efficiency investments.7% in 2009). the EU Energy Efficiency Directive will come into force this year. connect with us Energy use is a crucial part of TelecityGroup’s environmental policy: telecitygroup. particularly in areas close to human habitation. capacity and pricing. facilitating feed-in from renewables. Germany’s 36 gigawatts of photovoltaic capacity is the world’s highest. As well as finding new and renewable sources of energy. Four factors will define our options in the decade ahead. Solar will rise.100% in the decade to 2020. there will be 17 times the offshore wind capacity. Controversial – but compelling “Fracking” remains hugely controversial. Keep an eye on the European Super Grid idea – pooling continental resources.

including Sheryl Sandberg. radio and other “analogue” channels will move to programmatic as they become digital. ENTREPRENEUR. EVANGELIST.6bn We want to showcase the accomplished. Neelie Kroes and Marissa Mayer. Recently. but I did look up to entrepreneurs such as Richard Branson. you will be left behind. Nothing beats building a business. I admire people who follow their dreams and dare to think big. which champions women in technology. Improve Digital 2011 Chairman of the Taskforce on Automated Trading. nor the unknown. we are expecting native advertising to grow significantly. We are already seeing tremendous – and durable – growth in programmatic [buying] for display ads on mobile and desktop.Network for change 14 38 IN NUMBERS Janneke Niessen is co-founder of Improve Digital. as well as video. WHO WERE YOUR TECH ROLE MODELS? When I started out there were no specific role models. On the web. Face it head on and never be afraid to seek out those wiser than yourself to help you navigate the maze. I’m proud to have been able to catalyse model-disrupting changes to the European media market. JANNEKE NIESSEN CAREER HIGHLIGHTS 1998 Media director. wearables and 3D printing bring opportunities to do things differently – be smarter. entrepreneur. Europe’s leading real-time advertising technology provider. Startupbootcamp 2013 Board member. Inspiring Fifty 07 . We want to showcase the many accomplished. % forecast increase in programmatic display advertising revenue this year – to $16. fierce women in tech. but more in the way they are used than the technology itself. TV.COM WHAT’S NEXT IN ONLINE MARKETING? The trend is for more advertising sales to become automated. and Inspiring Fifty. CAN WE DELIVER A STEP-CHANGE FOR WOMEN IN TECH? We started Inspiring Fifty because female founders of high-growth tech companies are still very rare. nationalities at Improve Digital. among 60 staff Advalue 2001 Founder and owner. fierce female women in tech who are bringing about positive change in the industry. WHAT TECH EXCITES YOU? So many new developments excite me. ANY ADVICE FOR LEADERS WHO WANT TO BE DIGITAL? The networked world moves fast. your own company culture. and a product or service that customers love. IAB Netherlands 2012 Mentor. I’m inspired by some amazing women in tech. In a smaller way. INVESTOR – WHICH IS MOST SATISFYING? Without doubt. healthier and more efficient. We hope the programme pushes women to serve as an inspiration to others today and those who follow. 7write 2013 Co-initiator. a talented team. IAB Europe. too. disrupting existing industries. Seeing your vision become a reality is amazing – despite the challenges. The internet of things. Gender bias is still a real issue – when people think of a successful entrepreneur. TELECITYGROUP. Embrace it – if you sit on the sidelines. especially on mobile. You should never fear the pace of change. DQ&A 2008 Co-founder and CIO. FEMMY WEIJS TECHIE. Swogo. they still picture a white man.

not discriminating moves more decisively into streaming or charging differentially by video and even enterprise cloud user. and Comcast in the US to ensure their Having a dedicated CDN – rather than networks continue to deliver the company’s relying on piecemeal deals with networks content at speeds satisfactory for and serving data via “middle-men” servers customers. But given the has risen in importance. Those deals sparked fears – could be Apple’s biggest play since the around the future of “net neutrality” – the iPhone. Running the iTunes store and iCloud principle that internet service providers services has always demanded significant and governments should treat all data on data centre resources. for example. too. But as the company the internet equally. being better application or mode of connected across networks communication. left) – which itself now your own CDN is a costly option. That’s why hat’s Apple up to? While the press loves to speculate about the iWatch or Google has shifted its strategy to distributed servers outside of its core data centres (the full-blown Apple television.connections TRENDS Blockbusters Percentage of US peak internet traffic produced by companies’ networks 32% Netflix 22% Google 4. and maximum throughput. the move is not suprising.4% Tumblr 08 Content vs connectivity? Apple’s venture into content delivery networks reminds us that you can’t have one without the other.8% Twitch 1. you need to deliver content with low latency W 1 $ BN ISSUE 1 SMARTER COMPANY . Streaming video provider Revenue attributable And that’s why Apple.2% Amazon 0.5% Facebook 1. critical for serving content. – and that means finding the optimum blend Faster access to more networks is vital if of their own and third-party resources. is to Apple TV hardware and content in 2013 may be keen on its own CDN. But every accounts for nearly a quarter of all internet enterprise needs to work out how best to traffic (Google’s YouTube and Netflix serve its employees and its customers at together account for more than half of all the intersection of content and connectivity internet traffic in the US). volume of traffic created by Interconnectivity is Netflix.7% Hulu 1. the Cupertino Google Global Cache programme).3% Apple 1. applications. content. platform. giant has been getting on with the much It’s also the reason Netflix has signed more important task of developing a deals with major carriers such as Verizon content delivery network (CDN). the only company that For organisations not sitting on has higher bandwidth on its a $150bn cash pile – as revealed in networks than Google (see Apple’s Q2 2014 accounts – building charts. site. Netflix. and the cost to ISPs.

global IT spending this year will grow by 3. “a daily leaderboard of the best new products”. Forsman & Bodenfors Volvo trucks site that went viral. Best business blog was won by Mashable. for impressing IT folk. The perfect tool. broadly. such as interconnected. The Webby winner for best corporate communications went to Google’s Art.401 2012 3. userdriven networks (see page 38).777 GLOBAL IT SPEND ($m) Technology budgets are on the rise again. the crowdfunding site. It’s a clearing house for new releases. then. a new record. The Webbys features more than 100 categories. Enter producthunt.2% to $3.8trn. with a predicted 6. and although companies can submit their own products for the list.COM IT services budgets will come close to the $1trn level. TELECITYGROUP. a geek culture and economy specialist. That low growth may explain more cautious budgets set for 2012 and 2013. webbyawards. Gartner is expecting companies to shift spending from consulting and planning to actually starting new projects as the economy improves over the remainder of the year.663 2014 3. investors and users also comments on their usefulness and application. The digital economy moves fast – and staying on top of the coolest gadgets.co.664 -2 -3 -4 2011 3.6%. IT spending does. decided by 200. Copy & Code site – an exploration of the creative revolution in advertising.216 3.588 2013 3.com/winners/2014/ The iconic TED Talks.com (which is much funnier than it sounds). Multiple award winners included motivational talks streamer TED. and there are some great lessons among the winners for any business looking to sharpen its digital approach if you can wade through the awards site. 09 9 . But if you visit only one winner check out the personal website of the year for both Webbys and People’s Choice – reasonsmysoniscrying. including A the viral sensation of martial arts actor Jean-Claude van Damme doing the splits between two trucks. Enterprise software is the big winner.2014 WEBBYS pril saw the announcement of the 2014 Webbys – the veteran (est. Webby Breakout of the Year? Kickstarter. Reasons My Son is Crying (a site for every parent) IT SPEND ON THE UP 8% IT SPEND GROWTH 7 DEVELOPED ECONOMIES’ GDP GROWTH 6 5 SIGNPOST What’s cool? 4 3 2 1 0 2007 2008 2009 2010 -1 3. a community of innovators. and enahnced database management systems.9% growth to $320bn. blog service Tumblr.000 internet users. According to analyst firm Gartner.360 3. up 4. apps and services is a daunting challenge.151 3. And best branded content went to Swedish agency Forsman & Bodenfors for its work with Volvo. 1996) “Oscars” for websites presented by the International Academy of Digital Arts and Sciences – and which include the People’s Voice Awards. new journalism site Medium and low-cost host and design company SquareSpace. mirror GDP growth – although much higher budgets in 2010 and 2011 were not matched by an economic boom. as companies tackle some of the big trends in the industry.

.857 BT/ALCATEL ADVANCED FIBRE 1.what? We’re in the midst of a massive upheaval in web addressing.fly. 26% of people are active social network users. until If This Then That (IFTTT. getting a lot more complicated.. WeChat (236m). and has a rolling categorises the kind of programme of activations. But the infrastructure underpinning it continues to dazzle us with rapid speed improvements. the suffix at the end releasing these new suffixes in of a URL that. Globally. QZone (712m members). October 2013.com or a .42 56K MODEM Speed in kbps: 56 ADSL BROADBAND 1.000 GPON FIBRE 2.000 a time.wine Corporation for Assigned generic top-level and . even brand names. some restricted (usable by about .9 29. these (ICANN) agreed to end the aren’t cheap – and organisations restriction of gTLDs from the 22 will need to decide whether the “traditional” suffixes and started marginal increase in information imparted accepting proposals for new ones.360 EPON FIBRE 1.608. we can June 2011.62 7. That’s its nature. New top-level domains are coming on stream all the way through 2015. After registering networks – Facebook.net – just for communications organisations that meet certain criteria – like companies. Some are closed (a hould you be a . IFTTT will do a “that” to another service you specify – such as cross-post Twitter updates with work-related keywords to your LinkedIn profile. .238.152 307. Have you got yours? CONNECTEDNESS Post mix Merging social networks was hard.17 3. LinkedIn – and any number of apps. in theory. Sina Weibo (500m). . ICANN started (gTLDs). pictographic languages. Google has filed for 101 new gTLD At issue is the release of hundreds strings. the Internet the price of a new expect .200 ISSUE 1 SMARTER COMPANY . by their URL is worth whatever it costs them These could include non-latin character to buy their slice of the gTLD from whoever sets (opening up options for Arabic and handed over that sum to ICANN. but it’s much more social. In web service you offer. according to a report from BI Intelligence. Twitter. In July 2014. CHINA Social-ist paradise 10 Number of HD movies you can download in an hour: 1998 1998 0.288 CABLE BROADBAND 38. and Tencent Weibo (220m) are the big players.024. too.. in China.503.biz? What brand name.meet.824 2009 2005 2008 2008 2013 16.000 TYPICAL TELCO FIBRE (2012 SPEEDS) 77. Only Facebook and YouTube are bigger than QZone. for example) and S 185 $ 45% K SPEED FREAKS It’s easy to talk about how fast the digital economy changes. it’s 46%.connections TRENDS .146 REX FEATURES Internet penetration is higher in China (at 45%) than it is for the world at large (37%).536 ADSL2 12. 2002 1997 2005 1.aero gTLD) and others open address? Those questions are in the midst of (anyone can buy one). you can build “recipes”: if one service does “this”.554 LTE (4G) MOBILE TYPICAL TELCO FIBRE (2014 SPEEDS) 177. These technologies are listed by the kilobits per second (kbps) available at the time of their widespread adoption – with the year their standardised specs were agreed. or can anyone use it in their web the established .ninja.3 97. Amazon 76 and Microsoft of new generic top-level domains has filed for 11. say). for example. Names and Numbers domain for your website But at $185.6 249 143.com) came along.day.005 0.

must be that 64% of online teens born after the World Wide Web – is behaving are paying for some form of digital content online. 56% say gifts/rewards increase chance of them advocating a brand online 24 70 % investigate products via mobile apps and services % of 16-34s either have used. which has or service each month. wearable tech products 11 . b ut share Growth plays in online games d social networks (22%) than other Second screening are Tumblr and generations.” the According to a report from the influential Pew report points out. for content businesses in the next generation of users – the net natives particular. are with this audience. A TELECITYGROUP.COM % say that brands should provide entertainment. their main social network. (24%) and multiplayer Mobile. Only 7% said that Twitter was simultaneously. love to “second screen” TV and are more likely to pay for music downloads than the older generations. Research company. 94% of teen social media Messaging remains a crucial tech users said they had a Facebook profile. and they’re increasingly 81% said that Facebook is the profile they use using two devices – typcially phone and TV – most often. ls – but they’re much more reckons it’s spotted some likely to pay for music g tools important trends for downloads (26%). is also the teens’ phone of choice.TEENAGERS WITH A FACEBOOK PROFILE SAID IT WAS THE SOCIAL MEDIA PLATFORM THEY USED MOST OFTEN 16-19 IN NUMBERS 64 40 % of online teens are paying for some form of digital content or service each month TUNNEL VISION KNOW YOUR TEENS Youngsters are less likely to use search engines. or are interested in using. GlobalWebIndex (GWI). “[This] Android Instagram – although both indicates how diverse the of these are still well below monetisation opportunities Purchasing the heavy hitters like Facebook. mobile apps Messagin the demographic. Android. ny business leader planning their digital But the the most positive finding from strategy ought to take an interest in how the GWI research. That’s in line with been surveying teen internet users generally New discovery channe audiences on the web. and application for teens. as a cheaper option.

rather than being thwarted. embrace the randomness. you may be heading down the path to the winners’ circle. But I believe you can harness click moments. Don’t even try to presume I So as you lay your bets. If you feel confident one possible bet is a winner and are inclined to go “all in” on it. You need two simple shifts in mindset. you will run the risk of pursuing a plan that can quickly become outdated or that is so obvious that your competitor is also doing the same. we think we know the rules for success. and prepared to move very quickly once you see the first flicker of momentum building. But you have no choice but to roll the dice. You must simultaneously launch a barrage of different strategies that may or may not convert your click moment into success. Result? Click! Viagra becomes a best-selling drug. by definition. Stocks can rise and fall unpredictably. you’re denying the randomness inherent in your click and setting yourself up for failure. we think we can plan our way to success. focus group or business plan can predict which clicks will work. Accept that the complex forces governing success are going to influence your projects in ways you might not have expected… and might not like at first. Bethenny Frankel launched at least six different businesses before making it big with Skinnygirl Margarita. Frans Johansson is author of The Click Moment: Seizing Opportunity In An Unpredictable World and CEO of The Medici Group 12 any one of them is a sure thing. And yet. Of course. A great example is Pfizer’s blood pressure pill that caused a “prominent” side effect in the men who took it. realise that if things veer off the course you hoped for when you captured your click. But if you’re always looking closely at every little surprise. First. even the meeting with the person we eventually marry can be chance. you need to make many bets – purposefully. Accept the complex forces governing success. And because we have become experts in our field. you may be heading down the path to the winners’ circle.connections OPINION Frans Johansson Clicking all the boxes n business we place a lot of emphasis on creating the ‘right’ strategy. ready to leap through openings created by different circumstances criss-crossing. things happen that force us in new directions. Angry Birds was Rovio’s 52nd attempt at a game. realise that if things veer off the course you hoped for when you captured your click. rather than being thwarted. Even Apple has a very high failure rate for new ideas. We see it more and more as the massive interconnectivity and greater transparency of today’s digital ecosystem create opportunities for more clicks to spark more ideas – and huge successes no one expected. unpredictable surprises will be the best things you never saw coming. out of our control. The only constant is randomness. Creating a click moment is one thing – seizing it and riding its potential is a whole different challenge. No team of experts. ISSUE 1 SMARTER COMPANY . spontaneous incidents turn into mass movements. it’s easy to believe in randomness if we look at the world or our own personal lives. “that was when it all started”. So make your bets small – then you can weather the losses that most of them will bring until you click with the big winner. So as you lay your bets. If you don’t embrace randomness. when it comes to business. Randomness is. However it lends itself to creating what I call a ‘click moment’ – the one instant when fate turned your way. a moment you can look back at and say. Second. The reality is that rules change.

artists and commentators to share their ideas.000 people created content around that without changing a word of the original text. which mapped references to Shakespeare and his plays through Twitter. We also commissioned re-interpretations of Shakespeare’s work. connections and ways Shakespeare was being shared socially. Shakespeare himself was an innovator – and at the Royal Shakespeare Company (RSC) we already have 450 years of innovation in stagecraft and interpretation to incorporate into the way we navigate his work today. But the questions of where those points are to be found and how to use them are ones every organisation should be asking of their own approach to this incredible digital ecosystem. the technology just revealed the conversations. Over the past few years the RSC has explored this evolution with creative digital projects such as Such Tweet Sorrow (Romeo and Juliet via social media) and Adelaide Rd.Club 100’s most influential. too. Flickr and eBay. Now we’re in the digital age. and was named one of the h. That means there’s nothing happening for long periods – so we invited people to create new characters Google hits: and situations to fill in “Shakespeare” 276m the background. And Tom Armitage’s Spirits Melted Into Air looked at data-mapping a performer’s movements on stage. our work can travel. replacing headlines with appropriate quotes from the plays. the RSC launched myShakespeare – an online space for writers. the web and a mobile app. we are applying the tools of our own era to that process. The RSC put on a production live and online. We live in a world of makers now – over 1.000 pieces of content. by Bureau for Visual Affairs. We’re not just playing to people in the theatre any more. Sarah Ellis is digital producer at the RSC. visually and commercially online. They include digital projects like Such Tweet Sorrow. In 2012. That means questions change: what are the new rituals about how people receive and interact with culture? What content or approach works best in a networked environment? We’re discovering new cultural meeting points. where events take place over three days. we are applying the tools of our own era to that process. innovative and interesting people in the creative and media industries by The Guardian 13 . experimenting with how a play would work on the internet. as part of the World Shakespeare Festival and Cultural Olympiad. which used As You Like It as a framework for engaging a local community in London via theatre. The content was all there. We reached 30 million people through social media. rather than production timings. Now we’re in the digital age. You can see how relevant he remains today by the sheer number of hits from a Google search for a particular quote from a play or sonnet. We used the S TELECITYGROUP.COM timings within the play. Last year’s large-scale collaboration with Google’s Creative Lab was Midsummer Night’s Dreaming.Sarah Ellis Finding value in new meeting points At the RSC we already have 450 years of innovation in stagecraft to incorporate into how we navigate Shakespeare’s work. Our main commission was Banquo. hakespeare has always been an influential part of our culture. Brendan Dawes’ new work To Be Today linked Shakespeare texts through the APIs on the BBC News site. That “JK Rowling” generated more than 21m 3. In the digital world.

ID and access control will rely on central exchanges with expertise and great process. Standards Shared standards on data handling will open the door to interoperability between cloud systems. 14 OLD Single point of failure for comms. too.com/ cloudix IN HOUSE The volume of users is capped by in-house server capacity. Security Intercloud More? Go to demands page 50 rigrous security for a primer on virtualisation protocols. Limited connectivity to the wider internet and single points of failure around hardware.connections THE IDEA Integration Data centres are ideal for getting all your data into one high-spec location. And they like cloud’s flexibility. Choice Some data needs to live inhouse. Flexibility Switching between clouds seamlessly gives organisations the option to flex around demand and functionality. Limited options around cloud – including supplier lock-in. TelecityGroup’s Cloud IX platform means they aren’t locked in to one cloud provider. If you need to bring together applications. or Intercloud. a reality. hybrid and public clouds as they need. CIOs want the connectivity and resilience of colocation. network or cloud supplier lock in Limits on both internal and external user numbers connect with us PICK A CLOUD TelecityGroup’s Cloud IX platform is the perfect way to develop a cloud of clouds approach. Experts say these will emerge in the next couple of years. New services and scale have to be added manually. Cloud of clouds offers the same management and security benefits for your entire IT infrastructure. exploiting private. data and services – especially on different platforms – this could be a magic bullet. Partner cloud providers include: • Amazon Web Service • CSC • Fujitsu • iLand • Microsoft Azure • Outsourcery telecitygroup. Cloud of clouds Emerging standards promise to make the cloud of clouds. ISSUE 1 SMARTER COMPANY .

Data centres with strong links to cloud providers offer extra choice. capacity.” 15 . security and connectivity.Resillience. Additional capacity and services can be made available quickly. “I love visiting engineering-based companies. But a truly interoperable cloud of clouds means that can happen on-the-fly – offering even higher levels of redundancy. TELECITYGROUP. connectivity and scalability. But locked-in to cloud provider NOW ON THE WHITEBOARD In-house. data and services shared seamlessly Ability to scale user numbers and leverage legacy infrastructure DATA CENTRE PLUS CLOUD Existing infrastructure is maintained. Meeting room whiteboards always hint at the super-smart discussions they host.COM CLOUD OF CLOUDS Data centres already leverage higher levels of connectivity with cloud providers. co-lo and both public and private clouds all in same ecosystem via data centre NEW Ability to flex between clouds. Richard Young is editor of Smarter Company. but colocation offers resilience. access to more networks. options for creating blended services and supplier choice.

But that’s just the start. SwiftKey co-founder Ben Medlock tells Richard Young. PHOTOGRAPHY FELICITY MCCABE 16 ISSUE 1 SMARTER COMPANY . its techology is embedded in over 150 million phones.SWIFTKEY GAME CHANGER Its revolutionary “learning” keyboard has been a bestselling app for four years.

D

r Ben Medlock is the sort of person one ought to
secretly dislike. An accomplished student sportsman –
captain of his college football team and a gymnast – he
composes and records his own music, is fluent in several
computer languages, holds a PhD from Cambridge
University in natural language processing and cofounded one of the most successful app businesses in the
world. And he’s only 35.
But he’s also humble, articulate and considerate. And
SwiftKey, the business he started with college friend Jon
Reynolds and where he is chief technology officer, is very
cool. It’s impossible not to warm to him, and it.
SwiftKey is best known for a third-party keyboard that
you can install on your Android smartphone. It allows you
to use a clever flowing motion to “type” words (rather
than pecking at your phone’s tiny on-screen keyboard),
and it also predicts what you’re going to write next.
It can analyse your Facebook, Twitter and Gmail
accounts to see how you write. And once it gets a taste of
what you write about and the way you use words, it’s like
having a version of yourself from a few seconds in the
future, helping you pick which words to use.
“There’s a moment where you realise that it’s
reflecting your personality in some way, and I think that
really comes down to the fact that language is at the
heart of who we are,” says Medlock. “This is
really not about keyboards, it’s about the
way you express yourself.”

Evidence that the product – and the business – really
works is all around SwiftKey’s headquarters in central
London. The graffiti on the wall: “number one app in 34
countries right now”. The photo wall of 140 employees (it
was just four in 2010). The fact SwiftKey has been at the
top of the paid app chart for Android smartphones for
two years, on and off. That it’s done multi-million dollar
deals with global giants like Samsung and Nokia.
A great product, then, and a smash hit digital
start-up. We’re intrigued.

SMARTER COMPANY: LANGUAGE SITS AT THE HEART
OF THIS BUSINESS. HOW DID YOU GET INTO THE
SCIENCE OF IT?
BEN MEDLOCK: Language was always so much part of
the family growing up. We loved to play with words – the
use of language was so important to my parents.
At university, I loved some of the more esoteric
programming languages. Then for my final year
dissertation I got stuck with my third choice project – a
very abstract problem building up a parser generator.
Nobody really knew what that was. But I loved it. I had
such a good time doing that project, and that was really
how I got into natural language processing (NLP).
SC: CAN YOU EXPLAIN NLP?
BM: NLP – helping computers understand human
language – had gone through a significant transition
from symbolic approaches towards statistical approaches.
The symbolic approach is built around manuallyconstructed grammars and manipulating symbols. That
requires a high level of human involvement. The statistical
approach is a fusion of maths, computing and language
which builds mathematical models of the elements of
language and applies those models to learn from
data to solve any problem. It’s essentially the
application of machine learning.

Programming or
recording music – or
building a company
– is all about these
different patterns
that work together.
BEN MEDLOCK

TELECITYGROUP.COM

17

GAME CHANGER

ONE

month for iPhone
app SwiftKey
Note to get 1m
downloads

SC: IS THIS ABOUT ARTIFICIAL INTELLIGENCE?
BM: It ties into a deeper philosophical discussion about
the nature of the world and the human mind. But for me
it’s always about patterns. The reason I loved music
[Medlock did a music foundation course] was less about
performing and more about building up patterns that
work together. You’re building up a structure, and that’s
exactly what creating complex systems is all about. So
whether it’s programming or recording music – or, in
fact, growing and building a company – it’s how all the
different patterns work together.
SC: WAS LEAVING PURE RESEARCH A
HARD DECISION?
BM: I’d been a student for eight years
and I wanted to do something that
was more stressful – that involved
more interaction, shorter cycles, the
need to deliver things.
I had a chance to become a partner
in an NLP consultancy founded by my
PhD supervisor Professor Ted Briscoe,
department lead for the NLP group at
Cambridge and my mentor. I went into
business with him and had a lot of fun.

thinking about the distribution of characters – given
you’ve typed a C, what character are you most likely to
want to type next? Could we minimise the distance
between those characters on a keyboard?
But the more I thought about it, the more it became
clear that the work we were doing was around analysing
language. Our sense was that if we could build something
heavily contextual that looked at the words in the
sequence in order to predict the next word – perhaps we
could come up with a system where people were able to
build sentences by picking words rather than
having to type out each individual character.

SC: HAVING AN IDEA IS ONE THING.
WHAT TURNED IT INTO A COMPANY?
BM: It was clear we would need to get
some funding. Jon had had some
involvement with the government’s
Technology Strategy Board as part of
his civil service work and he knew
about grants for feasibility studies.
When we got that first grant of £15,000
BEN MEDLOCK
in May 2009 – it seemed like a huge amount
of money at the time – we both went full time.
We spent half of it on filing patents, because we
knew this space was notoriously litigious from an IP
SC: SO HOW DID SWIFTKEY COME ABOUT?
perspective. And we really believed that we had a model
BM: Ownership has always been really important to me,
that was a lot more powerful than anything out there.
that sense of building something that’s not just cranking
But we knew it would be hard to sell this as an abstract
the handle in order to earn money.
technology without a product people could engage with.
Then, in the summer of 2008, Jon [Reynolds] had been
That was a lightbulb moment: we had to build a
thinking about whether QWERTY was really an optimal
keyboard that people could use on a daily basis. So at the
layout for typing – especially on a touchscreen where you end of 2009, we outsourced the first keyboard, sitting on
can rearrange the keys any way you like. I’d been
top of our predictive engine, to a developer in Argentina.

18

The whole mobile
technology market is
changing so quickly
– and we were very
fortunate to get in at
exactly the right time.

ISSUE 1

SMARTER COMPANY

522,
071

#1 in

5-star user reviews
on Google Play

London
According to Wired
magazine’s list of top
European start-ups

17.5m

$

Raised in series B
development capital
funding in 2013

60
Languages currently
supported

SC: WAS THE MARKET READY FOR THE IDEA?
BM: We knew that Android was taking off. It only had 1%
penetration in the smartphone market, but we knew
Samsung and Sony had signed up for this new platform.
So we went to Mobile World Congress (MWC) at the start
of 2010, using a grant from UK Trade & Investment [a
government export agency]. I spent a lot of the conference
hidden behind the stand, trying to hack together this
horrifically unstable alpha version of the keyboard.
There were only four of us in the company, and we
needed to take a team to the conference to look plausible.
So we took a guy that Jon knew from college, one of our
early investors and my housemate. We had 1,000 business
cards made for them with ‘vice-president’ printed on them!
SC: WAS THAT ENOUGH TO BUILD CONFIDENCE?
BM: We’d also emailed two Android blogs to ask if we
could try to drum up some support for alpha testing. We
got about 600 people’s email addresses. Then in June of
that year we launched our first beta version of the app on
the Android Market [now called Google Play]. The eureka
moment was watching Twitter after we put that live.
There were last-minute glitches and we were up until

TELECITYGROUP.COM

2am trying to fix them just before go-live. I was on my
way home from the office in a taxi, watching the Twitter
feed on my phone. The reaction we were getting was
incredible. People were so effusive, they were getting so
passionate about the product even at that beta stage.
I knew the model was good. But I had doubts about
how it would work as a consumer product. At that
moment, I realised that people really cared about it.
When we released the paid-for app in September of
that year, it made it to the top of the charts. And to be
able to go into the Android Market and see it right there,
top of the list… that was an incredible feeling.

SC: THAT JOURNEY SAYS A LOT ABOUT DIGITAL
BUSINESS TODAY.
We were told that no one had ever built a successful text
input company, from inception to doing the big deals, in
less than eight years. And we wouldn’t have done, either,
had it not been for the app ecosystem. It allowed us to
distribute the product very rapidly.
We had SwiftKey users who happened to be product
leads in Samsung. Even a couple of years earlier, it would
have taken us years to sell in to that level of influence. The
whole mobile technology market changes so quickly – we
were very fortunate to get in at exactly the right time.
SC: HOW FAST DID THINGS MOVE?
BM: In 2012 we went back to MWC. SwiftKey won the
Most Innovative Mobile App at the GSMA awards. And

19

Jon put a huge amount of work into closing those deals. We’re now up to 140 employees. LANGUAGES EVEN? BM: SwiftKey is an unusual company for the UK.GAME CHANGER $ bn that year we also closed 2013 revenues of Nuance. Then there’s a second challenge: the whole emerging field of machine learning. SC: IS THAT THE BIG DIFFERENCE ABOUT DIGITAL – THAT IT JUMPS BORDERS. more typically British is a streak of self-deprecation that laces Medlock’s comments.” So where does that leave this very smart company? “In two years’ time we could be seen as the UK Google. that’s what we want to do. moving into what we call representation learning and deep learning. Andrew Grove at Intel said only the paranoid survive.” What we do know is that the company is developing specialised products for a range of environments – such as healthcare and the automotive industry – and continues to wow users. “We have a shot at building a really interesting UK-based business that is quite unique. Our long-term goal is to compete with the software giants of the West Coast [of the US – where SwiftKey CEO Jon Reynolds is now based]. is to build all that into applications that make sense to the consumer. That meant getting a really good team together. We’ve built an application that captures the things you’ve said in the past. It’s about our ability to use technology to capture and model human behaviour. then uses statistical models about the way you’ve interacted with it to try to make your life a bit easier. And so Jon closing a couple of these deals made us realise we could support a pretty big business. who heads up our languages team. And there was certainly a time. This is about much more than just typing. which is almost as difficult. which is my mantra in some ways. She’s led the team taking us from four languages to more than 60 over the past three or four years. We were displacing incumbent multi-billion dollar US businesses who’ve been doing this for decades. we had to support 60 languages. I suppose.” Medlock explains. “That’s part of the excitement of being a start-up.” he stresses. then it has to be based around building a wide-ranging and cutting-edge technology base. And having survived this long is absolutely no guarantee of the future. Medlock might be less confident at predictions than his software – but SwiftKey is still expanding. “You know that only 1% of startups will make it through the first year. 2010 to 2011. So Caroline [Gasperin]. SC: DOES THE CORE TECH HAVE MORE TO OFFER? BM: At a conceptual level. and that prediction engine is in use in more than 150 million phones worldwide. 20 ISSUE 1 SMARTER COMPANY .” What is. where we suspected we just might not be able to close them because big manufacturers are so demanding. “You know that a tenth of those will then fall off in the next couple of B years. in this particular case it’s about the way you use language. In order to close the likes of Samsung. or we could be trying to do something else entirely because we tanked. the dominant player in computer speech The multi-million dollar technology licensing deals were the culmination on the business side. One of the proudest things for me is to look at the people who have been around from the early days who’ve had such an influence. But the subsidiary challenge. And if we’re going to do that. perhaps. That’s our vision. THE PREDICTIONS BUSINESS en Medlock says his life has been a catalogue of obsessions. But having a diverse set of interests and a compulsion to explore them could well be the secret of his and Jon Reynolds’s success. “We came up with the concept because we wanted to solve a problem.” he says. Taking that principle to other areas of mobile and technology use is the broader objective. That’s all about how to capture this more accurately. It’s about consolidating what we’ve built around helping people to type – and then research and exploration in applying those same principles to other areas. not because we wanted to build a business as such. Samsung as a licensee. was a PhD colleague at Cambridge. it models behaviour. That’s our current obsession.

TELECITYGROUP.COM 21 . Globe-trotting Monty Munford reports from the countries striving to create the next generation of coders.GLOBAL TAKE WEB ANALYST APP DEVELOPER DATABASE ADMIN PYTHON DEVELOPER DEVELOPER DEVELOPER DATABASE ADMIN DEVELOPER NETWORK MANAGER PERL PROGRAMMER OS DEVELOPER DEVELOPER CODE TO JOY GALLERY STOCK Politicians know their economies need a pipeline of engineers – especially software engineers – if they’re to stay relevant in the digital economy.

That means it’s unlikely that the fixed internet. TiE Bangalore had nine charter There have been previous claims to a new economy members when it launched in 1999. accreditation. It could be anywhere in the world – Google Campus overtaking the US and becoming number one in the in London. And I 22 ISSUE 1 SMARTER COMPANY . film Akira) are making apps and coding as Bangalore and Pune in the vanguard – is a threat quickly as they can consume the online courses to European cities that currently prosper due to faster from MIT. AKIRACHIX But that also means the future of digital Africa is a generation of coders many of whom will hone their skills on mobile devices under tough conditions – an environment that will fire their creativity and adapatability. And its young people But these entrepreneurs need skills – and the are savvy. is buzzing.000 members of the city’s tech from an outsourcing hub to a modern. highly motivated – and growing up Kenyan government knows it. t’s mid-morning in Nairobi and the iHub. it’s leap-frogging more developed economies and moving to a truly wireless technology infrastructure based around data hubs and mobile access. trained. India will have 5. a glance tech-skilled labour force evolve seamlessly needs a global into the ground floor of the iHub provides from education to entrepreneurship. often overlooked hardware skills as well. but the professional is. Lagos. a figure rising faster than any other region. This initiative. In this space. has already transformed much of the continent. the prerequisite high-bandwidth. But with the TiE Bangalore programme. its mission has Bold ambition been successful. It’s seen an extraordinary transformation representing almost 14. many of which more than 1. of course. This is where Kenya’s youngest and brightest The Global Developer Population and Demographic entrepreneurs congregate in a co-working space to Study by Evans Data predicts that by 2018 put together their plans for world domination. At the latest count there were Much of this growth has been initiated in more than 150 companies that contribute to the iHub Bangalore. It even has the mandatory foosball table. The weight of outsourcing initiative aims to equip the country to be a “newly jobs helped – it created a critical mass of digital industrialising. the Skolkovo Innovation Center in Moscow world for programmers. these young coders might well leapfrog their western counterparts too. and secure environment”. connectivity and other technological factors. They evidence about its future economy. In a sense. Out of Africa Mobile. In 2030. will ever need to be laid there. a group of young female Can Europe keep pace? coders known as Akirachix (their company PROFESSOR HASSAN Africa and India’s emergence as territories is named after the Japanese animated sci-fi ABDALLA. Its Vision 2030 learning high-tech skills. And it have not only software skills. global city in community. According to the Africa Mobile Telecom Report 2013.2 million software developers. low-latency networks and data is to prevail in a country where their gender faces centres is a massive advantage – but it’s critical that even bigger challenges than in the West – even if they the next generation of entrepreneurs and workers are represent more than 50% of Kenya’s workforce. Delhi and the rapidly emerging hub of Pune. And one of the principle it was also the first Indian city to launch a global means of achieving that aim is to create a generation network of thinkers. along with represented the egos of the ministers making the launch of the Bangalore College of them rather than any reality. digital. Africa now has 80% mobile phone penetration. Even with competition from Mumbai. has seen a The data industry not Kenya achieves this new goal. now it has vision by African countries. of programmers and digital entrepreneurs. if Kenya indeed becomes a “middle-class country”. quite clearly. and its accompanying cables. The traffic is bearable compared staple of any serious tech meeting spot. resourceful programmers are coming through. UEL of the future – with the likes of Nairobi. to that in Delhi and Mumbai. a little over a decade. Having For the women-only Akirachix. or Silicon Valley itself.000. But whether or Engineering and Technology. high quality of life to all its citizens by 2030 in a clean designed to make it the “Startup Capital of India”.GLOBAL TAKE it’s a sign that the digital revolution brings with it more than generational or economic impacts. educators and entrepreneurs. the And it’s not just Africa where ambitious. middle-income country providing a employment. city’s centre for the tech community.

the prerequisite is to prevail in a country where their sex faces even bigger challenges than in the West. a technology gold rush is well and truly on. there are plenty of examples of organisations taking a proactive approach. Finland has long been pre-occupied with inspiring and training a future generation of coders. Every city wants to be the new Silicon Valley – and there will be new tech hubs forming the world over. Now supported by mobile and data behemoths such as Nokia and IBM. Speaking of Finland… In fact. Data centre of excellence The University of East London (UEL) is a global learning community with more than 28. taking its cue from Google’s Summer of Code programme. for example (see box). “We want to prepare the next generation for the world ahead with the best tools at their disposal. The industry needs a global professional accreditation. already a self-styled global digital hub. it’s also gained a following globally.7m by the European Commission to help define training and research needs and to create a new centre of excellence. where individuals and companies can learn basic code. Istanbul to Tampere in Finland. not dissimilar to that taught to Code Club’s kids. ARM and Samsung. it has nurtured the next generation of coders and led directly to a booming Finnish start-up scene.For the womenonly Akirachix. venture capitalists and tech startup communities. The PanEuropean Data Centre Academy (PEDCA) will drive much needed innovation and creativity. Computing and Engineering. characterised by the huge success of Startup Sauna. an accelerator for Russian. so they can not only imagine the future. London to Lagos.000 people in the UK. From Helsinki to Banaglore. MIT Technology Review. In London. which helps tech companies become investible. Cambridge.500 Finnish programmers. capable of exploiting this crucial foundation. is has gone on to teach more than 1. for example. called for urgent transformation of training and development to cope with a skills shortage across the sector. What will differentiate the scale and success of these hubs. a project organised and backed with the help of Finnish companies wanting to contribute to the community at a local level. The university has a strong track record in widening participation and working with industry. Wired UK and The Telegraph – as well as being founder of Mob76. raising more than $36m in funding. It will be the volume and skill of the coders drawn to them. with affiliated clubs springing up from San Francisco to Stockholm. The University of East London. offers courses to equip graduates with skills to serve the vital data centre industry. there is a need to work faster and start earlier.” says co-founder Clare Sutcliffe. the Dean of UEL’s School of Architecture.” 23 . is a volunteer-led network of after-school clubs for children between the ages of nine and 11 supported by government agencies and corporates such as Google.000 students from more than 120 countries.2 MILLION SOFTWARE DEVELOPERS CODE CLUB IS IN MORE THAN 2. but build it too. “There is no structured system in place to educate their successors. In the UK. BY 2018 INDIA WILL HAVE 5. well on its way to its target of being in 25% of the UK’s primary schools by the end of 2015. Since it launched a not-for-profit beginner’s course for female coders in 2010. In 2006.100 clubs in the UK. Code Club. its annual Startup Sauna event attracts the world’s leading investors. so educating the next generation of coders and programmers is vital for its future. East European and Nordic start-ups.” says Professor Abdalla. It is also a leading centre for female coders epitomised by Rails Girls – a group that echoes Akirachix in Nairobi. But in the face of global competition. 109 young people have graduated from the programme. Edinburgh. the stampede to provide young coders with the tech and entrepreneurial skills has begun. including a recent factfinding trip to Kenya and Nigeria. the country inaugurated Kesäkoodi (Finnish for “summer code”). industry hubs are vying with each other to be the new Silicon Valley.” UEL and the Data Centre Alliance (DCA) were last year awarded €1. In cities such as Bristol. Manchester and Newcastle. won’t be nice buildings or even cash. Recently. Birmingham.100 UK PRIMARY SCHOOLS 36m $ THE AMOUNT RAISED BY STARTUP SAUNA Monty Munford writes for The Economist. Interestingly. Professor Hassan Abdalla. but now has more than 2. “The situation will become exacerbated as more experienced professionals reach retirement age. and for industry. And he has plenty of relevant experience for this piece. Since its inception in 2010. The data centre industry provides employment for more than 15. however. Code Club has been in operation for less than two years. “I also went on an excellent course run by a kind of Code Club for adults called Decoded.

Gartner expects global revenues to top $22bn in 2015 – surpassing PC game sales.THE BIG PLAY Mobile gaming has been revolutionised by titles such as Farmville and Candy Crush Saga. 24 ISSUE 1 SMARTER COMPANY .

What unites all of these companies. social platforms. Their experiences – and successes – have lessons for every organisation. founded in Sweden in 2003. the rise of mobile devices. TELECITYGROUP. Last year.COM KING OF THE NETWORK Perhaps the shiniest star in the online gaming firmament is London-based King Digital Entertainment. it’s happily close to the $19 launch level) but there’s still an awful lot of people soliciting Candy Crush help from their Facebook friends. Its share price might have dropped more than 15% immediately after the IPO (as we go to press. underpinned by networked play via Facebook. Gibson would feel quite at home today in the $70bn-ayear global market for video games. the author of the cult sci-fi classic Neuromancer. who announced that “the future has arrived. Wooga (Berlin). is a focus on so-called casual gaming – which Riccardo Zacconi. In a few short years. data centres and Big Data analytics have revolutionised the industry in a way that suggests we’re only witnessing the early stages of a transformation that will spread to many other sectors of the economy. CEO of King. high-speed broadband. Three years ago. Pretty Simple (Paris) and Supercell (Helsinki).9bn. I WORDS PETER KIRWAN ILLUSTRATION MARTIN (Z) t was William Gibson. King floated on the New York Stock Exchange with a valuation of more than $7bn. no game 25 . though. with 75% attributable to mobile gaming. with both platform and content providers uncovering new ways of exploiting the network.G GAMES WITH UT FR NTIERS Online gaming is a serious business. It’s just not evenly distributed yet”. it delivered revenues of $1. It’s bestknown for the hugely popular Candy Crush Saga. King was turning over $64m annually. Zacconi wants King games to be an exercise in “bitesize brilliance”. describes as being “easy to learn but challenging to master”. In March. where the arrival of the future has been accompanied by a remarkable amount of disruption (and some pretty unevenly distributed profits). The revolution is being led by a new generation of European start-ups whose games for smartphones and tablets are driving a wave of turbo-charged growth: companies like Social Point (based in Barcelona).

the new generation of games like Candy Crush Saga generated revenues of $9. In the mid-1990s. Gartner expects this to increase to $22bn. a start-up called Facebook was spending its first venture capital investment on buying the domain 26 46% OF MOBILE GAMERS ARE FEMALE name “Facebook.3bn in 2012. emerged long ago as the heavyweights of console-based gaming. A year later. with the biggest and most sophisticated games costing significantly more. you should be able to arrive home and continue playing the same game on your iPad or desktop PC without missing a beat. the number of people playing games for the first time on mobile devices is growing rapidly. By 2010. A GAME CULTURE Casual gaming start-ups reach out to users that the console-based giants.” says Zacconi. seem to have forgotten. Twelve miles away. on Facebook or on smartphones. Also in 2005: Microsoft launched the Xbox 360. Nintendo countered with the Wii and Sony launched PlayStation 3. One of the results. In Palo Alto. fortified by barriers to entry – the most important of which was the sheer cost of developing new games. By 2017. it typically cost well under $2m to develop a game for the PlayStation. Costly distribution turned the games industry into ISSUE 1 SMARTER COMPANY .THE BIG PLAY session should take more than three minutes. Sony and EA. in the words of Steve Fowler. trying out new ideas. King aims to offer users a smooth transition between devices. and trying again. Like its rivals. was an industry that became “increasingly beholden to major bricks and mortar retailers as the predominant distribution channel”. PwC expects online and social platforms to reach parity with consoles. What’s more. By 2015. it typically cost well under $2m to develop a game for the PlayStation.” But there’s another ingredient here: the network. These three consoles came to define the games industry – with global sales of 263 million units. in their haste to cater to hardcore gamers. “We create many games. then launch them on our website to see what works and what does not. casual gaming accounts for about 16% of the video game industry. By 2010. The rapid emergence of casual gaming has placed a question mark over the future direction of industry giants such as Microsoft. on the move and during breaks. If you play Candy Crush Saga on your Android smartphone during the commute home from work. Developers were forced to do business with one of these three industry gatekeepers if they wanted a substantial audience for their games. Like its rivals. THE OLD GUARD Rewind to 2005: things looked very different. Activision Blizzard.000. Already. The rise of games for smartphones also explains why the number of gamers aged over 50 grew by 148% during 2013. King offers games that work in an identical way on different platforms – desktop PCs. According to industry analyst Gartner. in Cupertino. The platform manufacturers and games developers solidified into an oligopoly. “It’s a continuous cycle of innovation and improvement. online via apps. King’s games are largely designed to be played on smartphones and tablets. that had become an average of $10m. the number rose by about 25% during 2013. most of the growth in connected gaming continues to be generated by mobile upstarts. And despite sterling efforts to bring connectedness to the console. the number of female mobile gamers is up 29% year on year). In the mid-1990s.com” for a mere $200. GTA V was launched in September 2013 after development that cost up to $140m – and was backed by a further $150m in marketing. According to game industry research firm Newzoo. courtesy of low-latency networks and cloud engineering. In western Europe and the US. revising them. These companies. vice-president of strategy at the US ad agency Ayzenberg. which collectively generated more than $17bn of games revenue last year. Apple was barely a year into the project that would result in the iPhone in 2007. growth is evenly spread by gender (in western Europe. that had become an average of $10m.

Clash of Clans and Farmville – which. As Fowler puts it. spending on new physical games (sold on DVDs) in the US was outstripped by sales of downloaded games. said that in Q3 2013. published by Zynga. NPD Group. and social network gaming. As online gaming has taken off. you’re not really playing – TELECITYGROUP. But there’s another species of game that demonstrates how online and social are redefining the industry: MMORPGs. This business model culminated in Grand Theft Auto V (GTAV). often on mobile handsets.5 million. The best-known is World of Warcraft. first published by Blizzard Entertainment in 2004. launched in September 2013 after development that cost up to $140m – backed by a further $150m in marketing. with unit sales (in the US) down from 290 million in 2009 to 188 million in 2012. at the start of 2014 it was attracting 67 million players every month. the business evolved into “big risk and reward. run by Riot Games. But Riot’s estimated $624m revenue in 2013 proves that getting your connections right for a brilliant user experience is also a great way to build a business. with peak simultaneous players of more than 7.COM THE RISE AND RISE OF THE MMORPG 148 % increase in the number of gamers aged 50 and over in the US last year 1. GAME CHANGERS The trend looks startlingly clear. mobile apps.RICCARDO ZACCONI CEO OF KING something resembling Hollywood. 27 . was the first game to break through from a niche audience to a new generation of mobile and social players. with the chase for mega hits needed to offset investments”. Technically a “multiplayer online battle arena” (although the game has roleplaying elements. 75% of which is attributable to mobile gaming There are some incredible numbers surrounding mobile smash hits such as Candy Crush Saga. Games delivered and played over the web. Like Candy Crush Saga. games and add-ons delivered over the web. it’s principally what’s known as an “action real-time strategy” game). Players log in to game worlds and play either freeform or in set quests – but alongside (or opposing) people from all over the world. The current big hitter in this space is League of Legends. according to NPD Group. If you’re not connected. online subscriptions and related content – to the tune of $450m. have elbowed aside shrinkwrapped DVDs as the industry’s main source of growth. Even as this launch was unfolding in late 2013 – the game took $1bn in sales within three days – the industry was feeling the effects of another remarkable transition. which monitors game sales worldwide.9 $ bn total revenue generated by King in 2013. Massively multiplayer online role playing games have been on the scene for a while. That means great connectivity is a must. The new centre of gravity involves subscription-based sales. League of Legends is free to play. revenues generated by physical format games have plummeted. That’s a huge amount of data traffic that has to be handled with minimal latency – the gap between players striking their keyboard and the effects being seen by other players anywhere in the world.

phone games have existed since Snake on the first LCDscreen Nokias – but that’s like saying Space Invaders was an early version of Call of Duty). you see about a 10x increase in your audience and a 3x increase in your gross revenue. often using modular code held in company databases. “If you had asked me a while ago about giving away your games for free. In Gens’s view. “I would have said I don’t understand that scenario. senior vice-president and chief analyst at research firm IDC. While all this was happening. that can 28 be a really big improvement in your business. Big Data analytics and social technologies. they’re delivered to devices by networks that have reduced latency to an acceptable minimum and can exploit the network effects of phenomena like Facebook. Ethernet and internet protocols like TCP/IP and SQL databases.000 developers five years to build Grand Theft Auto V. describes as the tech industry’s third platform. even to industry visionaries like Gabe Newell. Depending on your costs. Often free to play. But beyond a superficial resemblance – shifting from physical media to downloads – the disruption playing out in the industry operates at a far more profound level.” Newell noted last year.THE BIG PLAY CANDY CRUSH RAKES IN MORE THAN $3M A DAY SWEET: Q1 PROFITS OF $127M It took more than 1. Of the third platform.” He ISSUE 1 SMARTER COMPANY .” Newell has changed his mind: “What we’ve seen consistently is that when something moves from a traditional monetisation model to free-to-play. The economics haven’t always been obvious. Gens says: “The core elements are the cloud. mobile devices and networks. whose Steam platform has been the runaway success story for online game distribution. the casual games arrived on the back of the smartphone revolution (yes. it typically takes a team of three just 20 weeks to build a new game. the first platform was underpinned by mainframes in the 1960s and 1970s.” A sceptic might argue that what’s happening today in the gaming industry is simply a re-run of what happened in the music industry from late 1990s. co-founder and managing director of Valve Corporation. The second platform emerged in the 1980s with personal computers. as consumers began listening to digitally-downloaded mp3s rather than CDs. Perhaps the single most important characteristic of successful casual gaming companies is the way in which they leverage virtually the entire potential of what Frank Gens. The idea that a marginal audience member is worth more than the marginal cost of provisioning that service seemed super-speculative to me. At King. either as a gamer or a publisher. mobile apps.

“to balance challenge and progress and drive a sense of achievement in our games”. Its Q1 2014 results released in May showed sales of $641m. More growth of this kind is bound to come. Bringing them into the cloud environment adds to the equation network infrastructure and ongoing operations support. heavyweight engineering nous. In late 2013. security. “It boils down to five trends. log in and first in-game purchase”. its reliance on Candy Crush Saga is also declining. King claimed an average of 128 million users each day in December 2013. Call of Duty (with network-intensive multiplayer battles) or Candy Crush Saga (that has Facebook baked into its DNA) – you’ll know you’re doing something right. It took a team of more than 1. successful games are adapted for Facebook. a games specialist at the US ad agency Ayzenberg. Crucially. “Anyone interested in online business should read up on Markus ‘Notch’ Persson. and games delivered as a service. often re-using modular code held in the company’s database. Big Data analytics. Peter Kirwan was editor of BusinessAge and Computing before becoming the go-to journalist on media business for outlets such as the Guardian. From here.” says Peter Warman. and user acquisition – all factors that should be familiar to every CEO. yielding $127m in profit. CRUSHING IT King has been getting it right.com. rather than as a product. Wired and Press Gazette.000 developers five years to build GTAV. 29 . If successful. At King. Traditionally. 15. regardless of their sector. of course. analytics are used to modify the gaming experience. In some cases it’s possible to track individual customers “from impression.COM 29 % increase year-on-year in the number of female mobile gamers in western Europe $ bn the value generated by new generation games like Candy Crush Saga according to Gartner 70 $ bn value of the annual global market for video games CASUAL GAMING AND BIG DATA King holds great store by its “repeatable and scalable game development process” which its IPO filing described as “unparalleled in our industry”. Candy Crush Saga is still the most popular Facebook game. Steve Fowler. it’s had four of the top 20 grossing games on Android. free games. and three on Apple’s revenue leaders list. Crafting hit games and ensuring that they generate the maximum amount of revenue during their lifecycle is largely guided by data.” TELECITYGROUP. it generates revenues from a small subset of superusers. says Fowler. to registration. they go on to be developed for Apple’s iOS and Google’s Android operating systems. a global marketplace. But the company’s fortunes are ultimately decided by the same thing that drives every games company: hits. games industry analyst and founder of Newzoo. Customer acquisition relies heavily on algorithms that assign a likely lifetime value to users. through download. The notion of using the network to hook people into free games and then charging users for add-on functionality holds vast potential yet. dynamic business models. its model has flexibility built in. So if your business can adapt in the same way GTAV (with its companion phone app). then. “inform decisions on what content to make. It’s an object lesson in the power of the social web for any company. who are willing to part with what the company describes as “a modest share of our customers’ entertainment spend” to pay for increased playing time or to unlock new episodes. Like its rivals. down to 67% of revenue from 78% in Q4 of 2013. talks of the “enormous amounts of granular data on player behaviour” available to digital gaming companies. Behind all of this there’s the cloud. CIOs need to be alert. as the online population of the Asia Pacific expands (it’s currently just 945 million people). project management skills and a laser-like focus on quality. Those trends are more screens. how to price it. Throughout 2014. which is used to test new games. based on factors like their age. And. to click. Throughout the game’s lifecycle.predicts that the interaction of these elements will result in the emergence of “hundreds of thousands to millions of new solutions over the next 10. These calculations dictate the amount the company spends on marketing – and how. console game production demanded clear product pipelines. The results. how to sell it. even how to promote it more efficiently”. one important source of data is registration-based site royalgames. At King. which “connects everything and ties into every single trend”. it typically takes a team of three just 20 weeks to build a new game. 20 years”. who used to work at the company that became King and left to launch Minecraft in 2009. just 4% of King’s users paid to enhance their gaming experience. location and level of gameplay.

Incredibly. John Chambers. According to Cisco. We have data centres to store and process the vast volume of information produced by connected and smart devices. alerting the farmer by text message when one of the animals is sick. RFID (radio frequency identification) tags. But there is huge potential for machines communicating with each other to improve the many complex processes that govern our lives – but that are still controlled by dumb mechanical systems or. When we get the blend of people. such as heart disease. which coined the phrase. A simple example: many drugs to treat chronic illnesses. So this kind of machine-to-machine (M2M) communication – that happens without any human intervention – has the potential to both improve lives and save money. cost a few dollars and can be re-used. in a pill that would allow your medication to send a message to your smartphone or even your doctor’s database to update your records. This has been going on for a while. We have wireless networks allowing untethered devices to communicate. Imagine you could embed a tiny processor. embedded processors (as opposed to the CPUs in computers and smart devices) make up over 99% of the world’s microprocessor production by volume (They will exceed PC processor sales by value as early as next year). Even a decade ago. Some of us may resist these “talking pills”. At the 2014 Consumer Electronics Show in Las Vegas. the promise is an “internet of everything”. need to be carefully monitored. It’s not even that smart: the sensors are based on a well-established technology. gather and then share data. and unprecedented economic opportunity for businesses. individuals and countries. per cow. predicted that the total cost-benefit of IoT could be as high as $19trn.” M2M: A HYPE THING Lots of people are getting extremely excited about IoT. turning information into actions that create new capabilities. The IoT revolution will give these billions of devices some autonomy and allow them to share data. But this kind of M2M application is already in the field – literally. As the Economist Intelligence Unit (EIU) report on the IoT. In the US. CEO of Cisco. that “will make networked connections more relevant and valuable than ever before. worse. There are already millions of tiny devices that monitor their surroundings. They broadcast data up to 200m.5trn in benefits just to retailers from smart shopping trolleys that advise and track customers. processes and processors right. powered by stomach acid. RISE OF THE MACHINES 30 ISSUE 1 SMARTER COMPANY .THE NEXT BIG THING REVOLUTIONARY THINGS The building blocks for IoT are here. He calculates $1. embedded processor sales of roughly 3. which has been active in the farming industry since 2003.” But that revolution is not quite complete. 75% of healthcare costs arise from chronic conditions. warns: “The IoT risks becoming heavy on ‘things’ and light on ‘interconnectivity’. richer experiences. TekVet transmits up to 200Mb of data per year. A monitoring system automatically undertakes simple jobs – such as taking a core temperature. by humans. A Quiet Revolution Gathers Pace. implants sensors in a cow’s ears.25 billion dwarfed computer sales of just 100 million. TekVet. This kind of hyped-up predication is obviously a guess (albeit an educated one).

For example. “Right now there are a lot of proprietary solutions that don’t work together. any aspect of the devices environment that might impart energy – even stomach acid is a possibility.Darlloz worm. according to the EIU). microprocessors and smart devices will move us away from an internet of databases and create a true Internet of Things (IoT). The solution might well be ambient power from wind. the sun. “There’s is not one standard.” says Markus Levy. Three-quarters of 779 business executives surveyed for the EIU report said they were already researching the application of the IoT. TELECITYGROUP. At a security conference in July 2013. Recent examples include the Linux. Or it might communicate with your electricity meter. and process the data. There are sensor nodes and microcontrollers. THINGS WE CAN TRUST Once machines are internet-connected and autonomous. But the IoT promises to network even inanimate objects. And because of the sheer scale and pervasiveness of IoT. hackers demonstrated how to open IoT-enabled door locks. But few of those executives were willing to cooperate with competitors on a common standard for their industry.IT’S A POWER THING Embedding chips with communication capabilities into a household appliance is simple. Tim Phillips finds out how connections between billions of sensors. it potentially creates “weak nodes” within a network – devices with outdated security protocols or vulnerable hardware. and automatically reserve an appointment in the cheapest engineer’s calendar. Because IoT rests on peer-to-peer connections as well as internet access.COM A ne w av enue of attac k for hack ers 31 . so that it turns on only when electricity is cheap. er to anoth device THE THING ABOUT LANGUAGE Interoperability is a big issue for IoT. It ought to be able to signal a maintenance company if it was about to fail – or perhaps even poll several suppliers close to your home. who as chair of IoT Devcon organises a forum where developers from many industries can meet and share their work. And the Wall Street Journal reported an IoT-capable thermostat was used to send information from within the US Chamber of Commerce in Washington DC to Chinese hackers. it’s a tempting target for malware. as well as a host of other agreements on protocols and privacy. How can a sensor that isn’t connected to a power source send a message? Batteries have to be replaced – an intractable problem for 50 billion objects (that’s the estimate for the number of “connected” devices by 2020. Your washing machine can already create a code to tell you what’s wrong – but only when the engineer inspects it. we open a new avenue of attack for hackers.” Standards are critical because they massively increase the network effects around IoT. All of those applications demand a shared language (or taxonomy). let alone create a way to share data with other industries. itself sharing data with your utility provider. e from on rry data orks ca tw e n ” “Mesh Machine-to-machine (M2M) communication is going exponential. a startup called Humdinger has created a matchbox-sized device that uses the vibrations of the wind on a membrane to create enough power for devices to transmit. for example – we need standards for devices that collect the data.

and we will see what works. When we’re talking about billions of mobile devices. For 50 years. If people see money at the end of the tunnel. 32 STANDARD THINGS The IoT revolution needs a manifesto – a set of standards to ensure all the “things” can communicate. the UK Technology Strategy Board’s pilot STRIDE (Smart Transport Internet of Things Data Ecosystem) in the Cambridge area aims to create interoperable street infrastructure for smart cities. projected for 2020.THE NEXT BIG THING COLD COMFORT FOR M2M If you want a metaphor for hype and reality around machine-to-machine communication and the internet of things (IoT). promising it would “revolutionise daily life”. “Why should our future home be a copy of the past?” asked Michael Treschow. this fridge had been announced by Electrolux… as a concept. Can we be sure that we have the skills to analyse data to produce useful insight. Writing in The New York Times in 1964. can use “mesh” networks – which have no central control – to send signals from one device to another. And in December 2013. who will control this information on every aspect of our lives? We need trusted third parties to create privacy and data sharing protocols. The problem? There’s still nothing a fridge can do that a smartphone or sticky note on the door can’t do better (except chill food. but the cost of trying is low. which could order groceries and suggest recipes. Inter-industry co-operation is less common – but there are encouraging signs. and the fridge wakes up his parents to tell them. The Times. hype – and the disappointing reality – has been skewing the debate on smart devices. with its Twitter integration for fridge users who want to broadcast what they eat. “It’s like the race to invent the million-dollar app for Android or iPhone.” connect with us We’re always expanding capacity to meet massive traffic growth: telecitygroup.” PRIVATE THINGS Finally. A MONEY THING There is also a huge will to solve these problems. The Telegraph. SSL and Data Protection legislation) as applications developed. and two in five discuss it at board level every month. By 1999. are being designed to have greater signalling capacity. When millions of nodes are constantly signing on and off the network to transmit small chunks of data. There are also many investors and inventors who want to solve these problems. Nor the LG Smart Manager Fridge in 2012. for example. the reality doesn’t yet match the hype – but this tech will be everywhere soon. Levy received three times as many request to present research papers at his 2014 conference as he was expecting. was set up by the motor industry in 2002 and now has 60 members. True. It didn’t. and The Independent among others. and was internet columnist at The Guardian.” he says. BIG THINGS What do we do with all the data smart devices generate? Both ZigBee and Z-Wave. Tim Phillips has written for the Wall Street Journal Europe. Intel Architecture Labs made the intelligent fridge the centrepiece of a “vision of the future” video as early as 1998. this data flow into the wider internet will stretch cellular networks. Ultra-high-speed 5G networks. “Cities need the IoT to save power. an open-source framework to support IoT. a number of digital businesses (including Sharp. Asimov’s IoT kitchen is still science fiction. A fridge that adjusts its use of electricity to lower our bills. look no further than the humble refrigerator. many of the initiatives are industry specific. or senses when food is off and alerts us? That’s still in the future.com/ more ISSUE 1 SMARTER COMPANY . CEO. LG and Panasonic) helped set up the Allseen Alliance. In 2014. But they can also incorporate aggregation nodes to collect data and send it back to a central database. In the EIU survey. Nor did the Samsung RF4289 in 2011. It pictured a scene in 2005: a child sneaks a late-night snack. “Relatively few developers will be successful. of course). popular wireless comms platforms for automated devices. make transport better and solve complex problems. Among his predictions: intelligent kitchens that would produce personalised “automeals”. Isaac Asimov described an imagined visit to the World’s Fair of 2014. only 4% of companies did not expect to be using the IoT in some form three years from now. For example. it can overwhelm the signalling capacity of the network. and provide accountability. The Car 2 Car consortium. people will try all different things. European and Japanese message formats. and the oversight that this is used ethically? The internet allowed standards to evolve (for example. It plans to unite US. so cars in major markets can generate compatible data – which will be essential for a future of self-driving or self-diagnostic cars. At the moment. The IoT’s rapid evolution may require that standards precede applications. It’s a not-for-profit group promoting (among other things) AllJoyn.

passion… all essentials for a digital start-up. Profitability? Forget it.Disruption.COM 33 . But ever since the first dot-com boom. e im s B i sm uld i u a e l n bu s n ss m i ea n W hat makes a successful digital business? For thousands of early-stage investors around the world keen to take a stake in the next Salesforce. Chris Torney tries to pin down what goes into the foundations of companies that deliver a return on investment – by asking the people who invest on the ground floor. But to be a digital business? It’s all about the money. TELECITYGROUP. iteration. But innovation isn’t the only criterion by which today’s bright young things are measured. potential backers have had to forget the good old days when you could evaluate a start-up company on fundamentals such as projected revenue.. that’s a billion-dollar question. innovation. Facebook or Twitter.. The chaotic and fast-moving nature of today’s markets means that venture capitalists (VCs) must instead put their faith in revolutionary ideas or groundbreaking technologies if they are to pick a winner ahead of their rivals.

” he explains – the very fact they’re still on someone’s payroll shows they’re not committed. ‘Go away and put a team together and then we’ll talk’. and if it doesn’t work out I’ll go back to my old job. But generally what I want to know is: ‘What is the problem that lots of people have that your innovation solves?’” FLEX TO THE MARKET In other words. then that might be a total turn-off from an investor’s point of view. So I look for a team that has been through some crises already. “It’s very important for me to have entrepreneurs who have taken that risk. “When we look at a technology.” says Ali Karabey at 212 Capital Partners in Istanbul. and who have some grounds for suggesting they are going to be able to execute on that idea effectively. There’s no great secret to this side of the equation. Life is too short. THE EXECUTABLE Of course. “If an individual came to me with an idea for a successful business.” Karabey says his own personal relationship with the firm’s founders is also a vital part of his investment decision: “No matter what kind of start-up you’re dealing with. but we all know that the idea will evolve eventually into something else.” In other words. This isn’t always essential: sometimes there is a disruptive innovation which doesn’t solve a problem. “That takes a special kind of person – or rather a special team. the best businesses can set out the problem and their solution. But these things aren’t immutable. as I don’t think a single person can take that amount of stress. ‘OK.” he says. I’d say. says the first thing he considers when deciding whether to invest is the quality of the team running the business. the more attractive it is because the greater the potential for the business to become very big. for example by selling their car or halving their living expenses. But I also want them to show they’ve done their homework: I shouldn’t know the market or their competitors better than they do. there are basic questions.NETWORKED iTEAM Alex van Someren. I’ll try this for six months. SKIN IN THE GAME The other essential for Karabey is that the founders demonstrate their own faith in their idea. managing partner of the earlystage funds at Amadeus Capital in Cambridge. And Karabey stresses another key characteristic of successful start-ups: adaptability.” says Rene Savelsberg. so you need a team that can work together for that length of time. “I don’t like it when the answer is yes. “The firm’s idea or innovation is the thing that people pay attention to.” Van Someren adds: “It’s often the case that really good disruptive ideas are able to be expressed as a problem for which this is a solution. Amadeus would never invest in a solitary entrepreneur who didn’t have the backing of a group. Karabey asks himself whether he will be the first person to have staked money to back it.” van Someren says.” says Van Someren. UK. Provided there is a genuine need that the technology addresses. the idea or innovation underpinning the business is of vital importance too. it creates a new market.” 34 ISSUE 1 SMARTER COMPANY . “Most successful companies will not [become fully formed] in the first five to seven years.’ But most great companies don’t get created that way. CEO of venture capital firm Chrysalix SET in Amsterdam. you know it’s going to take a long time.” Most people who start a business say. ‘I’ll quit my job today if you invest in my company’ – because people don’t like to take the initial risk. investors must then consider the size of the market it can disrupt or create. “The larger the market. “I am most of all interested in groups of people who have a passion for a common idea or vision. “About 60% of the people who approach us with an idea say.” he says. and I want to work with people I get on with. “Does it work? Is it possible to manufacture? Is it scalable? And is it produceable for the price it needs to be so people want to buy it? If the technology has limitations or there’s intellectual property protection with a third party that the company is dependent on.

really high Sometimes tech retention figures. says that of its 450 million active users. original backers. had very good traction numbers. shares and restricted stock of acquisition by Facebook (February 2014) 450 WhatsApp active users (February 2014) 72 is saleable before m % Proportion of active users who log in every day Current cost per user of annual subscription (free in first year) $ 0 The acquisition earlier this year of instantmessaging firm WhatsApp by Facebook for $19bn has been described as the most expensive purchase ever of a venture capitalbacked firm.” BUYING LOYALTY it has generated Sequoia Capital. Facebook hopes. “Sometimes a technology is so sophisticated it is saleable before it has generated revenue. there’s a lot of potential: all over the world. before the acquisition. Lina Chong at Hasso Plattner Ventures in Potsdam. That highlights the often huge gap between many digital firms’ fundamentals and their valuation by potential acquirers. IF YOU BUILD IT. Germany.” Marketing spend to date TELECITYGROUP. It has not been revealed whether the company turned a profit last year. large brands are not looking for bricksand-mortar stores to push their products. whether or not it generates money – and growth is an acceptable proxy for making money in some types of internet businesses. “WhatsApp is worth whatever the buyer can do with those assets. “It’s possible to first of all see very rapid uptake of an idea. WhatsApp will provide much greater leverage. For Facebook.” says Chong. “There are certain assets you can look at in companies – but none of these things are really meaningful until you find a buyer who can do something with them. says that the key with the WhatsApp deal. very fast before you’ve worked out how to make money from it. THEY WILL COME It also means VC investors have to look beyond financial fundamentals.VALUATIONS Vs FUNDAMENTALS WhatsApp’s numbers 19 $ bn Total value in cash. more than 70% log in every ALEX VAN SOMEREN. “In the social network space.” And that’s where. is the identity of the acquiring company. They’re looking for eyeballs to pay attention. WhatsApp’s revenues in 2013 are estimated to have been about $20m. It can be enough to show people are adopting an idea very. Alex van Someren at Amadeus Capital says it’s not even crucial for early-stage investors to understand how a business is going to monetise its innovation in the future.” she explains. that’s loyal users: “WhatsApp. and others like it. Perhaps this is because hitching it to a much bigger machine will enable it to generate revenue in a way that it would take a very long time to grow to organically on its own.COM 35 . day compared with an industry standard AMADEUS of 20% or less. one of the company’s revenue.

” 36 ISSUE 1 SMARTER COMPANY . “Most people who start a business say.” he adds. instinct and experience. though. so we needed to revamp and hire more people.” He cites the example of Solvoyo. having been both IT and small business editor for the paper. The company’s original plan was to provide its software to smaller enterprises via the cloud. In digital. is generally characterised by having “a small number of very big successes which compensate for a large number of very modest successes… and a high proportion of failures. this kind of venture capital investing is inherently risky and unpredictable.” he concludes.” THE EXIT Finally. backers should be thinking about potential exits.” Ultimately. It’s a case of evaluating the team. “All of a sudden the scale of the approach was about a thousand times bigger than what we had in mind.NETWORKED “Very few companies become successful with the first way they approach a problem or a market. ‘OK. “This is why the appetite for investors in this space is so big. market opportunity and technology.” That’s why venture capital. and if possible what potential returns are available from similar businesses in those markets. But even the best investors know: the odds are heavily stacked against a home run.” as van Someren puts it. they redo.” he says. cut out the middle man and scale as much as you like. I’ll try this for six months and if it doesn’t work out I’ll go back to my old job’. But for the overwhelming majority of tech companies. “We’re satisfied if we can get very high multiples from a few businesses to compensate for the neutral returns or losses from the others. “Then we realised it would be the big guys who had big logistics ops who needed this solution first – so we had not only to integrate the software to their existing systems. USA. the ability to adjust to market changes is not that great. “But most great companies don’t get created that way: they change. Van Someren says: “This means thinking about what the business is likely to look like in some years’ time – who are its competitors. And that’s a two-year process at least. Facebook and WhatsApp might have got it right. the opportunity to adapt is much bigger. say. a supply-chain management firm with headquarters in Boston. Chris Torney is personal finance editor of the Daily Express. “For me. being able to react to challenges quickly is absolutely vital.” Savelsberg adds that the very nature of digital businesses helps them pivot like this: “If you have a software company. But in the end there is only a limited amount you can do to objectively verify any of those things. a company that is making wind turbines. that 212 Capital Partners invested in two years ago. you can disrupt. But it was more meaningful for the bigger guys than the smaller guys. But if you are investing in Deciding whether to invest involves intuition. they redesign.” Karabey continues. instinct and experience. even before the initial investment is made. but also train their people in how to use it. Ali Karabey at 212 Capital Partners put his finger on the most important attribute for digital businesses: adaptability. “It’s a case of evaluating the business on its team. particularly in the digital ecosystem. The original approach was right: the software was solving the problem.” Karabey explains. Twitter. whose markets will it disrupt. they pivot. “Deciding whether to invest involves intuition.

“Venture capital was a perfect fit: it meant we would get a good deal of money on board with a good deal of expertise from people who knew how to build these sorts of businesses. “But the extent to which I can do that is part of the team Venture capital dynamic which exists at any given company: gave us expertise some need or value this kind of help more from people who than others.You’d be very silly not to try to find the best way to build something that can grow effectively. “You’d be very silly not to try to find the best way to build something that can grow effectively.” he says.6m ($2. “Then when I started talking to larger customers we could say. Qinec’s founder and CEO Robbie Hughes says venture-capital involvement has been crucial for the development of his company. A PATIENT INVESTOR One firm which has embraced van ROBBIE HUGHES Someren’s contribution is Qinec. Alex van Someren at Amadeus Capital in Cambridge. “The reason we were looking for investment was that our business model was great in the long-term. For me.” he says. For me. UK. he has a vast network of people who will. venture capital is that way. He left school to join Acorn Computers in the 1980s. “ TELECITYGROUP. well we’ve got serious. “My experience enables me to challenge their decision-making. Investors have more to offer start-ups than injections of cash. it’s not always about the money. reckons that his background as a successful entrepreneur plays a vital role in the support he offers firms. “The fact is I can phone Alex any day of the week with a question – and on the rare occasion he doesn’t know the answer. In 1996 he co-founded nCipher to develop internet security products using advanced cryptography. put £1.COM 37 . venture capital is it.” WHAT DOES THE SMART MONEY SAY? Amadeus. raising £14m in VC funding before floating in 2000 at a £350m valuation. to connect them with customers as well as with recruits. “Venture capital money is clever money.5m) into Qinec in 2012. WHAT MAKES A GOOD TECH VC? Funnily enough. but in the short-term in order to fund growth we had a significant customer acquisition cost. then co-founded ANT Ltd in 1990 to produce networking products (ANT was listed in 2005). and to generally increase the likelihood they’ll be successful. you can trust us to provide software to run your business better.” know business.” says Hughes. credible people standing behind us. That’s real credibility to digital entrepreneurs. along with Archimedia Investments. a LondonQINEC based business which provides web-based software to help clinicians manage patient records.

F IBL NE R E R SE ESS ERE DS OR U W A CC H ITY OT E S W ’ IT ND A LD CTIV T. N G TH A OR DU ES IN T. AL NO INE LE F ERP R H B TU EC OM PAB ENT L CUND T E C TOP E IN A HAV NS NG U A AN CH 38 ED S N CUE MA O L L MI .ECOSYSTEMS G L H C T NOS S A TE AL S N IO IFT E T SA L SH EATOR I AN ICA CR E F IT. G O C E OR LOG D T OR RIS . W RO E T RIS GE P TH SU UD IS RES S B P IO’ C ISSUE 1 SMARTER COMPANY .

and from control to access. using whatever hardware the IT people gave them. “As a result. up-todate technologies and new applications took a hit as organisations cut costs and fixed what they had. which constituted quite a risk for the CIO. head of the change management division of IT consultancy BJSS. rather than swagger. in every situation won’t work.” Employees have Think of it as a balance sheet got used to great UX honed problem: IT assets have been by fast-moving companies in depreciating faster than a massively competitive field investment in new systems. innovation in enterprise IT happened behind closed doors. strategies which allows unachievable. (BYOD. the mood has What’s needed is changed. They want that starting to be switched back same approach at work. where poor code “Combining with that is a that isn’t properly fixed starts whole shift to mobile and to accumulate “interest” over web-based applications. His company’s research Paradoxically. the IT platforms that organisations use have got much more PAYING OFF THE DEBT flexible and much more open. And the idea of digital businesses playing by different rules has become a driving force for change.” says Troy Fulton. “We’ve switched from adaptation to three doom and gloom to a gentle conceptual. This is IT glasnost. 39 . The technology deployed by businesses has been outclassed by the technology owned by staff. If a new system had to be rolled out – almost always at the say-so of the CIO – resources would be allocated to cover the costs involved.” he explains. In other words. 2014.” costs to productivity.COM “With low investment in IT over the past five years – since the financial crisis and recession hit – organisations are now sitting on a large amount of technological ‘debt’. “The roll-out of upgrades. on.” says Sear. however.6% in variety of devices. Technological debt is an “BYOD is only the extension of the old concept beginning. “These technological. Even five years ago.” These continue to generate new opportunities. (largely via their smartphones Sear says investment is now and tablets). mobile. Above all. there was very little room for failure. producing demand for advanced programmable infrastructure that can execute at webscale. development. largely thanks to the internet and mobile access. Enterprise IT has opened up.” But now fear of being left behind is accelerating the pace and scale of IT-driven change within enterprises. employees were more or less slaves to the system.” TROY FULTON employees’ Expecting TANGOE own devices into everyone in your the corporate IT organisation to use ecosystem) are changing exactly the same approach the art of the possible. Until recently. cloud and information. “Any CIO or CEO would have to be very sure of a return on investment before allocating resources.T he reign of the IT department may be coming to an end.” says Gartner of “technical debt” in software vice-president David Cearley. MAY THE FORCES BE WITH YOU Gartner also describes a “nexus of forces” at work in IT: social. in ways prescribed by the staff handbook. radical change – and it’s from systems to users. here is that user contexts There was very technologies and interaction little room for such as hybrid paradigms cloud and will make failure. It’s powerful forces are creating time to shift your IT strategy rapid. applications. Users have become knowledgeable and empowered. which “bring your ‘everything constituted quite own device” everywhere’ a risk for the CIO. TELECITYGROUP. which time – additional work that means changing the user will be needed to perfect the interface [UI] and the user system as errors proliferate and experience [UX] in enterprise people adopt workarounds. changes. according to Simon Sear. director at mobile management firm Tangoe. But some big changes in the technological and social landscape have turned that on its head. But the key computing styles. from set to get faster. forecasts UK IT spending to he adds that “the growing grow some 6.

security. meanwhile. CIOs who embrace this trend will find IT becoming more valued by the rest of the organisation.” says Sear. could mean “shadow IT” takes over and users find their own way of getting jobs done. “Users have smartphones. often have monolithic architectures built around scale and control. causing huge pressure on back-office systems. app and subset of users could spread IT resources very thin. Users get the tools they need. ISSUE 1 SMARTER COMPANY .” In retail financial services. long clearing periods for transferred funds) over good user experience will struggle.” says Simon Sear of IT consultancy BJSS.ECOSYSTEMS S M S E R T E S SYo US t ESTION QU S T SI E DO T HA W T HA W ? AN E M ? IT D E US A C ? ES L P AM X E S ON I T ES CIO U Q HE T R FO O DG L U CO? T G HA N W RO W S HI T ILLT? W WY OU O H LA P 40 Organisations can no longer afford to dictate behaviour to employees in order to make centralised systems design easier. Catering for every device. Banks prioritising legacy systems (eg. productive staff. online and mobile banking and pure-digital players such as PayPal have changed customer expectations. Sticking rigidly to a centralised systems approach. organisations get a more flexible infrastructure and more loyal. who are becoming the dominant users of our organisation’s information and systems? “Selfservice is the growing preference of customers – and it’s a much more affordable way for organisations to provide services. “Organisational IT has been outpaced by consumer IT. and accepted practice. How does our IT architecture empower our employees? And what about customers. cloud services and instant availability of content and applications. IDG’s Consumerisation of IT in the Enterprise study found that 82% of organisations have made changes. Organisations. such as creating new policies on sharing corporate data. in contrast. Users now expect to have a say in the IT they use.

with higher productivity the pay-off. Protecting data is an operational. Agile organisations will succeed by delivering change for users. “IT’s role should be to support employees’ decisions with appropriate security. With technologies like cloud and BYOD. and can be hard to justify investment to achieve a fuzzy aim like “innovation”. What level of security is appropriate? “If you feel deleting data from an employee’s iPhone is a necessary precaution. It’s much harder to accurately measure the return on investment of easier-to-use IT systems. This is part of a longer-term trend of breaking down internal silos.” connect with us Flexibility is a key weapon for tomorrow’s CIO – and TelecityGroup can help telecitygroup. too. for example. utilisation levels and innovation. Big Data shows how organisations are freeing information from silos to drive insight and innovation. So key performance indicators. But consumers want to access their own data when they want. it might be worth taking a step back. reduce operating costs.COM Control now relies on sensible policies and good identity management. improve time to market and deliver new products. “If they don’t spend to make these approaches work. A move from locked-down data and applications to making sure the right people can get at them instantly and easily. not dictating staff hardware choices or enforcing lowest-common-denominator security protocols. ethical and regulatory must. you need to think much harder about control. What investments will enable the business to grow? “In order to compete. Rene Millman began his career as a data analyst and network manager in financial services before moving into IT journalism. their competition will.” says change expert Simon Sear. Cost structures have changed as IT has got more flexible. For instance. Digital businesses get it. Delivery needs to be flexible and fast to give senior management a context for spending.com/ cloudix 41 . “CIOs could be fighting a losing battle to impose their will on the rest of the organisation or on customers – the best plan is now to embrace this trend and work with people. And mobile apps show the benefits of access from outside the physical parameters of the organisation. That’s risky if you want to stay secure. It requires a re-education of CIO and CFO. many companies need to increase IT costs. large projects of the past won’t work today. CIOs won’t get investment if they’re not delivering quick gains. more responsive platforms. “Both flexibility and the ability to protect data are critical. colocation and cloud-based systems – picking the blend best capable of supporting productivity and adaptability. global product manager of IT security company Cryptzone. there is little need to monitor devices.” Good project management is vital. Cost is a simple metric and an easy way to manage a business. organisations can boost employee engagement.” says Bodley-Scott.” says Jamie Bodley-Scott. It means investing in more flexible. even when that includes family photographs alongside business-critical information.Y T I L V o TI O S t R S S T C E T U N S C D O C O C oA C RO t P Many IT departments fall victim to management by budget.” says Sear. eBay or Amazon. nearly half of the 722 IT leaders surveyed say their departments are seen mainly as cost centres – so “cash spent” is how they’re measured. After stints as a senior analyst at research giants Gartner and IDC. And employees need to be able to exploit organisational IT assets freely if they’re to create value. You get that fine balance wrong. he’s now a freelance writer and broadcaster.” says mobile data expert Troy Fulton. not a cost centre. But if it’s data with a high level of importance. not tell them what they can’t do.” says Sear. are vital. Sales data and customer feedback is visible to all on Apple’s App Store. CIOs need to be able to look at the options around on-premise. not against them. Half of the companies surveyed by SailPoint have seen former employees trying to access data after they left – not to mention hackers or industrial espionage. “The slow. And according to CIO magazine’s 13th annual State of the CIO study. “If an employee has access to information of low value. TELECITYGROUP. The aim is to be a value creator.

(And don’t even get Jon Bernstein started on snooping…) 42 ISSUE 1 SMARTER COMPANY . Legislation. stateless – right? Not exactly.THE TANGLED WEB ILLUSTRATION ALEX ROBBINS The internet: global. universal. IT and trust issues mean that where your data is stored and how it moves around the world are critical considerations.

” explains Wright. controlled by the Irish company. a London-based lawyer and author of The Future of Privacy (DataGuidance. While that principle of server location still holds true. does they all differ. As ever. Global privacy officer Steve Wright computers. “But now you have controllers all over the world who have no critical presence in Europe – and therefore they can argue that the laws do not apply to them. says Ustaran. the reality is not quite that simple.” And even when a firm does have a presence in Europe. on drives and servers.” The information that has been stored in digital form direction of travel. is for companies to is subject to the laws of the country in which it is be subject to “the law of where the people are based”. Until recently data sovereignty meant data was subject to the laws of the country in which it was physically located. Spanish law doesn’t apply. your pocket. the notion of “location” commercial.” Ustaran explains. With 400 brands reaching two billion laws apply. become portable are contributing to this confusion. “You could have a UK There are company operating and collecting more than 120 data all over Europe. and organisationally challenging “For example. and the local laws around the hile it may be tempting laws where those people live don’t world on data to view the legally contentious – apply. financial and reputational risk – which has become more difficult to define. Europe and the Americas to allow local personally identifiable data to be processed in accordance with local data protection requirements. “In the 1990s when this law was drafted. sovereignty is taking on a wider meaning. So German law Data sovereignty refers to the concept that doesn’t apply. “But in and his global team of 12 are responsible for decisions today’s world. which are about protecting that devices have added in the EU by that company?” information – not sharing it. So the legal question that hasn’t been “There are more than 120 laws and various resolved yet is: if a company outside the EU puts a regulations around the world on data protection – and cookie on your smartphone. it includes that piece of equipment in around that data. BEYOND BORDERS The trouble is. So any new application or server process is put through a “criticality assessment” to determine the sovereignty of the data being processed by it. process and European Union law states that if the equipment transfer one of your organisation’s most valuable used to host data is located within the EU. 2013). physically located. even if assets are neatly encapsulated by the example of the business is not established there. “Essentially they have Portable. keeping it confidential. too. Cloud-based services means you really need to understand the dominion and the fact that the networked devices we own have of that data. that borders aren’t the only problem.” says Wright. “In Europe we have relied on the concept of the [location] of the controller or the user of the data to determine which laws apply.” explains Eduardo Ustaran. More them or not – is that the data collected is prosaic – but no less important. then European Unilever.” says Ustaran. “Our data centres W TELECITYGROUP. mainframe a lot of countries. data centres. though.are strategically located in Asia. they are right.COM 43 . whether you agree with the reality tends to be more prosaic. The issues of where and how to host. Any data CLOUDING THE ISSUE you hold brings with it related exposures to To complicate matters further. protection. Facebook’s – realm of data sovereignty through European operations are based in STEVE WRIGHT the filter of front page headlines Ireland and what they have been UNILEVER about the US government’s surveillance arguing about for years – and technically programme or cyber attacks from China. networked that amount to use of equipment the same principles. it generates a lot of information in the word equipment meant servers. people every day.” further complication to Ustaran points to a case in The issues around data sovereignty dictate the discussions about data sovereignty December 2013 where Spain’s where Unilever places its records. the current laws aren’t clear.

surveillance – most notably that of the US National PATRIOT GAMES Security Agency (NSA) – have led to suggestions of a And now European law is changing. “The ‘You can only So European data cannot be one that requires disclosure – or install data within processed elsewhere without the the one that prevents it?” And the these walls’ is necessary compliance. “It would also be counter-intuitive and restrict “In Switzerland. he says. imposed fines If you’re tempted to accept any demands by the of 900. “so that one shouldn’t have to send emails (possibly as early as this year) by EU data protection and other information across the Atlantic”. First. the AEPD. investors and the public at large. He’s associate sovereignty”. would-be customers. specialists urge caution. regulations designed to impose and harmonise Wright is not convinced.” he says. which extended existing powers (such as the Foreign He says: “To say. ‘You can only install data within Intelligence Surveillance Act of 1978) in the wake of these walls’ is not practical. jurisdiction or country boundary constraints. data and everything else. “the instincts of internet computing”.” Eduardo Ustaran agrees. conflicts.THE TANGLED WEB information commissioner. “So protection for the rights and freedoms you have a dilemma about which law To say of the data subject. few organisations will want to research director for information security at analyst give up information that may fall into the hands of. means any organisation personal data outside the continent operating in these territories must must be aware of the regulations clarify how third-party service EDUARDO USTERAN. for example. any suggestions of “improper or overboard” property which either belongs to a living individual access is likely to play badly with your customers. the taste. your own government probably doesn’t want Fayaz Khaki believes the word “sovereignty” – with information to be accessible by other governments its inferred political and geographical boundaries – is as “a matter of principle. nature of the internet.” says Khaki. meanwhile. of the host nation where the data is providers interpret these legal LAWYER being processed. understanding your data of ring-fencing global communications is counter to liability means getting to grips with the Patriot Act. the sovereign wealth funds of foreign powers.000 on a search engine company for breaches US government and treat the Act’s objectives in of data protection laws related to its new privacy good faith. insisting that any notion In the US. The midEurope-only internet. European organisations processing provision. Equally. “some free movement. national security or ill-suited for today’s connected world. firm IDC. the UK Data As Ustaran points out. Unilever’s Steve Wright places a huge value on to locate the servers that host and process data – and the “trust relationship”. In February. “Data can be viewed as Third. that’s a significant potential Meanwhile. too.” and terrorism. is a move towards citizen location and away from which was created using open source protocols “sovereignty”. be transferred outside the EEA [European For example. It’s a minefield. “Personal data is an example of regulated data. a US company that has a data Economic Area] unless that country or centre located in Europe will be subject territory ensures an adequate level of to laws either side of the Atlantic. “For example. A report written policies. and makes a distinction between regulated say.” he Outside the EU.” says Ustaran. “The integrity of our brands which networks it moves across? “Any organisation is not just about the physical quality – the look. “It’s also about digitally comply with the respective data protection regulations respecting their rights as a person. the Patriot Act also creates a Protection Act stipulates that personal data shall not potential conflict with European data protection laws. Among the changes because it goes against the concept of the internet. processing European citizen personal data ought to the feel. it makes it easier for the government is] trying to come up with a technical solution for a to access data it deems related to foreign intelligence problem which is not about technology. So the location of the data will no that allow the free flow of information without longer be the first test. the law remains incredibly varied. The cloud servers could be anywhere. Not about technology? “It’s about where the data 44 ISSUE 1 SMARTER COMPANY . For cloud computing. collaboration and the sharing of banking-related data cannot be processed outside its ideas and new concepts. “They took the view that Spanish law applies by the University of New South Wales in 2013 laid out to the company even though it’s based in California.” should prevail.” Khaki says.” three reasons. “This is unworkable laws across 28 member states. German chancellor 1990s data protection directive – which provided Angela Merkel suggested a European communication guidance to national policymakers – is being replaced network. or a legal entity such as a business. Second.” Khaki says. high-profile cases of state-sponsored mass pitfall. and of cloud not practical. says.” Don’t underestimate the importance of the last So how does this definition help you decide where point.” of that country. In short.” geographical borders. increasingly considered the low-friction WHO’S WATCHING? choice for companies. It’s unwise because [she 9/11.

including Brazil and Germany. have expressed an interest in enacting laws to bypass US servers – but few have done so. TELECITYGROUP.COM 45 .SECTION 215 OF THE PATRIOT ACT ALLOWS THE NSA TO UNDERTAKE THE BULK COLLECTION OF DATA Several states.

To understand your exposure. PRACTICAL CONSIDERATIONS And it pays to be pragmatic. the cloud or another third-party solution. European data sovereignty laws are among the strictest. “From a commercial So given the complexities of data sovereignty. 6. “the business should lead the conversation as the business is the data and risk owner”. global risk function for data. four or five of the most important to carry out a “Most organisations struggle to understand where all detailed legal analysis and see where that takes you their data is kept and used. the board needs to do the ultimate decision-making. With technological. At HQ works well as a metaphor for transparency in a world of Unilever. at least in part.com and Network News made him the ideal choice to write about data sovereignty.000 data subjects for a year or more will be than where your servers are based. says be pragmatic. It’s worth noting FAYAZ KHAKI technology. Ultimately. But as owners of the risk. cost and competitive edge. any company that deals with more protect its citizens.” Ustaran explains. These companies deal with those issues every day.” he concludes. It’s a Jon Bernstein’s roles as deputy editor of the New board-level decision. most global organisations have some the best approach your organisation can take? markets that are more important than others. 3. Steve Wright has introduced a privacy. especially if you’re part of the risk-management exercise. for example. the building’s façade – art deco and neoclassical – is imposing and closed off. it’s a moving target. as it is the data and risk owner.” says IDC’s Khaki. Define your risk profile Every organisation has its own risk appetite – a trade-off between complete compliance. so conforming will leave you in a strong position elsewhere. not one purely for IT or even Statesman. By contrast. “Unilever’s refurbished London and legislative changes. organisational Silicon. “Companies need to be realistic and to be seen to While data security naturally fits into your IT function. Local code officers are lightness rules. Define roles and responsibilities Legal and IT need to join forces to offer compliance advice and information security solutions. The next step is to define roles and responsibilities. more than 5. This is especially true of unstructured data. is. The business should lead the conversation.” responsible for compliance in their region. digital editor of Channel 4 News and editor of legal counsel. The glass lift provides panoramic views over London. “But they might you’ll need the legal department to offer advice on need to accept that they are not going to be perfectly compliance and an understanding of the relative compliant in all jurisdictions around the world. choose process – although that’s not as easy as it sounds. 5. for example. it is beneficial to take time to read and understand the detail of the contract to determine which laws a third-party supplier believes it is obliged to follow. This is central to the debate. It’s to do with public policy that within two years of the EU data IDC and where the boundaries lie – and protection regulations coming into what a democratic government should do to force. Read the small print While sovereignty continues to be defined. pick a handful of countries to study in detail. use colocated data centres. “If you operate in 50 countries. it’s about the politics of it – who That works well for a company should have access and on what the size of Unilever – but might basis. be trying their best.” obliged to employ a data protection officer (albeit not necessarily full time). 2. 46 ISSUE 1 SMARTER COMPANY . too – highly-regulated industries must be more cautious. in what volumes or where. The law has to considering where to locate servers. It will depend on your sector. Speak to your service provider Whether you outsource hosting. “Whether not be practical or applicable the NSA has rights to access this for a small or medium-sized data or not is nothing to do with organisation. take the opportunity to do a thorough audit. **EY’S GLOBAL INFORMATION SECURITY SURVEY. That’s merits of foreign territory laws. Reach for the highest common factor If a detailed assessment of exposure in every territory in which you operate is impractical. Undertake a data audit Most organisations don’t know what data they handle. 2013) 70% of organisations say security policy is owned at highest level** 1.” Khaki. 4.” It starts with an audit of all the data you host or says Ustaran. in terms of risk. by where an organisation is established. The alternative is not very helpful. ask your provider to outline their approach to data sovereignty.THE TANGLED WEB DATA SOVEREIGNTY CHECKLIST 75% of organisations are using the cloud in some capacity* 45% of organisations say mobile has changed exposure to risk** (*NTT COMMUNICATIONS. what is perspective.

58 TELECITYGROUP. So where did the world’s first quantum computer come from? It’s our guide to the ‘qubit’. here are four huge advantages of using a specialist data centre rather than your own server room. But they’re now available off the shelf – even if data centre cooling technology means they’re unlikely to go mainstream yet. 47 HIVE MIND Virtualisation: it’s the ubiquitous technology that most decision-makers have never heard of. THERMAL IMAGE: INSIDE THE SERVER 54 LOOK EAST Fast-developing economies. they start to slow down or even stop working altogether. 47 . 50 BUS DRIVER How TelecityGroup’s patented power management systems are keeping the cloud resilient. T to guarantee uptime. They have reliable power supplies. go to page 30 for visions of a connected M2M future 55 A QUANTUM LEAP? No-one understands quantum mechanics. Given how much heat is generated by those little squares of silicon as they process masses of data. including local generation capabilities. skilled workforces and a dynamic digital ecosystem: Eastern Europe is fertile ground for highquality data centres. They’re physically secure – to a standard much higher than most companies could justify. When those chips get too hot. But the thermal dynamics of specialist servers are a bit more complicated. They have high-spec connections to multiple carriers.COM A CHILL FILLED THE ROOM… Smart engineering can keep your computers cool and efficient. as Richard Young finds. And they’re cool – but not just in the “impressive” sense. they need to be physically cool. We think it’s time for a briefing. too.IN THE RACKS THIS ISSUE COOL KIT Liquid-immersed servers used to be the preserve of the boffins.

Meanwhile the trend is certainly towards higher density data centres – and more heat. “That water then trickles to a heat exchanger built into the cabinet. you can run the system as a dry cooler.” explains Richard Barrington. electricity really don’t mix.” says Barrington. Then we ran computational fluid dynamics to allow for a modelling of the heat diffusion – which meant we could design a process to move it out of the fluid bath to be picked up by water flows. it’s just the processors. The best data centres use thermal dynamic modelling to plot how the air flows and to plan optimum dissipation. Liquids do the job much better. Worse. “We’ve seen interest from the armed forces – our lower energy requirements and even the way our units generate hot water can be a big advantage in remote outposts. For organisations that need a lot of mathematical computing capacity. it’s a sealed unit that keeps itself cool. That means users of immersed servers will have very particular requirements. so they’re working harder. allowing for more heat tolerance. for example. it’s ideal for the oil and gas industry. or storing video and other media that need to be held on mass storage devices. and the ground water as a heat carrier. applications aren’t serving out data from a huge database. UK. of course. cooling is quite simple. Amsterdam is a very suitable place for ATES. But for now. Iceotope worked for five years with universities in Yorkshire. But water and cooling.in the racks In theory.” But there are limits. air turn up the heat on compresses easily. there’s already a clear application. and they dispense with the heat using whatever their environment has to offer. the mainstream cooling picture shifts. “An ATES system uses underground water-bearing formations to store heat. means we can make the heat available for re-use very easily – for example. That’s what niche supplier Iceotope has done with its new server cabinets. offthe-shelf option – or. so you don’t need aircon. an energy system that goes deep into the ground to manage But the lower power and infrastructure demands of a liquid cooled server – essentially. One change likely in the server industry is an evolution in the way equipment is designed. getting custom-configured builds to drive down cost. if they’re a massive buyer. “For example. In practice. The big one is that hard drives can’t be submersed in the With energy costs and sustainability climbing the priorities list. Why? First. For Iceotope’s target market – high-density computational servers – that’s unlikely to be a factor. closed “cool aisles” integral to the building’s infrastructure to minimise ambient warming. as a flow of hot water. The answer is to use something other than water. “That gives us a lot of efficiency. So you circulate warm air out of the racks that the servers are housed in to somewhere the heat can dissipate (usually using water) and feed in cold air to replace it. That means they’re typically deployed for niche applications in universities. There are some interesting developments around sealed-unit hard drives that use helium inside their casing. doing this efficiently is complicated. which relies 1 SMARTER SMARTER COMPANY QUARTERISSUE ONE Þ COMPANY Þ TELECITY . rather than relying on engineering within a data centre – make the concept a winner in hostile environments. where there are massive computational requirements in the field – but not the heavy-duty cooling and power to run conventional servers. Heat comes off components in your servers. Bitcoin mining is a great example: the servers just have to chew mathematical models incredibly fast with heavy processor loading – which means high temperatures. and thus a common point of failure. developing its system and rolled out its first production models at the University of Leeds just last year.” MAINSTREAM LIQUIDS? Immersed servers also don’t need fans – a rare moving part in the digital ecosystem. But once the hardware manufacturers develop better processor efficiency. “First. “Most people specifying servers for a data centre will still be looking either at the lowest-cost. cloud services and virtual applications allow servers to cater for multiple customers and they’re more heat) at the AMS 5 data centre. and it’s even a fire suppressant.” Steman explains. servers are increasingly taking over network functions. you need to use a deeper level of engineering. It GOING TO GROUND 48 48 If you want real efficiency in your cooling. That also helped us design a system that uses gravity to trickle water around the casing while maximising heat extraction. too. smart minds at companies LIQUID ENGINEERING But air is a poor conductor of like TelecityGroup and heat – so you need to flow a lot Iceotope will continue to of it over components to pick up their excess warmth. or companies running computationally intense algorithms. Literally. it’s hydrofluoric ether. we immersed the server board into a non-conducting liquid – essentially. like a web server might. for example. But he’s realistic about the practicalities. too. It’s a lot better than water for moving heat. Second. Iceotope’s business development director. which makes it efforts to improve hard to move around. TelecityGroup deploy ATES (Aquifer Thermal Energy Storage.” he says. Pim Steman helped Novec solution used by Iceotope. “It was a three-stage development process. Providing there’s a temperature gradient of at least five degrees. And Barrington points out that the lower power requirements and higher density possibilities might make liquid-cooled servers attractive even for conventional data centres. They usually operate with solid state memory.

” Smart use of ambient temperatures and local conditions (see below) remains an important weapon for data centre operators. But with energy costs and sustainability climbing the priorities list for every business. You can find out more at telecitygroup. mixing colder and warmer water. “This will be a great step forward for large data centres because it will enable us to reduce energy consumption and the use of refrigeration – clear environmental benefits. likely to run at higher capacity.5 1.” TELECITYGROUP. we’re already providing immersion on being able to pump cold water. smart companies like TelecityGroup and Iceotope will continue to turn up the heat on efforts to improve cooling. there’s pressure to maximise the exploitation of data centres with high standards of infrastructure – such as power and security. stable water down in the aquifer. connect with us THE POWER TO COOL TelecityGroup recently won the “Best Improvement Process for Energy Efficiency in the Data Centre” at awards organised by Broadgroup – and delivering effective cooling systems is fundamental to our energy strategy.com/ coolyou 49 . TelecityGroup director of engineering. It’s proof that good structural engineering means adapting the design of even the most high-tech installation to work with geographical features that can keep your chips cool – whatever the weather. And there’s certainly more to the issue than PUE – power usage effectiveness.25 Average data centre PUE in 2007* Average data centre PUE in 2013* Target PUE for TelecityGroup in 2013** *UPTIME INSTITUTE DATA CENTER INDUSTRY SURVEY 2013 **TELECITYGROUP For organisations that need a lot of mathematical computing capacity. the aquifer moves slowly. The trend towards higher rack densities will eventually lead larger sectors of the industry toward immersion cooling. That means it’s less efficient for cooling areas to strategic data centres. And third.2.” says Chad McCarthy. cooling than ATES in Amsterdam. too. We draw ours from 160m deep – and it’s stagnant. a ratio showing how much of the power coming into a data centre makes it into the servers rather than cooling them or running the building. “To cater for customers’ future needs.65 1. there’s a clear application.COM In other parts of the Netherlands.

think instead about resources and resilience – they’re more traditional management considerations. Across an organisation.” says James Perrott. when demand is far less than the peak. using the same 14nm process. and they’re the big reasons virtualisation is important. If no one is using the HR application. it’s not hogging processor capacity that could be used by other software. but on a smaller chipset. AMD will roll out “system on a chip” processors in both flavours. each application used by your organisation – for finance or human resources. But put 10 people in one car and it becomes slow. Colocating your hardware gives you access to hyper-reliable power. say – would have its own server. VIRTUAL THINKING he technology world is awash with terms that provoke a casual listener to ask: “Is that a thing?” Virtualisation is certainly part of the lexicon apt to bamboozle the uninitiated. if you had to buy a different car for everyone visiting your offices – staff. paying only for what you need and making sure they’re less likely to fail on you. You have to have access to human resources and raw materials. The software can iron out fluctuations in demand for each application. and you need to be able to rely on them being there when you need them. IT research firm Quocirca. you’re wasting resources. locking people out and even losing data when things got busy (using Perrott’s example. Next year. you create a series of virtual servers that use whatever physical server hardware you’re running. “Imagine 10 people need to get to work. But strip away the jargon and it’s clear how important this technology is to your business. Intel will roll out Skylake. That’s a big reason why virtualisation is so valuable within data centres. In 2015. virtualisation underpins modern computing. Virtualisation is a way of helping you get access to the technology resources you want. most of the power of these servers was not being used. especially in dense data servers on one machine – or. 1 SMARTER SMARTER COMPANY QUARTERISSUE ONE Þ COMPANY Þ TELECITY . Virtualisation solves these problems. for example. Or. Businesses need both. This should allow more flexible server design. suppliers and customers – you’d have quite the fleet management challenge). that’s a lot of wasted processing capacity. which aims to use 10nm fabrication (the alternation between shrinking manufacturing processes and smaller dies is known as the Intel “tick-tock”). several virtual servers running across several machines.in the racks It’s the most important technology most people have never heard of. as well as ensuring there’s always an option to throw centre environments. for instance. head of IT for pan-European brake manufacturer Eurac Group. 14 nanometre manufacturing process by the end of 2014 (that’s about the width of 42 atoms of gold). allocating all available resources wherever they’re needed. the virtual server can be allocated more physical computing resources from around the data centre. allowing both processor architectures to use the same motherboards. put three or four people in each and you can do the same job with fewer cars. But despite its less-than-tangible reputation. Most of the time. IT needed to buy hardware to meet the maximum possible demand – or risk applications failing. So rather than worrying about terminology. and its Skybridge initiative will deliver pin-compatability. if you’ve bought 10 cars and only two people are coming into work over the weekend. That might be a number of virtual Chip and motherboard maker AMD is looking to build bridges between Intel-style x86 processors – which dominate servers and PCs – and ARM’s chip architecture. “I use a car analogy. cooling and connectivity – plus physical security. to apply Perrott’s metaphor again. Virtualisation allows you to make the most of those essential attributes. “By using virtualisation in the correct way you can attain much higher utilisation and could even halve the equipment you need.” T CHIPS SET FOR 2015 50 50 OUT OF THE SILO Before virtualisation. Meanwhile Intel is confident of launching its Broadwell generation of processors using a much smaller. Because the number of people using the application at any given time would go up and down. Instead of having a physical server for each application. followed by Cannonlake in 2016. more likely. Lindsay Clark grapples with the basics.” says Clive Longbottom. which leads in low-power devices such as smartphones. service director. One person to one car is misusing resources. If the finance team is running a processorintensive risk model.

COM One of the big trends in personal computing is the demise of the hard disk drive (HDD) in favour of solid state drives (SSDs). MEMORY GAME TELECITYGROUP. Each generation of operating systems could differ wildly (that’s still the case. So virtualisation helps deliver the flexibility that makes using a data centre. The ongoing tumbling cost of memory is one of the most compelling – and.642. all the more attractive. TRIED AND TESTED Although most businesses have been exploiting virtualisation in this way for at least 10 years – and anyone using a data centre relies on it – the approach dates back to the 1960s. allowing Windows programs to run on Apple’s OSX). Manufacturers – including Samsung. We’re some way off being able to phase out HDDs. even at the PC level. So by creating a “virtual machine” By using that replicates the software virtualisation.more physical hardware at your virtual servers when demand rises. empowering – trends in computing: Cost of a megabyte 1965 1975 1985 1995 2005 2014 $2. Enterprise SSD looks ready to break out of its niche. There were just 11 million units shipped in 2009. IBM developed virtualisation for early mainframe computers as a way of allowing more than one user to access a single machine.0073 51 . But SSD is growing fast. behaviour of the older operating system while you could halve translating its inputs and the equipment outputs to the newer one. It also meant applications written for older machines could run on new ones. to an extent). SSD specialists such as SanDisk and traditional storage leaders such as Western Digital – are currently consolidating technologies and manufacturing capacity through acquisitions and strategic partnerships. 2013 saw an 82% rise year-on-year to 57 million units – forecast to grow to around 200 million by 2017. investment in applications could be protected (virtual machines are still widely used on desktops – eg. too. in the era of big data.412 $67.584 $550 $30 $0. rather than hardware at your own premises. you need. Intel.149 $0.

the 802. once an engineer has created the host server. Virtual environments are much more easily Wifi is already ubiquitous – and new developments promise to push wireless transfer speeds higher than ever. FLEX APPEAL Virtual servers Virtualisation also helps you make more of desktop do not mean PCs. VIRTUALISATION FOR REAL James Perrott says his company. 1 SMARTER SMARTER COMPANY QUARTERISSUE ONE Þ COMPANY Þ TELECITY .11ac.” says Smith. “You don’t need anything near the level of expertise or the level of care [you would need] to get a physical server up and running. certified in June 2013. even one running an older operating system. virtual servers do not mean you can escape software licensing fees. which runs on a virtual machine created in the computer operating system or browser. It’s not all positive: using a higher frequency (60GHz) in the spectrum means WiGig has trouble penetrating walls. The big challenge was explaining the concept to executives outside IT – hence his car analogy.11ad standard that can reach speeds of up to 7Gbps. “It’s really fast. senior product marketing manager at software firm Novell. adopted a full virtualised environment four years ago. computer storage. chief technology officer at Northern Devon Healthcare NHS Trust.800 users across 1. But that. says application virtualisation allows the organisation to provide up to 250 applications to 4. so there’s no single point of failure. A new virtual server – when you’re rolling out a new application or setting up a new office. Strong explains. of resources or allow more costeffective management.in the racks Virtualisation also played a role popularising the worldwide web. A new virtual server? More like a couple of hours. The virtualisation software allows the latest applications to run on any machine. They can all be virtualised to make better use licensing fees.” Setting up a physical server may take 30 to 40 hours. It also means you can happily RADIO STARS 52 52 colocate your physical servers in a highperformance data centre with fewer worries about future configuration.” says Justin Strong. say – takes less time and expertise to set up compared with physical servers. “It would take a lot of engineering and use a lot of resources. that’s a massive advantage. The first concepts using the standard have been announced. “Trying to get a single operating system to run different applications with different requirements would be nearly impossible. Being able to grab an application and push it out to work on any device is a huge time and cost saving. The same is true for Flash. Now a new term comes into the lexicon: WiGig. A software company may charge for many virtual servers in the same launching a WiGig product at Mobile World Congress that will find its way into 2015-vintage smartphones. Geoff Smith. WiGig could give a new lease of life to older wireless technology. for example. However.4GHz and 4GHz bands. But 802. advocates argue.200 square miles without worrying about the set-up of the local desktop PC or visiting rural locations.3 gigabits per second (Gbps). Eurac Group.” RISK ARCHITECTURE Virtualisation is also a way to manage risk – virtual servers can easily be replicated across different physical servers. They rely on software written in the programming language Java. And by freeing up traffic from the common 2. In the 1990s. could be ideal for public places where mobile users and providers want massive bandwidth confined to specific areas. for example – while maintaining essential colocated servers as part of your set up. And it helps when you can point to lower hardware acquisition costs. Most devices now ship with 802. That way programmers can design applets for websites without worrying about which operating system or browser they would be executed in. such as Windows XP. So your IT resilience is much better – and so is your future-proofing.11n standard wifi units. offers theoretical speeds of 1. you can escape operating systems and software applications. applets were introduced to websites to make them more interactive. with chipset designer Wilocity transposed into the cloud. still commonly used for online games and video. When you consider a single physical server could host 100 virtual servers. three times faster than its predecessor. But it’s not just the number of physical servers you need to buy.

Here are a few examples. as in life. allows for tenfold growth in traffic. it comes with its own language. Hypervisor: The piece of computer software that creates the virtual machine which runs a virtual server. it is rare to get something for nothing. Ask your data centre operators about services to help monitor hypervisor and manage your virtual environments. maximising the use of its processor.com that you access on demand.com/ govirtual Data centres are the foundations of the internet. So the advantages of creating new virtual servers must be offset against relationships with software suppliers.” 2010. maximising use of desktops. even if they run on a single machine. See more: telecitygroup. but the world’s largest IX is in Germany. Snapshotting: This technique creates an image of a virtual machine at a particular point in time.COM connect with us Managed services are a crucial part of the TelecityGroup offering. virtual servers can be created running different operating systems – but sharing the same virtualised hardware resources. desktop or storage. which allow Internet service providers (ISPs) to exchange traffic. laptop or even smartphone) can access the applications they need. Third is London (LINX) – the oldest in the top 20. This way. But its beating heart(s) are the internet exchange points (IXs). Host machine: The hypervisor could be running one or dozens of virtual machines on a single physical host machine. Like any sphere of computing. connect with us IXS AT HOME TelecityGroup data centres are home to both AMS-IX and to the new Apollon super-node for DE-CIX at its Frankfurt base. data storage. Its Apollon super-node. anywhere. Find out more at: telecitygroup. applications. Virtual Desktop Infrastructure (VDI): Allows you to separate the applications you use from physical machines – meaning anyone. It is often used for backing up systems before a tricky change in operation. way it charges for physical ones. Engineers can revert to the snapshot if anything goes wrong. But virtualisation is critical now.2 terabits per second. The internet was born in the US. Infrastructure as a service (IaaS): Many people know software as a service (SaaS) – using cloud-based applications like Salesforce. up from 0. Guest operating system: The hypervisor gives each virtual server a guest operating system in a virtual operating platform. Close second is the Amsterdam Internet Exchange (AMS-IX). EUROPE’S POWER PLAYERS TELECITYGROUP.5 Tbps at the start of Lindsay Clark was news editor of Computer Weekly and Construction News – and now writes for The Times and Financial Times. set up in the web’s prehistoric era: 1994. connecting servers that deliver web services and enterprise data. IaaS uses virtualisation technology to provide the same access to computing and network capacity. In computing. launched in 2013. on any device (PC.com/ decix and amsix 53 .LIFT THE LID ON VIRTUAL JARGON Virtualisation is now common in corporate IT. they sounded like IT marketing hype. operating systems and servers. Deutscher Commercial Internet Exchange (DE-CIX) carries a peak traffic of nearly 3. “When I first came across virtual servers in the late 1990s.

DOUBLE-DECKER BUS It’s a big boost to operational reliability. not on a per customer basis. Installed capacity should match demand to be economical. The obvious option.com/ design 54 ISSUE 1 SMARTER COMPANY . A failure would have wider consequences than ever before. with a rapid time to market and without occupying an airfield-worth of space for plant to provide power. That would be a mistake. Now. we’ve been working with cloud for some time. demanding 99. OPTIMISING REDUNDANCY At TelecityGroup. connect with us Chad McCarthy is director of engineering at TelecityGroup Find out more about the processes that go into innovative design at our data centres by visiting telecitygroup. We’ve developed a patented electrical infrastructure to deliver a scalable. Server capacity is expanded with aggregate demand. even compared to Tier 4 N+N topologies. high-density power supply network that decreases statistical downtime by a factor of thousands. Power supply strings – such as generators or uninterruptable power supply (UPS) systems – can be connected together without introducing a common failure mode. we will see higher processor utilisation in servers and a higher power demand per cabinet. The net effect in colocation data centres is a move to high density data halls. voltage… for a spectacularly irrelevant three milliseconds duration. The use of virtual machines and applications removes the link between hardware and single users.yet another sign of our commitment and understanding of the new information age. a single UPS failure will affect neither A nor B customer supply – characteristics which are far superior to standard data centre topologies. for example.995% uptime – a figure we would always seek to better. Customers were rightly nervous about losing a supply or being on partial mains for a while. offers customers the ability to mix and match cloud services to suit their needs. underutilised capacity will result in financial failure. even a single rack can now cater for hundreds of users. our SPP Bus allows us to maintain the rest of the data centre infrastructure much more easily. Our own providerneutral Cloud IX platform. Better yet. offset somewhat by increased efficiencies of new equipment. which greatly increases the processor demand per server. Meanwhile our Engineering division has taken up that efficiency and reliability challenge. then. all critical loads are unaffected by any fault condition. only when the aggregate load exceeds the aggregate capacity of the entire data centre will a bypass to mains or generator be activated (Note: we define this switch to mains power as a failure – even if it wouldn’t take customer servers offline). This in itself is easily solvable. In effect. The power supply is massively robust. When we tested the system. Similarly.5% difference in customer supply S RACK TO THE FUTURE Ultimately. The cloud is also affecting data centre infrastructure. With the SPP Bus. Current practice allows one customer supply (of two) to be affected by maintenance. But that also means it’s creating new vulnerabilities for internet providers and enterprises. This sounds like a job for engineering… ervers are working harder than ever.in the racks POWER TO THE PEOPLE Cloud computing is revolutionising the online world. TelecityGroup Engineering has pushed maintenance affecting partial supply to customers out to a five-yearly interval . and we can operate more reliably with fewer costly components. That means we can reassure customers who can’t afford any downtime. or perhaps delete the redundant ‘B’ supply for power to save space and cost. But other expectations of the modern data centre are that it can be delivered at low cost. It is impossible to overload any single UPS because the other units compensate. N+N refers to the level of redundancy: for every component. is to drop service levels. It’s not just the sheer volume of data and processing created by the evolving digital ecosystem. The increasingly standardised servers in data centres are now taking on functions previously allocated to bespoke networking equipment. there is a standby ready to kick in if there’s a failure. even before the cloud. says Chad McCarthy. regular plant maintenance is carried out while maintaining two UPS supplies to all customers. even a symmetrical short circuit directly on the parallel connection resulted in a mere 2. or “SPOF” (single point of failure). (The Uptime Institute’s Tier 4 is the highest specification for data centres. In the era of cloud computing. ) Our Segment Protected Parallel Bus (SPP Bus) is the biggest breakthrough in mission-critical infrastructure design ever.

of development With growth “There’s a great that makes them from content opportunity to fascinating put in place the prospects. then. there are considerable buying data centre operators in domestic reasons for buying into Poland. market share. And have been revolutionary for the east Turkey. on having the mostThat’s a big plus for local connected carrier-neutral governments and businesses.” says Mortell. too. is their potential as but they’re at a stage international hubs. facilities in the markets where as the countries’ ICT infrastructures we operate.” says delivery networks tried and tested Maurice Mortell. “That benefit from TelecityGroup’s model holds true for these countries. times larger in dollar terms than it was t’s just 25 years since the fall of at the end of communism (it’s now the Berlin Wall and the opening the eighth largest in the EU). – really speeds up our development Poland sits at the heart of a resurgent time. was countries to capitalism. TelecityGroup made OPENING DOORS significant investments in the region. rapidly raise them up TelecityGroup. in terms of data centre “Our brand is built MAURICE MORTELL TELECITYGROUP quality. Bulgaria. There’s demand for both in highpotential economies east of the Danube. and ISPs in Poland. technologies and vice president investment is a big designs we’ve used for developing in other markets to markets for priority for us. Bulgaria and Turkey. The these countries. Last year. But the intervening years broadband speeds in the world. a nation of 76 million. “They’re all rationale for TelecityGroup quite new markets for us. Its emphasis on quality of their development in terms of ensures big-name international connectivity – and that’s good. free known as the Silicon Valley of the movement and democracy.LOOK EAST Fast growth and market transformation are the hallmarks of the digital economy. of course. has been running for years in some cases unique attributes and opportunities. up of the former Warsaw Pact a more recent EU member state.” says Mortell. Clearly. It businesses are drawn to base their gives us real opportunity to build out operations in-country.” he continues. TELECITYGROUP. approach to data centre design and but we’re in at a relatively early stage management. has a of Europe in a different sense – with unique position straddling Europe the emergence of a dynamic and and Asia. it’s only Communist Bloc in the 1980s – and 17 since the most recent military coup still has the third-fastest average in Turkey. “In each of these Eastern Europe.” “Buying data centres – that have Each country. as Maurice Mortell tells Richard Young.COM 55 . its economy five I < TelecityGroup’s PLIX data centre in Warsaw: the most connected place in Poland. But an added attractions are clear. compelling digital economy.

TelecityGroup has already attracted major players in the digital ecosystem into its data centre in Warsaw – those who need to optimise proximity to their users for services such as social networking. FRANCE internet service providers in Poland.” says Mortell. where our arrival really boosted the popularity of colocation as a concept.” says Mortell. gaming and video. POLE VAULT and investment is a big priority for TelecityGroup’s Polish business. UK PARIS. on-site.7m (67%) NetIndex average broadband speed: 20.” 56 MANCHESTER.” says Mortell. was born in the upper floor of a hotel in Warsaw – a physical SOFIA SURFING high-point in the city that allowed 3DC was already a local market for more efficient wireless links leader before the TelecityGroup and then developed a acquisition. “Add in growth at a brand new facility. attracted by the peering facility to allow for growth.in the racks deals. “We certainly saw that in Dublin. “For customers connecting a lot with each other. satellite Turkey is a very enterprise clients and uplinks and even the sophisticated market telcos using its Sofia country’s internet exchange point tech-wise.5 million Internet users: 25.” says Mortell.5Mbps Acquisition: PLIX Joined TelecityGroup: November 2013 On-site IXP: Polish Internet Exchange (PLIX) Email: pl.com LONDON. we’ve bought facilities that are local market leaders – and the teams running them are extremely skilled and experienced. scale – and that’s what the entire country. we also have all “There’s decent capacity in Sofia the larger tech companies and we can build out the existing there. us there. “Achieving the right mix of clients and sectors that can benefit from working with each other within the data centre is a huge advantage. That means we can get our international clients on stream there much more quickly. bursting to facility as a landing point in Eastern Europe. But we’re opportunities – so there’s a real also looking at green field sites so critical mass to our operations that we can develop future capacity already.” SUNRISE IN THE EAST Although these acquisitions were only completed in 2013. the benefits of being able to manage traffic entirely over pure fibre as it interconnects within one facility is priceless. It remains get itself up to speed only issue was that it the most densely didn’t have the ability to connected facility in on connectivity. “We have a reputation in terms of the technology we deploy. ” PLIX. with a healthy critical mass of telco roster of pure colocation connections.info@telecity.” from content delivery networks and ISSUE 1 SMARTER COMPANY .” TelecityGroup’s presence in these markets is also a real plus for local customers keen to exploit the benefits of colocation. As importantly for these customers. Such deals also help build critical mass within the data centres – a real draw for other new customers and partners. IRELAND POLAND Population: 38. “Its (IXP). the standards we set and our international reach that makes us a more compelling strategic partner in the eyes of local business leaders. all three locations are brilliantly placed to handle traffic over borders to other regions that might otherwise be a more peripheral proposition in terms of latency and bandwidth. We want them to have exactly the same experience in Eastern Europe as they’d find anywhere else in our network. UK DUBLIN. we can do now it’s part of “With the Polish IXP MAURICE MORTELL TELECITYGROUP TelecityGroup.

” There’s massive demand from a vibrant tech start-up scene in Istanbul – including gaming businesses. There’s a real sense that this city split in two is a gateway to the east.” he continues. which provide scale for future growth is critical for the economies of these countries. “It’s a bit of a cliché to say that Istanbul is where east meets west.” Maurice Mortell is the vice president Developing Markets for TelecityGroup and country manager for Ireland. we’re ideally placed to facilitate incredible growth in traffic. FINLAND BULGARIA Population: 6. “But in terms of population and growth. NETHERLANDS FRANKFURT.” Traditionally.com MILAN. mobile apps.” 57 . We’re skirting the edges of really big opportunities further east. “The data centre is a key part in the selection method for any business when its deciding where to set up in Europe.HELSINKI. GERMANY TURKEY Population: 76. “It’s bursting to get up to speed on connectivity. “Our Turkish business had already TELECITYGROUP.com One particular target under the new ownership is to encourage both domestic and international financial services players to exploit the opportunities of colocation.98Mbps Acquisition: 3DC Joined TelecityGroup: November 2013 On-site IXP: Bulgarian Internet Exchange (BIX) and Balkan Internet Exchange Email: bg.com STOCKHOLM. it’s very sophisticated tech-wise.COM established a lot of value-added services around cloud and some clever online management tools for hosting – and we can leverage that up to the next level.” says Mortell. “But there’s a broader dimension to the location. “Many people have a gross misunderstanding of the market there. SWEDEN AMSTERDAM. ISTANBULLISH SadeceHosting in Istanbul was acquired in May 2013.7 million Internet users: 35. but it’s really evident when you go there.1m (59%) NetIndex average broadband speed: 32. Asia is incredibly important. The availability of resilient.4m (46%) NetIndex average broadband speed: 12Mbps Joined TelecityGroup: May 2013 Email: turkey@telecity. Data across the Atlantic dwarfs any other connection for European exchanges. and with enhanced facilities in a location such as Istanbul.info@telecity. that hasn’t been a big factor in terms of traffic. and we can help. The fact that we’re in Turkey should encourage more international firms and connectivity providers to enter the market. ITALY * Penetration as determined by InternetLiveStats.9 million Internet users: 4.” Mortell stresses. well-connected data centres. cloud services and much more.

There are paths going in many WHAT IS IT FOR? limited to being a one directions. IBM and UC Berkeley) suggested the D-Wave machine could They can be in a state of “quantum superposition” – both a not definitively be said to be a quantum machine. That changes the order of the ones and 58 DOES ANY OF THIS MATTER? In the medium term. see page 16). well over a billion transistors arranged as logic gates are switched on and off depending on how the ones and zeros arrive. no matter how complex. Quantum bits contributor managed to find a decent So what’s quantum computing? analogy. HOW DO CONVENTIONAL CHIPS WORK? Computers are very simple: they only understand electrical currents that are either on or off. that will twist. A quantum computer takes all the military researchers are so interested – and it time. But the input/output mechanisms. one Medlock’s street. planning. A conventional computer must try all the possible Intelligence Lab based on a D-Wave Two suggests that the solutions one at a time until it gets the answer. scientific debate is being overtaken by a practical one (the new lab. zeroes coming out of the other side. But many fields are held back by the need for the massive computational power quantum systems can deliver. one and a zero at the same time. They can be A typical computer will take a route until it hits a dead end. Imagine you’re at the centre of (qubits) aren’t a maze. They translate any input. which determines the arch 2014: researchers at University College London output – such as video. There. will work on machine learning SO… EXPLAIN IT LIKE I’M FIVE! problems – which sounds like it’s right up Dr Ben On reddit. incidentally. then start at the problems much more quickly than both a one and a zero beginning and try the next route from conventional computers. into ones (on) and zeros (off) that get fed in batches of 64 at a time through a processor. Google and the Universities Space can test lots of possible answers to a given problem at the Research Association (USRA) launched a Quantum Artificial same time. and the University of Southern California gave a cautious thumbs-up to the description of the D-Wave Two as HOW IS QUANTUM COMPUTING DIFFERENT? a “quantum computer”. One obvious scratch – repeating until it finds the way at the same field is cryptography – which is one reason out. instantly seeing which one is the could be the only way to handle some seemingly fastest to the exit. in a typical modern chip. paths at once. impossible high-end maths and physics problems. where researchers need to cycle through trillions of amino acid combinations to uncover proteins – quantum computing could be the only practical approach. a calculation or a stream of data. this is very niche.in the racks A BIT OF A QUESTION Quantum mechanics: it’s the science even the world’s best physicists say they don’t entirely understand. It’s going to be important for cyber security. It’s controversial: earlier research (by Quantum bits (qubits) aren’t limited to being a one or a zero.com’s ELI5 community. turn and divide. D-WAVE M 1 SMARTER SMARTER COMPANY QUARTERISSUE ONE Þ COMPANY Þ TELECITY . finance. With the right control and The dispute might seem a little academic to most. So how come the first “quantum computers” are already being built asks Richard Young. and in drug discovery for example. Quantum computing promises to allow us to solve incredibly complex algorithmic or a zero. this means the quantum processor fact that in 2013 NASA.

NEXT TIME Smarter Company returns soon with more in-depth perspectives on the digital economy. We’d like you to tell us a story. So how is town planning and the design of urban infrastructure changing to improve inhabitants’ digital existence? What are the benefits for business? Where around the world can we find cities “built for digital”? And what might the town of the future – designed around data – look like? 4 Networking hardware is becoming commoditised. We know that our customers and partners are making use of the digital ecosystem in some incredibly creative ways. Smartphone fingerprint scanners have brought biometrics into the mainstream. Get in touch via smartercompany@telecity.. But what would you like to have seen more of? What’s your take on the technologies. But the elite networking boxes that run the internet have mind-blowing capacity to direct traffic and manage data. Smarter Company offers the low-down on how these systems work.COM CEO RICCARDO ZACCONI AND THE SOCIAL REVOLUTION IN MOBILE GAMING 2 where content meets connectivity NEXT BIG THING 3 Collaborative economy Working together is a feature of the digital age. hyperconnected resources is allowing innovative organisations to rewrite the rules on enterprise applications. with your smartphone to send us an email – and your business could be in a future edition of Smarter Company. tech such as the iris scanner is already a core layer for physical and digital security..com or scan the QR code. Working with flexible. ideas. right. businesses and smart leaders we’ve featured? Get in touch via smartercompany@ telecity. backup and mobile CRM. So what is it? How does it work? And where will it take us? COOL KIT The world’s most expensive routers GLOBAL TAKE New towns. TELECITYGROUP. the Juniper T4000 and Cisco’s CRS-X. So what’s coming up in our information-packed Issue 2? GOT CODE? How the world is training a generation of programmers FOLLOW THE MONEY What makes a great digital business – by the VCs who fund them THE STATE WE’RE IN Data sovereignty: why your information can’t be global (yet) SMARTER COMPANY 1 A TelecityGroup publication for businesses at the heart of the digital economy ECOSYSTEM Cloud applications that will blow your socks off The cloud: sharing music. the openness revolution in IT. So we want to hear your stories. BLUFFERS’ GUIDE Everything you always wanted to know about virtualisation GETTING SMARTER Dr Ben Medlock explains how SwiftKey knows what you’re going to type next + The internet of everything.COM 59 . But for many businesses. right? Wrong. Smarter Company picks out some of the best examples from the TelecityGroup ecosystem (and no photo-sharing apps). But there’s potential beyond document sharing and integrated supply chains.com or scan the QR code below with your smartphone to send us an email and tell us what you think.COM 5 We hope this first edition of Smarter Company has entertained and informed you. BLUFFER’S GUIDE Look into my eyes… TELECITYGROUP. the true collaborative economy is the big idea that throws everything we know about business into question. liquid servers CRUSHING IT KING. Welcome to the world of the super-routers: Alcatel-Lucent’s 7950 XRS. For some management thinkers. smart cities How smart? Data is central to society. where they’re best applied – and the optimum ways for business to exploit them. with more functions assigned to servers.