DEAC: We Are the Data Buffer Zone Between NATO and Russia

March 15, 2018

If everyone on Earth took one photo each day and saved it in DEAC data centres, it would take 13.8 years to fill them up. This is a statistical fact that can be attributed to DEAC. Data centres, which operate in cities from London to Moscow, and the growing loyalty of clients make the company one of the best-known data centre operators in Northern Europe, but this is only one side of the story. We visited Andris Gailītis, CEO of DEAC, to get to know the company better and record the other side of the story – the one that tells us of the company’s objectives, experience in export markets, and its vision for the future.

 

What is DEAC?

 

We are a private banker in the data sector. Unlike others, who have entered this sector from the telecommunications field, DEAC has been a provider of hosting services since day one. Our uniqueness lies in the fact that we do only what we’re good at.

 

I don’t believe that being good at everything can be considered added value – if you’re good at everything, you’re really good at nothing. It is similar to driving with all-season tyres. There are no such tyres – there are either winter or summer tyres. All the others are for driving in the woods. It’s the same in our business. We have a competence that we have been perfecting over the years. We can build private clouds for our clients. We can service our clients’ support systems. This is what we’re good at and what we have been committed to since 1999. We don’t try to insert ourselves where we don’t belong. That would only mean wasting resources and money.

 

Who is your client?

 

DEAC has a variety of clients, but we mostly work with export companies from Russia, Ukraine, Belarus, and other post-Soviet countries. I am glad that our clients come from different financial backgrounds. We have been burnt before – we drafted a big contract, but the client suddenly backed out. It hurt. That’s why it is better to have several clients that bring in a couple of thousands a month rather than one who dictates the rules.

 

In each new region we have to prove that we will still be viable in two years. We have to demonstrate presence. We have to participate in all conferences. It’s about looking for direct contacts, visiting the new markets, and meeting the potential clients.

 

What are your immediate goals?

 

DEAC aims to continue increasing the quality of client service. We have to learn to improve our competences, because viable companies are those that can persuade their clients and provide qualitative services. The coin has two sides – you can grow sales figures quantitatively or you can lose clients just as quickly because you can’t ensure quality. It is risky.

 

In regard to finances, DEAC plans on increasing its business capacity a couple of notches. We don’t set unrealistic goals, only ones that we can reach. We are closing in on 10 million in revenue. Even though we have slipped a little, we have to come back and aim higher.

 

We will focus on the Baltics and only on business class clients. We are working on developing a partner network in Old Europe and Scandinavia. We’ll see how it works out. These are very busy markets that protect themselves, especially Scandinavia. That is actually the way to go – while Latvians are digging graves for one another, Scandinavians would rather pay the regular price to their neighbours to make sure the money stays in their country. It is an instilled and unspoken rule that demonstrates the attitude towards one’s country, friends and family.

 

When did you decide to go for export markets?

 

After building our second data centre, we realised that we would never fill it up if we didn’t come up with something. This is when we started aiming towards Russia. First of all, we are a smaller country, so our average client is also smaller. Second, the attitude of medium Russian companies towards IT is much more serious than here.

 

In Latvia, large clients know that they need to buy a tractor, fork lift or whatever else, but don’t realise that IT is the backbone of their entire business. If something goes wrong, it lasts for days, and what they lose is not their 100,000 euro tractor, but millions. It is only when they experience it first-hand that their thinking changes. In Russia, people raise specific concerns, they want to understand how our solutions can help their business.

 

Russia wasn’t a strategic decision, we simply live right next to it. This is how life is dictated by politics, and it is an inconvenience for entrepreneurs. Russia is our nearest neighbour, so we will always have to work with it. Everybody’s closest partners are their nearest countries. In any business area.

 

What homework did you do on your way to Russia?

 

We didn’t. I was sitting at the table with Oļegs Naskidavejs, Sales Department Manager of DEAC, and I told him that he would be leaving for Russia next week. Being a diligent person, he did as he was told and investigated our options.

 

It’s a similar story to the one about filling up our data centre. We are different by being experts. I am saying that truthfully, with no arrogance. I designed the DEAC data centre for the most part together with our Technical Director. The only thing we outsourced was hydraulics, which are needed for cooling. Everything else we did by travelling the world, watching and learning. We are all, including myself, certified engineers. DEAC Technical Director is a high-class specialist, who understands everything from the very basics. He can’t be fooled. And this is where our competence lies. We can do everything quickly and qualitatively.

 

What do you think is the Latvian IT export success story?

 

I have to mention MikroTik that makes both software and hardware. The actual manufacturer for MikroTik is HansaMatrix, which proves that despite the plethora of Chinese products all around us, we can manufacture electronic components ourselves in relatively large amounts. Perhaps, there is a future for what Squalio Cloud Consulting and TestDevLab do as well. These are services with a return on investment. The value is not in the sold hardware but in being able to ensure salaries to your employees and pay dividends. As a result, all the money stays here.

 

I should also mention data centres and IT outsourcing that we provide. Latvia is a land of data transit. We are located in an unstable zone between NATO and Russia, but, on the other hand, Russia is our biggest trade partner. No matter the sanctions, everyone will want to work with it. We are the buffer zone, we are right in the middle. Everyone who does not feel like entrusting Russia with their data will store it here, under the protection of NATO. This is not something to hide, it’s normal. It comes down to our geographic location.

 

I have to say, though, that overall I am sceptical of the Latvian IT industry. The figures look good but as soon as the financing from the funds stops, 70% of the companies that depend on this money will disappear. We have to be able to define our products. Unfortunately, half of Latvian companies can’t do it because they simply don’t have the products. Some companies don’t care about anything. They have other priorities. As rude as it might sound, they are simply squandering national and European funds. When the funds dry up, they will have to start thinking about what else they can sell. After all, the market shows how long we can afford to sponsor certain things.

 

What are the most important export lessons DEAC has learnt that you can share with others?

 

First of all, you have to consider the local market, competition, products, and prices thereof. You have to consider market resistance. Our main advantage is that we are not actually competing with the locals. We are a data centre service provider, and if any Russian entrepreneur wants to take their data outside of Russia, they will do it. No matter if they decide to store itin Latvia or Switzerland.

 

Second, you have to understand that nothing in this world is free. You need big money. In the beginning, many potential partners told us to come by in another year or so before they would even consider negotiating with us. Many companies come and go, so they want to make sure you will be a trustworthy partner. Building recognition and promoting yourself will take no less than two years. We have had cases when entrepreneurs want to accompany us to a conference. We have nothing against it, but the expenses have to be split. As soon as it comes up, they back out.

 

Third, you have to use the available financial support instruments responsibly. Latvian IT Cluster support in the External Marketing Activities of the Latvian IT Companies project was very helpful for us. Plus, we’ve also attracted financing for developing products with very high added value. You have to look for opportunities, but not many do it. Many are not even aware of such support and how it works. People have to be encouraged to use these opportunities.

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