Co-location and cloud service provider Online Tech on Monday said it received a $20 million investment from media company News-Press & Gazette that will enable it to expand its data center presence.
Online Tech, which specializes in offering hosted services for customers who need compliance with government and industry compliance, is looking to add four more data centers across the Midwestern U.S. in the next 24 months to meet growing customer needs, said Mike Klein, president and COO of the Ann Arbor, Mich.-based company.
Privately-held Online Tech currently has a profitable operation based in three data centers with a total of 60,000 square feet of space, Klein said. Those three data centers were originally corporate data centers from General Motors' EDS operation, Thomson Reuters and Fidelity Information Systems, he said.
However, the company has been growing 30 percent per year for the last few years, and it needs the expansion, he said, an expansion which requires heavy up-front capitalization.
"We will be acquiring new data centers, and a lot of investment is needed to expand," he said. "To date, we have expanded by taking over corporate data centers. Also, we need to invest in private capacity. As customers grow, we have to spend a lot to bring in the equipment to serve them, even though they will be paying for a service."
Online Tech's current business is split about evenly between its colo operations, where its customers are primarily located in Michigan, and its private and multi-tenant cloud operations, where it has a nationwide customer base, Klein said.
Of the two, the company's cloud business footprint is growing much faster because of compliance concerns among its customer base, which includes healthcare, financial and retail e-commerce companies, he said. "We're one of the few third-party data centers that are certified HIPAA-compliant, and we also focus on compliance with Sarbanes-Oxley and PCI," he said.
The $20 million investment from St. Joseph, Mo.-based News-Press & Gazette came as a result of that company expanding its media business, which includes three television stations, four radio stations and 14 newspapers, into the digital press world, Klein said.
"Media companies in general are becoming more digital," he said. "Early this year, NPG grew its own data centers and found it liked the data center marketplace. So in the second quarter of this year, they started looking at opportunities to invest in the data center business, which was about the time we started looking for investment."
Klein said he was surprised that a media company would want to invest in the data center business. "If you had told me six months ago that we'd get investment from a media company, I would have been shocked."
As a result of its investment in Online Tech, News-Press & Gazette will get seats on Online Tech's board of directors, but management will remain in the hands of Online Tech's executives, Klein said.
PUBLISHED SEPT. 17, 2012