How Kio Networks is preparing for the coming datacenter boom

Kio Networks is eyeing datacenter demand arising from the arrival of hyperscalers to Latin America and the growth of cloud services.

The company expects that up to US$900mn will be invested in the overall datacenter market in Latin America by 2026. The market is booming with acquisitions, construction announcements, new facilities or cloud regions.

Mexico-based Kio is also operating in Panama, Guatemala, the Dominican Republic, and Spain. It has 40 datacenters and clients in the cloud, content, financial services, and government sectors, among others. Its installed capacity is in the order of 20MW.

Last year, the company was acquired by investment fund I Squared Capital.

This year, it announced the construction of a datacenter in Querétaro state, as it follows a broader local growth strategy.

BNamericas spoke with Alejandro Ríos, CTO of Kio Networks, about the regional datacenter business and expansion plans.

BNamericas: In which sectors are your datacenter services in highest demand?

Ríos: One of the main factors driving growth is the acceleration of hyperscale datacenters. During the pandemic, construction for many had to slow down and there were supply chain issues, causing many expansions to be delayed. But far from stopping the demand, it accelerated.

So, we have a capacity lag. In Mexico, being the second largest economy in Latin America, this is beginning to be noticed. Not always able to build them themselves, hyperscale datacenter businesses are leaning on companies like ours.

Businesses are also accelerating digital transformation, which is why demand has been growing. We had to expand one of our datacenters and we made public the construction of more datacenters in the same region, [Querétaro].

BNamericas: Is the situation similar in Central America and the Caribbean?

Ríos: Yes. In fact, the need for communication with the two types of clients – hyperscale and cloud service providers, plus end clients (companies) – has accelerated.

I like this phrase from Gartner: “There is no business strategy without a cloud strategy.” So, we see that demand for companies but also for cloud and content service providers is increasing a lot. And this also fueled greater need for security.

BNamericas: Do you plan to continue investing in new datacenters or expansions?

Ríos: Yes, in both directions. Our datacenters are designed with extra capacity that can be [implemented] when a new computer room is required. In Querétaro, for example, construction was very fast. Several of our datacenters have this capability.

In addition, we have some plans to build centers. Publicly, I can only say that we are evaluating the north, center and south of Mexico.

One important thing to keep in mind is that the market is very dynamic, and if a new service provider comes along, it is very easy for them to buy a lot of capacity and fill up the existing datacenter very quickly, so you have to have a construction and location to continue growing. We are closely following the demand to be able to offer a product very quickly.

BNamericas: How do you satisfy demand that quickly?

Ríos: Well, construction is a challenge and you have to add supply chain issues, which are far from resolved. There are statistics that indicate that projects were delayed for three months, but now they are already up to six months.

In the regions where we are, we have a lot of local knowledge, so we don't have to go through that learning curve, which means that we can have a head start of between six and nine months. On the other hand, we have plans with sites already chosen based on the submarine and terrestrial fiber available.

BNamericas: Just as supply chain issues began to ease early this year, Russia’s invasion of Ukraine and a new coronavirus wave in China caused troubles again. How is the current situation?

Rios: In general, the problems have not been resolved and have generated many other logistics problems, extra costs... The war in Ukraine is causing energy difficulties, so everything slowed down again. It will still be a while before this will be resolved.

What you see are different strategies ... in construction. What we see is that larger projects are being carried out now, because we are considering future requirements. That also increases complexity.

BNamericas: How has the entry of I Squared Capital benefited Kio Networks?

Ríos: This strong support has been welcomed.

I think it strengthened the analysis and evaluation of new markets and new extensions.

It is a pleasure to be able to have the support of this fund when it is most needed. For the expansions that we have to make, there is a need for capital and that is when our investors play an extremely important role.