Atlas Cloud at “Tip of the Iceberg” as cloud computing catches on

Tue 9:10 am by Peter Murray

Founder and CEO Fred Stearman is a veteran of large communications companies such as Bell Canada and Telus. If you accessed a website to buy tickets to the Vancouver Winter Olympic Winter Games in 2010 or checked results of your favourite events, then you have seen Stearman’s handiwork.

It is tempting to say that all an investor needs to know about Atlas Cloud (CSE:AKE) is that the young data centre expects to be profitable a few months from now, grow slowly but surely, and see earnings inch higher with each new contract signed. But that would be to overlook the larger, more interesting picture that revolves around the company’s decidedly refreshing business philosophy. It is equally important to understand that Atlas Cloud plans to prosper in Vancouver’s fast-moving technology scene by going back to basics.

Founder and CEO Fred Stearman is a veteran of large communications companies such as Bell Canada and Telus. If you accessed a website to buy tickets to the Vancouver Winter Olympic Winter Games in 2010 or checked results of your favourite events, then you have seen Stearman’s handiwork. Designing and maintaining the Internet backbone for the Olympics is just one of the highlights of a 30-year career in programming, hosting and other activities, serving mostly large clients in western Canada.

Good as his employers and other big companies were at taking care of larger clients, Stearman could never shake the feeling that other customers were often at a disadvantage simply because they were small fish in a big pond.

Atlas Cloud’s mission is to upend that dynamic and put the small business first.

WHAT EXACTLY IS A DATA CENTRE, YOU ASK?

The “cloud” is one of the higher profile topics in technology these days, as companies large and small begin to figure out the benefits of decentralizing data storage and access to resources. The traditional approach of investing directly in hardware and software and paying in-house experts to maintain that proprietary system brings high costs and often sidesteps system redundancy.

The decentralization concept at the core of cloud computing solves all of these problems. For the cloud to exist, through, the world needs data centres.

“Primarily, we offer power, cooling and bandwidth for the IT industry,” says Stearman when asked for an explanation of the Atlas Cloud business.

“If you can imagine you have a number of servers in your office and it produces a lot of heat, the power grid goes up and down so you need a battery backup, and for code you need some fire suppression, and if the power goes down for a long period of time, you hope there is a generator in your building. We consolidate all those pieces and share it amongst many people.”

Touring the Atlas Cloud facility, a former manufacturing site on the city’s east side where cardboard boxes were formed, one quickly gets the picture.

Rows of racks stand in a highly secure environment. These racks, explains Stearman, are for mounting servers. “They look like pizza boxes and you can fit 42 of them into a rack,” he says. Several metres away sits a large diesel generator to provide power in case of a major electrical grid failure. The generator is elevated from the floor to keep it safe if flooding occurs.

A second data centre, likely to come online in about a year, will look much the same, but with one big difference -- location. To hedge against the potential for a natural disaster in Vancouver, Atlas Cloud intends to establish a separate centre, likely in Kamloops or Calgary. That not only adds to the ability to ensure safety for customer data, it also enables the company to be close to a second significant customer base. The Vancouver location goes live on December 1.

A FAST PATH TO OPERATIONS AND PROFITABILITY

Stearman is clearly someone accustomed to getting things done, the tone of his voice grabbing an edge when he talks about corporate strides made to date, even though the timeline he presents sounds more like a model of efficiency. “We raised money in July, ordered equipment in August, installed it in September and October, and will finish it in November,” he explains. “The reality is we should be EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) positive by January 1 and every month, we will keep adding to that.”

To establish a bootstrapped technology business with growth supported entirely by cash flow once service begins would be quite a feat. Making things a bit easier has been a co-working space at the front of the facility called The Cranium. Here, young technology companies rent desk space at bargain rates as they build from the ground up. It is a great networking environment, and having an experienced hand like Stearman around is pretty valuable, too.

For Atlas Cloud, having The Cranium meant there was cash flow to help cover rent, utilities, insurance and other basic costs right off the bat. And since The Cranium sits on a wooden frame inappropriate for housing servers, it makes perfect sense to have a cash-flowing business occupying space that perhaps could not be fully utilized by Atlas Cloud otherwise.

Another way to grow quickly is through acquiring complementary businesses, and while Atlas Cloud is not targeting anything in particular at present, its public status opens the door to this possibility. “It is going to position us well as we expand,” says Stearman of Atlas Cloud’s CSE listing.

“As we generate more revenue and EBITDA, our stock value will go up and enhance our currency to do an acquisition.”

BIG COMPANIES DON’T POSE A THREAT

Technology behemoths such as Amazon (NASDAQ:AMZN) and IBM (NYSE:IBM) are the companies most often mentioned in media coverage of the cloud computing industry, but having such big names in the same sector is not really a concern for Atlas Cloud. “Our customer base is totally different than the national carriers,” Stearman says. “If you make it cost-effective for small businesses to have a good DR (Disaster Recovery) plan, there is a market for it.”

In addition to attractive pricing, Atlas Cloud supports small businesses with the ability to negotiate terms of variable lengths so that their contracts are tailor-made. And then there is the biggest draw of all – superior customer service.

“We actually have people you can come in and meet, so you are not a number,” explains Stearman. “At larger companies,” he bemoans, “you call a 1-800 number and hope you get someone to help you out. Here we have named technicians and named people. I am the owner and will talk to every customer.”

Value-added services such as data backup and website design round out a service line-up that should make any small business’s IT manager smile.

Stearman believes it is a perfect time to be entering the data centre industry, as corporations are only just beginning to embrace the cloud concept and the benefits it offers.

“People think everything is going to go cloud. I am going to trust my data to be somewhere and it is always going to run at 100%. The reality is that very few companies have embraced outsourcing their data services. We are the tip of the iceberg in terms of visualizing what the cloud is.”