DATA CENTRE SPECIAL: Evolving data centre models
24 May 2013 | Gareth Willmer
As global carriers increasingly move towards the cloud and higher-capacity services and networks, the role of the data centre has been shifting from pure storage and connectivity into a place to do business with multiple tenants. Gareth Willmer investigates the moving market dynamics.
Bigger hasn’t always necessarily meant better in the data centre market, but lately this seems to be changing.
In the US, market data shows that organisations have moved away from smaller, less efficient and more remote server rooms in the face of the economic crisis. This in turn has led service providers towards congregating at larger data centres, a trend that only looks set to accelerate.
Global data centre provider Equinix cites recent figures from research company IDC which forecasts that the total number of data centres in the US will fall from 2.94 million to 2.89 million between 2012 and 2016. Equinix says this reflects the move from older network-only PoPs to large multi-tenant data centres as cloud services gain traction. While this is a relatively small drop in numbers, it indicates something about the way the US market is changing. This is particularly evident when taking into account that IDC also expects total US data centre space to grow from 611 million to more than 700 million square feet over the same period, representing a rise of almost 15%.
According to IDC, the move to virtualisation and server consolidation has contributed to a decline in the size and number of smaller data centres as applications are shifted to larger central facilities. IDC says the content explosion and rise of the cloud have simultaneously helped bolster the number and size of larger data centres, with a significant 20% growth in the average capacity of US ‘mega’ data centres to 50,000 square feet between 2009 and 2012. “There’s definitely an increase in space in data centres,” says Anthony Rossabi, SVP of service provider markets at US data centre provider Telx. “There are more and more folks that want access to multiple customers. It gives folks the ability to see and interconnect with those who might be in data centres.”
According to Rossabi, carrier-dense facilities broaden the options for customers, providing diverse paths for connectivity and allowing them to cut down on latency by being closer to the customer. “I think that as the cloud continues to develop there will be more and more facilities in different markets,” he says.
Adam Janota, EMEA director for global networks at Equinix, says 90% of global data centres are small locations, while only 10% are larger and the focus on the latter is set to rise. “Enterprises are going towards an outsourcing model and this is a global trend,” says Janota, although he adds that the US tends to lead in the cloud adoption and outsourcing market.
Richard Villars, vice-president of data centre and cloud at IDC, adds that the perception of a data centre is evolving from a room or building where an organisation puts its IT equipment to a facility on which it might build and run its business.
The apparent rise in appeal of the multi-tenant data centre will be music to the ears of major carrier-neutral data centre providers, which have sought to create marketplaces and business communities in their facilities in which to help cross-connect customers.
This strategy is spurred by the growing belief that large data centres are increasingly becoming places for multiple players to do business. Equinix launched its Marketplace service to aid interconnection between its data centre customers in October 2011 and cites strong growth in network customers interconnecting with financial services and content customers, with network-to-cloud and network-to-enterprise connections also on the rise.
Equinix says ongoing customer surveys on decisions that affect the selection of a data centre have revealed that network service providers prioritise carrier density and cost-effective cross-connects to take advantage of this high level of concentration.
In addition, Equinix says members of the mobile ecosystem are seeking ‘hubs’ where they can aggregate connectivity and content.
Equinix found that apart from basics like security, reliability and power availability that are a given for reputable data centre providers, customers most value the provision of carrier neutrality by a co-location provider. This, it says, is closely followed by a mechanism or tool such as the Equinix Marketplace to do business with other partners in the data centre.
“Multi-tenant data centres provide an automatic revenue opportunity and this is a huge advantage,” says Janota. “There’s a first-mover advantage, in that carriers that move in within six months have a much higher percentage of business in the facility.”
Janota also illustrates how space in Equinix’s data centres expanded during the last decade, helping it provide its current potential through more than 7 million square feet and 4,000 customers globally.
He points out how the company’s fourth London data centre, LD4, is larger than the previous three combined and the 27,800 square-metre fifth, LD5, is larger than the previous four together.
He further gives the example of one of the company’s clients consolidating from six small data centres to three Equinix facilities and says this kind of trend is related to the whole ecosystem and the move from co-location in small telco rooms to multi-tenant data centres. Janota says one way to optimise network costs is to collapse legacy data centres and move PoPs to a carrier-neutral data centre, adding that: “All network components have to be optimised. What better way is there to do this than to sit in the same place where the content is?” Kevin Dean, chief marketing officer at Europe-focussed data centre provider Interxion, says from Interxion’s perspective the overall size of data centres is increasing, although the rise is not necessarily rapid. “A typical module [of about 1,000 square metres] is not changing in size, but you might have one with more in it… With the same amount of space you can do a lot more.”
Dean stresses that one source of differentiation when using a carrier-neutral player like Interxion is that the company has an average of more than 50 carriers in each data centre, compared with just a handful in many carriers’ and wholesalers’ own data centres.
He says this level of connectivity will prove beneficial moving towards the cloud: “Going forward, cloud platforms will follow that connectivity…. Carrier neutral data centres will also be cloud data centres.”
There is, says Dean, rising carrier demand for space for more bandwidth, new services and cloud services, with Interxion enabling a higher level of redundancy and resiliency if they need to interconnect cloud platforms. Carriers are also trying to offer more of a portfolio of services to enterprises, leading to more customers in data centres. Carriers have an opportunity to use Interxion for partnering to connect up their enterprise customers into its sites to benefit from multiple cross-connects to customers in different business verticals and to reduce latency. Dean also says enterprises need to rationalise their applications and are looking for the lowest possible cost. But like Equinix, he says part of Interxion’s pitch is that “if you come to our data centres, there is a revenue opportunity.It’s not just about saving costs for lots of carriers.”
The campus experience
Carrier-neutral providers can also help provision outsourced power requirements, with consulting firm BroadGroup predicting that space will become less important than power within European data centre metrics.
Dean separately refers to the trend towards building out data centres in campuses and on a modular basis. In a white paper published last year, Colt said that modular builds could cut its data centre’s delivery time to just four months, a fraction of the previous build time and potentially key in a rapidly changing market moving towards the cloud and virtualisation.
IDC’s Villars picks up on this theme, saying that data centres are now often prefabricated in several chunks, shipped to their destination and grown in a modular way rather than being constructed on site: “Data centres are shifting from being constructed to being manufactured.”
Villars predicts that the modular model will dominate after 2016, contrasting with the fact that “two or three years ago every data centre was unique.”
Raymond Vredenburg, senior director of product management for data centre and transport services EMEA at Level 3, agrees that it is “more and more clear that the scale and size of new-builds is getting bigger and bigger, with larger data centres and campuses.” Level 3 itself is both expanding the size of its data centres and setting up new ones.
Jonathan Wright, VP service provider at Interoute, says meanwhile that “It’s still a relatively booming market with plenty of build out and customer demand. I don’t really see growth abating yet.” The current average size of Interoute’s managed service data centres is 1,000 square metres, with an average growth of about 25% year-on-year.
International carriers also see benefits in using third-party multi-tenant data centres, with a potentially high number of tenants facilitating the sale of network services. Level 3’s Vredenburg says a further factor is that “it usually comes down to the fact that acquiring our own data centres is quite capital intensive. [It’s also about] having the knowledge and the right type of resources in-house.”
Interoute has a number of criteria for selecting whether or not to run a data centre itself or use a third-party carrier neutral provider, including what demand is like in a certain market, how quickly it needs to get to market, how costly it is to acquire land and how abundant and secure utility power is. The company says it will typically decide to use a third party “when we want to get started or test the market.”
But international carriers still often prefer to build their own data centres if there is a sound business case for doing so. As Interoute says: “Once the business case is proven and sales and operations are satisfied with the level of demand, the case will move to build out, providing costs are understood and power is readily available.”
Interoute says the majority of data centres where the company takes 1,000 square metres of space and offers hosting services are its own, aside from limited carrier-neutral sites. The company has network PoPs in more than 200 third party facilities, but these typically consist of a small number of racks. “Interoute’s data centres remain primarily own-build, with only a few exceptions,” says Wright.
Neil Downing, VP of enterprise solutions and sales operations at Interoute, says third-party data centres can be quite pricey when signing up to a minimum tenure of a few years and a minimum number of racks for serious managed services, while telcos tend to be charged premium prices: “They are expensive places to be. In a decade, in some facilities there has been 600% inflation.”
Wright says further that “the veneer of neutrality has decreased in third-party data centres as they provide more services”. He says such data centres are only about 25% as neutral as they were about 10 years ago, with this facet eroded as they offer a lot more services that are more and more like those of a carrier such as internet connectivity and Ethernet or bandwidth connections between their own data centres in different cities and countries.
Vredenburg says Level 3 weighs all options when investing in sites, with the goal of creating the greatest experience for its customers and the most positive investment for our shareholders: “This often aligns to a capital investment and ownership, but in other cases we have found great partners to work with and spaces that meet our stringent levels of security and reliability inherent in our data centre services.”
He adds that Level 3 prefers to sell space and security in its facilities where feasible and that the company itself is a multitenant data centre operator with more than 350 facilities in the US, Europe and Latin America, while also leasing some space in third-party facilities.
Len Padilla, VP of product strategy at NTT Europe, acknowledges that cross connectivity in carrier-neutral facilities can be an advantage, but that NTT often itself provides a large amount of connectivity in its own data centres and has facilities where many networks are present.
Padilla also says that NTT seeks to build its own facility once it gains sufficient scale in a particular market, after initially taking co-location space in a data centre where it has a strong network presence.
The company is additionally opening new data centres to underpin its new Infrastructure-as-a-Service (IaaS) cloud offering for enterprises, in a bid to offer robust cloud services that provide additional services like managed hosting rather than just simple virtualisation.
Smaller carriers with a regional focus could also gain from entering a broader supply chain in a multi-tenant data centre as they seek to play a part in the cloud ecosystem, rather than choosing to own and operate their own facilities.
Indeed, Colt has previously indicated that it can be difficult for telcos to create their own cloud service with their own platforms when seeking to bring different services to the cloud and that aggregation may instead be needed in the marketplace.
It will certainly be interesting to see how the market for multi-tenant data centres continues to evolve as the cloud and different communities of interest develop globally, as well as to see how carriers opt to align their own data centres with those of carrier neutral third parties in a bid to help maximise opportunities.