CLOUD SPECIAL REPORT 2014: Rise of the cloud data centre
19 June 2014 | Gareth Willmer
The unstoppable rise of the cloud is fuelling the global data-centre market, leading to a wide array of models to support virtualisation services in facilities.
Throughout the world, the growth of the cloud is set to drive data centre roll-outs and traffic in the coming years. Numerous carriers, data-centre companies and cloud providers are investing in this area, attested to by the recent slew of announcements about cloud-based data centres.
A key finding from discussions with industry players is that there are multiple strategies for operating and differentiating cloud services in data centres, often driven by the player’s size, their traditional role in the market and their regional focus. Ultimately, these models seek to capitalise on the significant uplift that the cloud is lending to data-centre growth.
In its Global Cloud Index from October 2013, Cisco predicted that annual global cloud traffic would more than quadruple between 2012 and 2017, from 1.2 to 5.3 zettabytes. The company contended that by 2017 this would drive more than two-thirds of data centre traffic, forecast to triple to 7.7 zettabytes.
Europe and North America have established themselves as cloud strongholds, but other regions are set for faster growth in coming years. Cisco forecasts that cloud traffic in the Asia-Pacific region will experience a compound annual growth rate (CAGR) of 43% between 2012 and 2017, compared with about 30% for both North America and Western Europe.
These regional trends present huge opportunities, with network operator Pacnet for one seeking to leverage its pan-Asian footprint. In February, the company launched its Pacnet Enabled Network (PEN) in data centres in Asia and the US, opening up cloud possibilities over its Network-as-a-Service (NaaS) architecture. As with many other players, Pacnet has opened cloud-branded facilities, having recently launched its carrier-neutral CloudSpace II data centre in Singapore.
Giles Proctor, Pacnet’s VP of data centre construction and operations, says that “PEN extends enterprise-class data centres and private clouds to any external cloud vendors, offering customers and partners the flexibility to create a truly virtual Asia-Pacific data centre”.
Asia-Pacific, he says, has a “very promising future” for cloud, despite its widely varied cultures and regulatory regimes. This is because of its sheer population size and the lack of legacy infrastructure in many countries, with data-centre capacity still underbuilt compared with Europe and North America: “They will look and buy the best, most efficient solution, and that is generally going to be cloud.”
Proctor cites the way Pacnet has entered new markets, with the company opening a data centre in Chongqing last year to add to its several existing Chinese PoPs. A quick glance at the facts indicates the massive opportunity: Chongqing alone has a population of close to 30 million, while China has more than 1 billion mobile subscriptions in a rapidly growing economy.
Others are also paying close attention to Asia’s prospects. In April, Interoute opened a virtual data centre (VDC) based on Infrastructure-as-a-Service (IaaS) in Hong Kong, its first outside Europe. CTO Matthew Finnie says the move is largely driven by European customers seeking a gateway for connectivity to global enterprises that store data in Asia.
NTT has separately been opening data centres across Asia to push its Enterprise Cloud service, which is in 12 locations worldwide with two more launches planned this year, including in Shanghai. Len Padilla, VP of product strategy at NTT Europe, says that financial data centres in south east Asia such as Malaysia, Singapore and Hong Kong have been “very, very successful. We probably will see them continuing to expand; I don’t see any slowdown in the future”.
Cloud players are also orientating themselves towards Australia, noted by Forrester Research as a fast follower for technologies established in the US and Europe. Cisco, for example, has made local carrier Telstra one of the first partners on its newly announced Intercloud, a global network of clouds to be hosted in Cisco and partner data centres.
“Telstra will have a rapidly evolving global-service catalogue ready to be sold in the market,” says Fabio Gori, Cisco’s senior director of cloud marketing.
Middle East inflection
But even Asia-Pacific’s growth is set to be eclipsed by the Middle East and Africa, which Cisco anticipates will see a CAGR of 57% in cloud traffic between 2012 and 2017, albeit from a relatively low base.
Orixcom is one company that has seized on this potential, having just passed the anniversary of its launch in Dubai. CEO Andrew Grenville says Orixcom is focussing for now on the UAE and Saudi Arabia, where the bulk of the region’s GDP lies, but is keen to explore markets such as Iraq and Qatar, as well as Africa.
“You won’t find many more MEA-focussed cloud players,” says Grenville. “It’s a very thin market for cloud providers who are actually out here and operating from here.” He points to the region’s limited number of high-quality data centres and widely varying regulatory regimes, but several large projects are now underway and Grenville expects a significant uplift in quality facilities, with government-led investment in infrastructure and education helping to drive growth in the UAE.
“There is a strong need for private cloud in this region,” says Grenville. “Companies really want to keep their arms around their data.” There will be significant adoption of hybrid cloud, he adds: “There are very few players that will put everything public and very few that will put everything private. We don’t want to box them in to force them to take one or the other.”
A recent Orixcom survey of mainly UAE-based companies illustrated how location is becoming increasingly key, with three-quarters viewing it as important for data to be located within their own country and to be able to source cloud services from a local provider.
Europe and North America clearly remain markets with enormous cloud demand. Indeed, the expansion of multinational companies from these regions drives the growth of cloud data centres elsewhere, as they seek locations close to target markets to improve latency and security.
“The industry is primarily driven out of North America and Europe, with Asia-Pacific as a catch-up market,” says Jim Poole, GM for global networks and mobility at data centre provider Equinix. “Right now, the US, the UK, Germany and the Netherlands are the leading countries in terms of the number of cloud logos.”
Data centre provider Interxion referred to the turning on of a “light switch” in Europe’s cloud market in the final quarter of 2013, with cloud providers and systems integrators committing resources in anticipation of surging enterprise demand, sparked by improved economic prospects and the removal of barriers to adoption.
“There’s increasing understanding of the cloud and increased confidence in running infrastucture in the cloud,” says Ian McVey, director of the enterprise and systems integrator segment at Interxion, who adds that “cloud service providers are looking at having more nodal penetration in Europe rather than just one PoP”.
Much of the focus for players with a pan-European, North American or global scope is based on large multi-tenant data centres offering high-quality cross-connects.
“The centre of gravity has moved from the basement to the multi-tenant data centre,” says Poole, citing the large campus environments that Equinix provides in locations such as London. “Hubbing is well understood and accepted. If you’re a telco, you want to be where the other telcos are.”
Centres of attraction
Players have multiple strategies for running cloud data centres, with options for differentiating in areas such as the presence of particular companies in their data centres, or the overall breadth of their services.
David Hall, commercial and strategy manager at data centre provider TelecityGroup UK, says that his company’s London facility provides Europe’s first node to offer the Direct Connect option for Amazon Web Services (AWS), although Eircom now offers it in Ireland. “We supply a secure, low-cost, high-capacity connection into Amazon’s platform,” says Hall.
This has contributed to a surge in cloud demand alongside TelecityGroup’s launch of its Cloud-IX platform in London, set to be rolled out to its facilities across Europe. Cloud-IX, which launched with six partners, includes the boon for TelecityGroup customers in distant facilities of connecting to AWS in London at no extra cost.
Hall says the next step is to roll out Cloud-IX in Dublin and Amsterdam in the first half, followed by further markets. The aim in each location is to first attract more “fairly obvious major players, but equally much smaller partners”. He emphasises that in each market “it’s really important to have an ecosystem of local providers – latency is king with cloud services”.
Meanwhile, Interoute is seeking to capitalise on its extensive global network. The carrier has six VDC zones in Europe aside from its new Hong Kong location and is planning a launch in New York around May. “We’re blessed with so much infrastructure that we have the ability to turn up services,” says Interoute’s Finnie. “We can skip the messy data-centre building.”
NTT, for its part, has followed a strategy of offering a fully-managed service for enterprises rather than a one-dimensional virtualisation service. Apart from underpinning its Enterprise Cloud with global data centre builds, the company has sought acquisitions to expand its footprint. NTT recently snapped up cloud-network services company Virtela, which Padilla says NTT is seeking to “deeply integrate” into its offering, while European activity this year may be similar to its 2012 acquisition of UK data-centre provider Gyron.
IBM is also focussed on turning data centres into cloud facilities, with plans to invest over $1.2 billion in expanding its global cloud footprint, including opening 15 new data centres worldwide, bolstered by its acquisition of cloud infrastructure provider SoftLayer. Doug Clark, cloud leader for IBM in the UK and Ireland, says that “from an IBM point of view, our differentiation is our breadth of skills and services. We do all formats of cloud and have an option for every type of service.”
As for Cisco, which is seeking to link up with telcos to form its Intercloud backbone, Gori says it is differentiating its strategy based on an application-centric approach: “We’re moving towards a world where most of the value is in the internet of things – billions of objects connected to the network.”
Gori says for instance that the platform currently offered with Telstra “will have APIs. It’s not just cloud reselling”. He adds that “it’s not a walled garden like with other cloud providers. You can port in and out workloads from any clouds. You can have freedom of choice”.
Despite the variety of approaches to cloud data centres, one thing players have in common is their championing of “hybrid” cloud models. This approach is wise if Gartner’s forecasts are anything to go by – the research company predicts that almost half of large enterprises will have hybrid offerings in place by the end of 2017.
Neil Cresswell, CEO of Virtus, a London-based data centre provider, refers to a “triple-play” of private cloud, public cloud and co-location, saying companies “want access to all three in one data centre”, with a desire to know where the cloud lives.
Clark adds that “the future is dynamic hybrid cloud”. This vision entails virtualised, opex-led environments for cloud data centres rather than capex-intensive models using just enterprises’ own facilities.
“Margins are getting narrower,” he explains. “People need to provide added value in real time.”