The once mundane and functional data centre has been radically transformed over the last decade. Today’s data centres are sleek and modern, and sited in all sorts of unpredictable places. They are host to a far broader array of services than their old-school forerunners, are being operated by a wider range of players, and now cater for the needs of diverse customer types. The regulations that govern how data centre operators handle their main commodity have evolved beyond recognition.
Also in flux is the clearly critical relationship between those that administer data centre facilities, and the operators of the networks responsible for the flow of data to and from centres.
“Carriers are now central to the success of any data centre,” says Tim Anker, director and founder of The Colocation Exchange, an independent agent for data centre space and related services. “It’s great having all that hosting power, but if you can’t access it then it’s not much good.”
It is part of Anker’s job description to offer guidance to potential consumers of data centre capacity looking at available options, matching them perhaps to a big, established data centre player, or one of the many new more specialised entrants to the market.
A diverse group
“There’s the very large wholesale operators offering what’s essentially a real estate solution,” he says. “The bottom of their world has rather fallen out since big banks stopped taking out long leases. Guys like Telecity Group and Equinix are doing well. At this level of the market, they’ve got pretty high occupancy. They’re not really offering much above 5,000 sq ft, and go down to the size of a single cabinet. Then you’ve got a load of new entrants, like managed services providers, most offering a quality that’s up there with the Equinixes.”
“There’s quite a few different types of data centre operator popping up now,” agrees Jim Poole, general manager of global networks, mobility and content at Equinix. “We have a very specialised focus, on the interconnection part of the business. We started with internet peering, then embraced carrier-to-carrier business, and now we run Ethernet exchanges.”
Poole has observed an increasing complexity in the relationships between the different customers using Equinix facilities: “We’ve noticed a certain magnetic effect, in the data centre ecosystem, between network companies and content companies. It’s going on inside the footprint of our data centres. Content delivery networks (CDNs) are good customers of ours. Traditional media companies who are interested in direct distribution of content are talking through us to a CDN, as well as perhaps making an arrangement with a network operator.”
The financial services vertical represents an altogether different environment, says Poole: “You’ve got electronic trading companies talking to us, wanting to trade next to each other,” he explains. “They want to be co-located where there’s maximum network access. They’ve now figured they can get the Ethernet connectivity they want at a lower cost in our centres. In addition, you have a lot of cloud companies coming to us for our Ethernet exchange services, so they can connect to their customers using a carrier’s Ethernet network. In the everything-as- a-service era, we can help them deploy regionally in the US, Europe and Asia, and not just be reliant on one data centre.”
Old limitations disappearing
Dave Green, Virgin Media Business product manager for high capacity services, says that old limitations on where data centres might be located have largely disappeared, acting to increase the natural dependence of data facilities on network infrastructure.
“One of the biggest challenges for network operators in the UK is the way data centres are shifting from London,” he says. “We’re fortunate enough to have a deep access network in the sort of places they’re moving to.”
When it comes to the construction of new data centres, there needs to be early engagement with network companies before building starts, believes Green: “Otherwise you’ve got a bunch of roundabouts with no roads off them,” he says. “You’re also seeing a broader range of customers using data centres, which means different sorts of network service are needed. We’re seeing, for example, a move beyond traditional IP VPNs to new Layer 2 Ethernet VPNs to match the next generation of high-capacity services being extended into centres. There’s a lot of data centre operators turning to network operators for managed services – allowing them to focus on what they do best.”
The interplay between data centre and network cuts two ways. If data centres are now more reliant than ever on the right network to connect them to customers, then network operators too are symbiotically linked on data centres to help them extend their reach into new service areas. In some instances the distinction has blurred totally with carriers entering the data centre market as owner-operators of their own facilities.
Hybrid models emerging
Verizon is one example of this hybridised model, driven, says group product manager for international IT solutions Mark Beaumont, by surging customer demand for next-generation services. “All our data centres are customer-facing, and vary in use from co-location to cloud,” he says. “We’re also introducing infrastructure services in our data centres, like IaaS and cloud storage. We opened a facility in Hong Kong earlier this year, two floors of 10,000 sq ft each. One is for colo, and the other for our computing as a service [CaaS] platform and other new services. In London we have similarly segmented data centre space.”
Verizon’s data centre customers are both wholesale and enterprise, he says: “Everyone from small and medium businesses to very large enterprises takes our CaaS offer. The spectrum is vast. We work with other types of service provider too, like SIs or telcos. Our telecoms customers are probably mostly localised PTTs rather than other global carriers. These won’t have a budget for their own data centres, or will be in a hurry for space and not sure how to go about acquiring it. Customers are often wary of making long-term commitments. Some might just want 100 racks, some 10,000 sq ft.”
Beaumont accepts that positioning Verizon as both a provider of carrier services and an operator of data centres is a sizeable strategic leap. “Yes, it’s a significant change to move our core competency over from being a traditional networking company to being a network and data centre business,” he says. “Prices have eroded in the network market though, even if it remains the foundation of our business. We have to look at other things. We have to consider technology changes too, like the cloud which is having a major impact on our industry. At the end of the day, it’s all about what offers a better service to our customers.”
Another carrier building and operating its own data centres is AT&T. Steve Caniano, vice president of the company’s hosting and cloud services business, does not believe there is an inherent contradiction in this position: “I don’t see a big split between the data centre world and the telco world,” he says. “We’ve been into the data centre market for some time now, and we’ve been in the application hosting business for 10 years. A carrier-based hosting provider like us is a strong integrated proposition. By owning our own data centres, we have an end-to-end service model. A lot of other carriers are more patchwork in their approach. They do the pipes, and someone else provides the data centre. They’re putting a requirement on their customers to have multiple relationships.”
A global service
Fewer carriers, though, are building their own centres than looking for the more capex-lite option of leasing carrier-neutral data centre space, says Damian Milkins, CEO of data centre operator Controlcircle.
“It’s only really the very large carriers that I’d say compete with us – players like AT&T and BT,” he says. “Most come to us because they want to diversify by adding intelligent add-ons to their portfolio of services. Where we’re seeing demand grow fastest is in global data centre contracts. It’s about who has got the ability to offer a truly global data centre service.”
Akber Jaffer is general manager of Colt Data Centre Services (DCS), a spin-off from Colt’s main network business that owns and operates data facilities around Europe. He says that many of the telecoms service providers who talk to him are simply looking for space to help them extend their IT outsourcing business into new areas.
“There are a lot of telcos working with us – and with other data centre companies – to get the capacity they need to fulfil their BPO contracts,” he says. “Sometimes when you’re a service provider needing data centre space you need to move fast, but the timeline for provisioning new capacity is long. It’s also hard to foresee demand. You can put it in a business plan, but you can’t actually plan for everything. In that case you can come to us and say ‘We just signed a new contract’. Our modular data centre model plays to that need.”
Jaffer says there is also demand from telecoms customers and others for data centre capacity that is more and more space and energy efficient: “Across the board we’re seeing better use made of facilities. As an industry we’ll soon be looking at utilisation of nearer to 80% than the 40% to 50% of the past. We’re certainly planning on that basis. Power density demands are increasing, which means we’ll be looking to evolve our data centre design to accommodate that. We’re looking to acquire more data centres as well – in north London and in the south of Paris.”
The issue of energy efficiencyEnergy efficiency is plainly a big issue for all stakeholders in the data centre market, whether owner-operators or leaseholders. Consulting firm Broadgroup Research published recent figures showing that power represents an average of 56% of a typical data centre’s operating costs, while analyst firm Gartner has concluded that data centre energy expenses are rising at roughly 12% a year, their fastest growing overhead.
Anybody paying for data centre space to support their new hosted service offer had better consider exactly how the profitability of that service might be affected by cost factors outside their control.
Green data centres are, in any case, good business says Anker of The Colocation Exchange: “We’re seeing green technology making incremental improvements to power consumption through the use of cold-aisle containment, multi-core processors, virtualisation, new evaporative cooling techniques and many other advances,” he says.
The energy issue is forcing all data centre customers to think carefully about how they buy services, he says: “There needs to be a change in how we think of data centre capacity, looking at it in terms of power rather than space. In certain facilities, like Docklands, the price will only ever increase due to a shortage of space. However, if data does not need to be hosted in the City then there are many other viable options.”
“We’re making our data centres more efficient, our pilot being our Geneva facility,” says Adnane Boulerbah, manager for power and facility design at Interoute. “We’re estimating we’ll save around £80,000 a month, and that’s with an increased number of servers. That’s just one centre, so just multiply that by our total number. We’re taking the EU code of conduct for data centres and rolling that out around the world. Part of it means taking power from green sources, which means renewable ones. We’re doing this in Germany, Sweden and Holland. Part of it is the need to avoid building new data centres. If you can reduce power needs and use less space, there’s no need to build. Why not avoid unnecessary capex? Customers in any case are demanding more compact space and more power per square metre.”
Demand for space continues
A shift to the virtualisation of data centre infrastructure is another effective way to control power costs, says Milkins of Controlcircle. “Systems are consolidating to save space. Vendors are producing unified boxes to reduce the footprint needed in a data centre. This has paralleled the shift to on-demand computing.”
Raw demand for data centre space to support all types of activity will at least keep the sector vibrant and exciting for a while yet, says Jonathan Hjembo, research analyst with consulting firm TeleGeography.
“Despite economic conditions, there’s still a lot of demand for new data centre space, especially in the retail co-location end of the market,” he says. “On the wholesale side, it’s a bit different, with supply starting to exceed demand. Even in well served markets like London, New York and Frankfurt, you’re seeing strong demand. Now everyone’s asking where the nodes will be in places like Africa and the Middle East. That’s still being worked out. It’ll be about where’s best served by carrier networks and power.”
Those owning or just reselling data centre capacity will need to be on their mettle to find creative ways of adding value for their customers, says Poole of Equinix: “Unless you’re delivering underlying value, and not just selling a lot of cheap space, the data centre market is not going to be a good place to be in in a few years,” he predicts. “I see a lot of investment coming into the sector that isn’t chasing value.”
Beaumont of Verizon is convinced that global reach will be an important asset for the data centre operator in it for the long haul: “Our CaaS service is now operated out of three nodes – in the east of the US, the Netherlands and Hong Kong,” he says. “By the end of 2011, we’ll have added the west coast, the UK and Australia. I can’t see us going on to have a CaaS node in every country though.”
He doesn’t at least anticipate a glut of data centre capacity, despite the rapid emergence of so many new builds: “Everybody’s going nuts around content,” he says. “And we’re seeing significant increases in storage needs. The data explosion is very, very real – not something analysts have dreamed up, for once.”
Milkins of Controlcircle says that fears of a global shortage of data centre capacity of a few years ago are already a mere memory: “Supply is slightly ahead of demand at the moment – partly because there are new technologies that enhance the abilities of systems and free up space,” he says. “And there’s a lot more space coming online than there was two or three years ago when there was talk of running out.”
Not, says Caniano of AT&T, that the market will bear an infinite number of new players all seeking their own data centre niche: “A data centre is not a small investment, and entering the market not a casual undertaking,” he says. “You don’t go from running a network to hosting data overnight.”
In a complex market, the buyer too must beware they are talking to a data centre operator that has the ability to meet their needs: “As a customer you’ve got to kick the tyres, because not all data centres are equal,” he warns. “Check up on resiliency and redundancy, because this is something that’s running your business.”
