Tony Bishop, SVP, Platform & Ecosystem Strategy
November 21, 2019

The pressures of digital transformation (DX) cause an imperative shift that’s forcing businesses to retool how they operate. Yet, while 70 percent of businesses are pursuing DX initiatives this year, only 21 percent of companies feel they have completed their company’s digital transformation. For IT teams, DX presents both a challenge and opportunity to support business growth by expanding past the constraints of traditional data center infrastructure. Modifying IT environments inherently incurs costs, time investment, demands new skills and with scaling requires more advanced power and cooling requirements. Colocation serves as a powerful lever to re-architect towards a decentralized infrastructure, giving critical access to carriers, providers and networks with turnkey solutions that can be geared for future scaling, putting IT at the helm to successfully lead the charge towards transformation.

Challenges of traditional on-premises data centers

On-premises data centers are also referred to as private data infrastructure that companies keep in-house and are expensive to design and manage—both in terms of capital expenditures (CapEx) and operational expenditures (OpEx). However, that doesn’t translate to companies ditching their on-prem data center environments. In fact, most companies are choosing a mix of cloud, colo, and on-prem, understanding that not all workloads belong in the public cloud. A recent report by JLL indicates explosive demand for data centers with the average number of data centers per company growing from 12 and expected to grow to 17 over the next three years. For IT leaders, one key challenge will be to separate the noise from those data center providers that can truly guide them through the complexities—and often hard-to-find IT skill sets-- of digital transformation.

As a result, data center capital and operational costs will continue to rise, an expense center already under financial and operational pressures. And with costs rising and demands increasing, the need for training and developing IT team skillsets continues. The demand for more technical skills continues to increase, however it seems the supply remains stagnant. The State of the Data Center survey by AFCOM found that four in five respondents stated that they are struggling to fill roles across IT security, cloud architects, IT systems, DevOps, and data center facility technicians, engineers, or operators.

For IT teams that run most workloads on on-premises data centers, they often find themselves spending significant time dealing with day-to-day data center management activities. An IDC study finds that 45 percent of IT data center staff time is spent provisioning, configuring, monitoring, maintaining, troubleshooting, and remediation, while only 21 percent of their time is spent on strategy.

IT’s seemingly endless conundrum

Often unable to focus on business-enabling initiatives, IT teams find themselves at a logjam. Business leaders want their IT leaders and teams spearheading initiatives such as cloud adoption, mobility, Internet of Things (IoT), among others, that transform customer experiences and drive revenue. But lacking time and resources, IT leaders struggle to have their teams expend the time necessary to tackle. Of course, if they do find time to work on new business initiatives, they often add more constraints on the data center.

Historically, adding more floor space and server and storage racks is what IT teams did to meet new business demands. But the exponential demand for more data center resources and power makes it difficult to do so. Our definition of a data center ecosystem has also evolved to go well beyond buildings that offer space and power. Data centers must be seen as innovation and technology partners.

Emergence of colocation data centers

Instead of constructing new data centers or expanding existing ones, third-party colocation has become a critical part of many IT strategies. These outsourced infrastructure extensions have been around for 20 years. Gartner predicts that 80 percent of enterprises will have shut down their traditional data centers by 2025 (compared to 10 percent today)—either migrating workloads to colocation data centers or to the public cloud.

But the dynamics of colocation data centers are much different today than a few years ago. First-generation colocation data centers simply provided businesses with racks and space for servers and storage systems and were largely used by small to midsize businesses.

Second generation introduced capabilities of fit for purpose solutions conceptually borrowed from wholesale datacenters, enabling businesses of all sizes to defray the cost of building and maintaining a data center with state-of-the-art technologies.

Third generation colocation addresses the shift to data centric architectures that require distributed data hosting, connectivity and exascale computing to be accommodated in a single datacenter campus. They also enable businesses to embrace cloud capabilities—both private and public.

Colocation providers supply the building, cooling, power, bandwidth, and physical security. They typically lease by the rack, cabinet, cage, or room but maintain ownership of hardware and software settings. By coordinating with the colocation provider, end customers can quickly and easily upgrade and downgrade space requirements and network bandwidth. The result is that the customer does not pay for space and network bandwidth that they do not need, which is often the case with on-premises data centers. More advanced colocation providers even include on-demand and scheduled services, which end customers can use for deployment, patching, incident response and event management support, and more.

Business advantages of colocation

In many ways, today’s third-generation colocation solutions are akin to on-demand Software-as-a-Service (SaaS) models. On-premises data centers inhibit scalability and incur significant CapEx costs—such as the building, cooling systems, and racks—and OpEx costs—such as building and maintaining the equipment and providing physical security. These responsibilities and associated costs are moved to the colocation provider.

In addition to the cost advantages, colocation affords businesses with the springboard to more easily and quickly embrace the cloud and edge computing, including edge computing and Internet-of-Things (IoT) devices. Cloud adoption is rapidly growing. Eighty-six percent of enterprises deploy a multi-cloud strategy, with 60 percent having moved mission-critical applications to the public cloud. When it comes to the network edge, market adoption is still in early phases, but that is quickly changing. As more data and applications get pushed to the network edge and more users and network traffic extend to the edge, performance challenges increase. And this directly impacts user experience and even revenue. For example, Amazon finds that every 100 milliseconds of latency translate into a one percent reduction in sales.

One of the most prevalent edge computing phenomena today is IoT, which is exploding—experiencing a compound annual growth rate (CAGR) of 34 percent. Gartner predicts there will be 20.4 billion IoT devices by next year—a number that is expected to hit 64 billion by 2025.

Scalable, cost-effective private clouds

For private cloud services, colocation is a cost-efficient, flexible alternative to an on-premises data center. Security and regulatory compliance—as related to the physical environment— is overseen by the colocation provider, reducing the complexity of securing your IT environment. At the same time, with an on-demand infrastructure, the private cloud services only consume racks and space that is needed, and moreover IT leaders can scale data center infrastructure up and down as workloads dictate. Consequently, in contrast to on-premises data centers, IT leaders only pay for infrastructure that is needed rather than paying for idle data center space—not to mention the accompanying power consumption.

Low latency, fully optimized public clouds

Colocation also offers public cloud advantages. Performance is the top reason IT leaders cite for moving applications to the cloud. It ranks ahead of compliance and security as well as resiliency and availability. On-premises data centers lock organizations into a fixed location, which creates latency when pushing data between the data center and public clouds. Colocation solutions allow them to place applications and data closer to the public clouds; this reduces latency.

With the workload volumes of data analytics and artificial intelligence (AI), the issue of proximity of applications and data to public clouds—in addition to bandwidth performance—is crucial. Connecting applications and data requires a rethink of the traditional data center, and colocation solutions can offer path forward for organizations seeking to harness the full capabilities of the interconnected digital age. Organizations can distribute their digital infrastructure around the globe to meet local business requirements, while remaining in control and maintaining confidence in meeting resiliency, compliance, and security mandates.

Extending to the edge

Gone are the days of simply choosing a data center that is close to your company’s headquarters. Now, companies must operate ubiquitously and on-demand across all business functions and points of business presence no matter where customers, partners, and employees are located. Therefore, Digital transformation isn’t slowing down any time soon, as IT architecture needs have been pushed out beyond traditional cloud services and data centers to the edge. Edge computing places dedicated resources closer to end users and devices which can free up core architecture and valuable network assets for other mission-critical tasks. As more and more use cases emerge, enterprises will continually seek the benefit of deploying copies of applications and data within proximity of the edge for performance and regulatory purposes. Gartner predicts that, by 2022, more than 50% of enterprise-generated data will be created and processed outside the enterprise core data center or cloud.

Similar to the law of gravitation in which all objects attract each other, data and applications can be viewed in a similar way. As the amount of data grows, it becomes more difficult to move since data and applications are attracted to one another. This can be referred to as “data gravity”. The more data gravity there is, the more applications and services are forced to move closer to the data. This is not ideal for organizations who want to have more control over moving and accessing their data whenever and wherever they want. Re-architecting towards a decentralized infrastructure removes data gravity barriers to accommodate distributed workflows. It will be paramount for IT leaders to securely connect and enable a pervasive data center platform that brings users, networks, applications, and cloud systems closer to the data.

Colocation solutions, coupled with a platform to connect environments to the networks, enterprise, content providers and cloud and IT providers needed in a business ecosystem, give businesses the flexibility to locate data center workload capabilities near the computing edge. This reduces latency, improves availability and reliability, and decreases costs. In a nutshell, whether data analytics, AI-enabled applications, high-performance applications, or IoT devices, colocation shrinks the distance and business requirements between computing resources and the edge.

Colocation Brings the Cloud and Edge to the Data

Now, end users have access to applications and data—at the speed of milliseconds—that were only a pipe dream a few years ago. Business leaders can capture intelligence using IoT sensors and analyze that information in near real time that enable them to tap into new markets, optimize operations, and deliver unparalleled customer experiences.

This requires a decentralized infrastructure that allows IT leaders to embrace the possibilities of everything from multi-cloud deployments to edge capabilities such as IoT. The traditional on-premises data center simply cannot deliver to the speeds and cost this new interconnected ecosystem demands. The third-generation of colocation services offers IT leaders the agile, cost-effective means to capitalize on these requirements. And with 65 percent of workloads still residing in on-premises data centers (versus the public cloud or in colocation facilities), much work is left to be done. Solving for the placement and housing of distributed data footprints combined with exascale computing between the cloud and the edge is of critical importance.

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