Co-lo stepping stones to the cloud

The co-location market, although not sexy is still a large and profitable business for the data centre industry. Even with all the desire for as-a-Service and cloud, according to analyst firm MarketsandMarkets, the global co-location market was still worth an estimated $25.72 billion in 2013 and is expected to grow to $43.34 billion in 2018. In caparison, the headline stealing worldwide spending on public IT cloud services was estimated at roughly $47.4 billion in 2013 according to market research firm IDC.

Despite co-location demand having grown a bit in the last few years, there is a still huge amount of over capacity. CBRE, an another analyst firm estimates that at the end of 2013, Europe had around 15% overcapacity while London was closer to 20% which has led to fierce competition in the market. In fact over the last 4 years, CBRE notes a broad increase in capacity across Europe but with a sluggish and highly variable rise in demand.

Although 2008 was a bumper year for co-location demand, the recent uptick has also proven a counter point to another trend that has helped grow demand. “Self-build,” a trend in earlier years where private organisations, such as large banks, who were previously buying up sites such as vacant warehouses to turn into data centres has virtually ceased. Some suggest that co-location and potentially cloud is starting to be considered as suitable for these previously conservative customers who have now realised that building and maintaining data centres is hard work. It is also not a core activity in a market with over capacity and diversity of eager data centre operators. What is very clear from deciphering all the signs is co-location products are changing rapidly.

Co-location in its barest form of space, power, cooling and connectivity is often not enough for a vast number of organisations. The desire to reduce costs while still increasing the flexibility of ICT has led to increased demand for value added services provided alongside co-location. From basic remote hands to fully managed services, the economies of scale make it a tempting and relatively attainable offering for data centres.

However, what co-location is for many organisations is the first logical stepping stone moving from in-house to an external supplier. As both a technical and more importantly trust exercise, co-location is still a vital step to help organisations understand the intrinsic trade-offs, both good and bad, that placing IT, at least partially in somebody else hands, entails.

But let’s be honest, not all data centres are created equal. Most Data centre and hosting providers are exceptional at what they do. They are in the business of IT and have invested in redundant infrastructures, networks, and facilities that will ensure core applications and data is secure and readily available at all times. However, what some data centres lack is the ability to provide consultative and collaborative relationships with their customers.

We all accept that IT is constantly evolving. Co-location may be a sufficient strategy for an organisation at one point in time, but eventually their hardware will reach the end of its lifecycle, applications will evolve, and IT outsourcing requirements will change. While migrations between data centres are possible, they can be quite cumbersome. This makes the section of the co-lo and its longer term strategy a much more vital consideration. This is not just the upgrade from Intel Generation X server platform to Intel Generation Y server platform but more crucially the move away from physical and into virtualised, cloud or maybe ultimately into an SaaS delivery model.

To mitigate risk, few organisations go for a big bang approach but instead favour incremental steps. So with all and sundry suggesting that the bulk of IT will eventually reside within clouds, the co-location first step might well be the journey of many steps with the same critical data centre supplier.

Irrespective of data centre preference, co-location customers must make a fundamental consideration around where they think their IT will be heading over the next five years. This does not need to be a 100% accurate prediction but the likelihood is that ‘as-a-service’, cloud and managed service are likely to form part of the typical IT landscape. According to late 2013 research by IDC Enterprise, a research firm, more organisations are heading to cloud but less favour faceless public alternatives, but instead prefer private clouds. According to the research, 69% of respondents report having data, applications or infrastructure deployed in a private cloud compared to 59% utilising a public cloud. What's more, the average percentage of companies' IT environment in private clouds (28%) is double that in public clouds (14%). Only 28% use community clouds, most commonly in education and high-tech.

This private cloud market is a good fit for the current data centre operators moving up from co-location to higher value services. For customers, there are a number of significant benefits such as a more personal level of service and an ability to customise private clouds and SLA’s in a flexible fashion. It is essential enterprise customers ensure that the data centre selected for initial co-location has a credible strategy to meet client expectations. This could just start with remote hands, through managed services, disaster recovery services, cloud, SaaS or the myriad of potential hybrid solutions. So although cloud maybe grabbing all the headlines, it is co-location that is still providing a valuable starting point for the great IT transformation.