Advanced Computing in the Age of AI|Monday, July 13, 2020
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Datacenter Economics No Longer Add Up 

The inexorable rise of big data and the waterfall of unstructured data being generated by connected devices and sensors are fundamentally changing datacenter economics, prompting a growing number of enterprises to consider greater IT virtualization or colocation as they adopt a hybrid cloud approach.

Recent market research confirms that datacenter spending continues to increase. But retrofits are giving way to a growing focus on colocation or cloud services as the cost of building new datacenters becomes harder to justify.

Those trends, again driven by big data and the Internet of Things (IoT), are also being propelled by practical considerations like reducing latency in the datacenter as enterprises push data to the edge of networks. Meanwhile, hybrid and all-flash drives and storage are also being implemented as a way to reduce latency, note market analysts and colocation service providers.

Anticipating the shift away from corporate datacenters, colocation providers have been acquiring additional capacity. For example, colocation vendor VXchnge said in May it acquired eight datacenters from market leader Sungard Availability Services. The deal gives the Tampa-based provider greater operating scale in 15 North American markets.

"Pushing data closer to the edge—closer to the businesses using the data—will become more important," the company noted in a blog post. "Having a datacenter that is closer to the people analyzing the data will increase speeds and reduce latency."

Colocation providers like VXchnge are betting that more enterprises will look to virtualization or colocation rather than investing in costly new datacenters. They are also wagering that customers will conclude that the increasing number of applications, workloads and IT infrastructure running on top of open-source technologies can be run reliably and at lower cost in the cloud.

"Big data and the Internet of Things will drive many changes in hardware, software, datacenters and more in the future," VXchnge asserted. "To improve performance, companies will rely more heavily on pushing data to the edge."

A recent datacenter spending survey bears out at least some of the colocation service provider's assertions. Market researcher 451 Research found in a quarterly survey released earlier this month that 62 percent of respondents said they plan to consolidate IT infrastructure to accommodate power and space availability. Forty-one percent said they were looking to utilize cloud service providers, including infrastructure-, platform- and software-as-a-service vendors as well as hosted private clouds.

Only 25 percent of companies surveyed by 451 Research said they planned to build a new datacenter this year.

Moreover, it reported that datacenter consolidation and "migration projects" would translate into more high-end, centralized datacenters. Hence, the market researcher said overall datacenter square footage owned by global enterprises remains flat.

If predictions about big data becoming a core enterprise capability prove true, market economics will likely fuel the shift away from datacenters to growing adoption of hybrid cloud infrastructure, market analysts say.

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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