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  1. #1
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    [EN] The Impact of Major Telcos Shedding Their Data Centers

    David W Wang
    February 1st, 2016

    As 2016 just kicked in, the news swirled that Verizon Communications may start to sell off their data centers for billions of cash in return. While such news is not really a surprise, since other major telcos like AT&T, CenturyLink, and Windstream have already done or considered doing so, it is surely dramatic. Only five or six years ago these telcos were rushing out to buy and acquire data centers and cloud computing resources into their pockets, but now they seem to want to kill these hens that once laid golden eggs. Of course the telcos shedding their data centers doesn’t necessarily mean data center is a declining business. On the contrary, data centers play pivotal roles in the next generation datacom, cloud computing, and data intensive wireless services. However, some serious flaws must have been troubling the current model of the data center business, hence why now the telcos are determined to deal with these pains. What would be the impact of this data center divestiture wave to the industry, market and customers?

    If following the common thinking track, we may expect some tier-1 data center colo service providers like Equinix, Digital Realty or CoreSite stand out and grab the data centers on sale. After all, using Verizon Terremark as an example, its “crown jewel” assets with incumbent customer base there like NAP of the Americas in Miami Florida, NAP of the Capital Region in Culpepper, Virginia, and NAP of Amsterdam in Europe are all very popular and valuable. In my opinion, if Verizon acts quickly with the right offers, there might be a window for it to seize and unload the data centers with ease to some other colo or web service operators. But the window won’t be that big and still. Things can change and evolve fast for the data center industry and market.

    Three major forces or issues may interact with and shape the real impact of this data center spin-off by the major telcos. First of all, the increasing pressure from the high cost of data center operations, in terms of power, air conditioning, hardware and software systems, and infrastructure management, etc. is threatening the sustainability for a sound business model. Some significant and innovative solutions in this regard are due. For example, major colo service providers are investing into renewable energies such as solar, hydraulic and wind power to offset the power consumption of their data center fleet. Major web service providers like Amazon or Facebook are using ODM (Original Design Manufacturer) to bypass brand vendors like HP or Dell for data center infrastructure purchasing and deployment. In this way, they can save 25-30% of the total hardware cost.

    All these aggressive cost saving initiatives, however, would work out better over relatively new asset sites with new geographic selection, design and deployment which require less cost in innovation and re-engineering. The Verizon Terremark assets, on the other hand, are not the new breeds of data centers in its design, architecture and operation. As time goes, they may quickly depreciate due to technology evolution and business model changes.

    Second, the new breeds of data center are getting smaller, commodity driven, and proximity to the customers - the so called edge data centers. Getting smaller is quite like the way the hotel business operates. A major hotel chain must find ways to offer more affordable lodging with the same core service quality to customers, such as a 5 star vs. a smaller 3.5 star hotel. Keep in mind this is different from the existing so called Tier 2 and Tier 4 data centers which carry quite some gap in service core functions. The new breed data center can still be a tier-3 or 4 level in capabilities but just smaller in scale and size. Is this feasible? Sure, advanced software system and virtualization technologies will help make all this possible.

    Commodity driven refers to the popularity of basic cloud, storage and backup services on the bread and butter level. As more enterprises and technology service vendors moving and centralizing their IT operations to the cloud and data center colo space, not everything will require high end solutions. Quite many items will just fall under routine admin and maintenance needs that can be accommodated by basic commodity like services. Edge data centers, on the other hand, tend to get closer to the end users for smooth migration, shorter traffic backhaul, low network latency, and easy access for daily management. So while the super centralized tier 3 and 4 data centers remain popular, the new design and buildout of local and edge data centers may soon steal the thunder and take a lot of business away from the crown jewels and make the data center business more distributive in the future.

    The third factor is the tradeoff between consolidation and decentralization. The telcos’ spinning off their data center assets may logically create some capacity and location surplus and duplication for the industry. So consolidation may be needed to handle this situation. Meanwhile, as stated above, another trend is for smaller, basic service and closer to end user data centers to quickly expand and grow. It sounds conflicting, doesn’t it? A potential middle path might be for colo service providers to dismantle those super level costly data centers and then diversify its existing tenants to other new breed and smaller edge data centers. This may make a win-win for the industry and market, because colo service providers can save cost and resources on one hand, and their clients will be better served with less service glitch and more care on the other hand.

    All in all, this wave of data center spin-off by major telcos may not just go as another routine round of re-grouping and alignment for the industry and market, rather it may push for the arrival of Data Center 2.0 - the new revolution of data center service models, technologies, and practice.


    David W Wang is a senior telecom/IT business development consultant based in Washington DC metro and author of the new book “Cash in on Cloud Computing”.
    http://www.telecomramblings.com/2016...-data-centers/

  2. #2
    WHT-BR Top Member
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    The Data Center as a Commodity

    The more important aspect of this data center commoditization movement is the need to forge connectivity between what will soon be a highly distributed data ecosystem.


    Arthur Cole | Infrastructure | Posted 01 Feb, 2016

    While companies like Verizon, AT&T and others will no doubt maintain their own data footprints to varying degrees, the spinning off of data assets raises some interesting possibilities for the common enterprise: As reliance on the cloud grows, can legacy data infrastructure be sold off as well, or at least made available to other organizations on a colocation basis? According to Logicworks, colocation revenues are growing at about 10 percent per year, with large providers like Equinix hitting 13 percent or more. So rather than simply decommission legacy assets, can they be leveraged for a reasonable return?

    The short answer to that question is yes, but it becomes less so with each passing day. The colo industry thrives on providing cutting-edge service, so if you intend to lease aging infrastructure, the returns will steadily dwindle unless you are willing to invest heavily to keep things up to date. Selling in-house assets is possible as well, but again, time is the enemy and, depending on your physical layout, you could wind up with an awkward situation like someone owning a chunk of real estate in the middle of your corporate headquarters. As well, anyone heading into the colo business must realize that no less than Amazon is ginning up to corner the market, so it will take a pretty crafty business plan to make a go of it, says Broadgroup analyst Daniel Beazer.

    The more important aspect of this data center commoditization movement is the need to forge connectivity between what will soon be a highly distributed data ecosystem. As IT analyst Bill Kleyman notes, the goal is to foster not just simple data communications between locations but full-bore interoperability. Virtually all of the top cloud providers offer dedicated links between on-premises and hosted resources, but even these can become problematic in the presence of multiple cloud and/or colocation deployments. Companies like Adva Optical, Ciena and Cisco provide data center interconnect (DCI) platforms, which require little more than (typically) an optical transceiver at each location, but adhering to this kind of infrastructure puts a crimp in business managers’ flexibility in provisioning cloud services on their own.

    So where does this leave the enterprise? Is it doomed to sit on legacy infrastructure until it is almost worthless, and then be stuck with the decommissioning and disposal costs? Perhaps, but if done gradually and as part of a broader infrastructure strategy that leverages cloud and colo in an interoperable fashion, then the reduced capex and opex budgets should more than cover those costs.

    And at the same time, the flexibility and new business opportunities that abstract, distributed architectures enable is virtually incalculable.
    http://www.itbusinessedge.com/blogs/...commodity.html

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