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A Fast-Growing Data Center Segment Bridges Corporate Networks and the Cloud

Wednesday, April 13, 2016  
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Companies, looking to gain the best performance from the cloud, are placing a higher value on reducing the physical distance between their servers and those of their cloud providers. Colocation data centers, where their machines share space, have emerged as an important factor in enterprise cloud strategy.


For CIOs, a major benefit of colocation is that the proximity to cloud providers makes connections faster. Equinix Inc., the market’s largest colocation firm by revenue, says it provides less than 10 milliseconds of latency to over 90 percent of the population of North America and Europe. The setup has become increasingly important as corporations move part of their IT infrastructure to the cloud, but still need fast connections to their corporate data centers in so-called hybrid cloud arrangements. “You can view colocation as being a mid-point between the traditional model of enterprises running their own data centers and moving fully to the public cloud,” said John Dinsdale, chief analyst and managing director of Synergy Research Group.


The colocation market is expected to reach $55.31 billion by the end of 2021, with a compound annual growth rate of 14.45 percent, according to a March 2016 report from Research and Markets. Equinix commands 8.1 percent of the market’s revenue. Digital Realty Trust Inc. is second in revenue at 5.6 percent, according to a March 2016 report by 451 Research, but the largest in terms of operational square feet.


The rising popularity of the cloud and hybrid cloud is fueling growth. Fifteen years ago, most large companies housed their applications and data in their own data centers. Now corporations such as General Electric Corp. are moving to the cloud, but they’re not moving everything. So, there’s a need to connect company data centers to the public cloud in a fast, seamless way.


For companies like GE, Burger King Corp. and Caterpillar Inc., that connection may occur in a large grey building off Highway 85 in San Jose, Calif. or a similar place.


The San Jose colocation facility, one of Equinix’s 145 data centers, lies close to railroad tracks alongside which telecom carriers have laid fiber networks, explains site manager Keith Patterson. Having that level of bandwidth nearby attracted companies seeking high-speed access to the Internet, so Equinix has expanded to house them. Today, more than 120 service providers connect into the center.


Inside the center, enterprise CIOs can connect servers, housed in racks separated physically by metal cages, to a cloud provider such as Amazon Web Services that may be across the room. That’s done either directly with fiber if the company’s demand is big enough or companies can use the Equinix Cloud Exchange service which gives them a port on an Equinix switch that gives a company virtualized connections to one or many clouds.


Today there are 1,300 cloud service providers colocated in Equinix data centers.


“Now hybrid is real, it’s not somewhere off in the Midwest, it’s literally right next door. That’s a big draw for people building hybrid clouds,” Equinix CIO Brian Lillie told CIO Journal.


Colocation and data center firm Digital Realty Trust Inc. says shared facilities are necessary because they can accommodate companies that want move more fluidly between the cloud and their own data centers. Some startups beginbby running all of their IT in the public cloud but as they grow they find they need their own data centers, Chris Sharp, chief technology officer of Digital Realty told CIO Journal. Conversely, corporations are migrating to the public cloud from their own data centers. “Every end state is hybrid,” he said.


That’s been the case for Equinix customer GE, which is revamping its IT architecture for a cloud age. GE is moving 60 percent of its workloads to the public cloud to providers including AWS, according to GE Power chief digital officer Ganesh Bell. At the same time the company is rethinking its data centers, with a goal of consolidating them down from 34 to a dozen next year, according to a GE spokesman.


Colocating in Equinix data centers gives GE a strong connection from its own data centers to the cloud. The idea is to make cloud services so responsive when employees use them that it feels like they’re hosted in the corporate data center.


Colocation also makes it easier for GE’s customers to access the cloud-based digital services that the company offers its own customers.


As GE digitizes its own factories, the company is taking sensor data from industrial machines and analyzing it in its Predix cloud to predict outages and optimize operations. “The amount of data our machines generate are high volume data,” Mr. Bell told CIO Journal.


Now that GE and other companies are starting to rely more on the cloud, they’re noticing a change in data traffic patterns, said Mr. Lillie at Equinix. “They realized that instead of 80 percent of their traffic going to this data center of theirs somewhere in Omaha, they look at it and say 80 percent of our traffic is going out but it’s not architected for that.” That’s a problem that colocation providers say they can help solve.


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