The Data Center as a Commodity

2016 Business Communications: Changing the Way We Work

There is a lot of talk about the commodity data center these days, but this usually refers to the type of hardware that goes into building it.

Increasingly though, as more of the data infrastructure becomes virtualized and portable and enterprises at large gravitate toward cloud and colocation solutions, we are starting to see the data center itself treated as a commodity; that is, a thing to be bought and sold, hopefully for a profit.

Verizon Communications recently embraced this new paradigm by putting its substantial data center assets on the market for an asking price of $2.5 billion. The move is part of a broader strategy to divest itself of its landline businesses and even a good number of its wireless towers to concentrate instead on communication services. The nearly 50 data centers up for sale produce estimated annual revenue of about $275 million (minus EBITDA), and include the collection acquired from Terremark for $1.4 billion several years ago. AT&T is said to be exploring the sale of its data center assets as well.

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. (Disclosure: I provide writing services for Adva.)

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.

Arthur Cole writes about infrastructure for IT Business Edge. Cole has been covering the high-tech media and computing industries for more than 20 years, having served as editor of TV Technology, Video Technology News, Internet News and Multimedia Weekly. His contributions have appeared in Communications Today and Enterprise Networking Planet and as web content for numerous high-tech clients like TwinStrata and Carpathia. Follow Art on Twitter @acole602.