Cloud, virtualization take toll on data centers

mainframe servers in the cloud
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The data center is transforming -- modernizing to meet business demand as technologies such as software-defined architecture, cloud and virtualization take hold. This modernization is also being driven by CIOs and IT executives taking a hard look at their computing needs and asking whether they want to own and/or operate data centers any longer, industry experts say.

It's a big issue. According to new research by Synergy Research Group, spending on enterprise data center equipment is static while spending on service provider data centers is booming. And Gartner predicts that a software-defined data center's programmatic capabilities specifically regarding application programming interfaces and/or command line interfaces will be required for 75% of global 2000 organizations seeking to adopt modern IT approaches such as DevOps by 2020.

As the workloads companies are trying to support are increasingly linked to analytics and other data-intensive apps, those with data centers are facing a huge dilemma, observes Rick Villars, IDC's vice president of data center and cloud. Customers are struggling over whether it is better for them to buy servers and storage and put it in their own data center to run, or if it makes more sense to buy infrastructure in a data center run by a vendor that can optimize the apps for the workloads they need.

Enterprise-owned data center space

The majority of data center square footage is still used by enterprises -- as opposed to service providers -- but that won't always be the case.

Enterprise data center space today
77%
Enterprise space 10 years ago
90%
Enterprise space by 2020
50%

IDC

Of all the data center square footage in use today, 77% of that space is owned and operated by enterprises for their own use, while 23% is owned by a service provider that is selling the space to other companies, says Villars. In contrast, 10 years ago it was closer to 90% of data centers being enterprise-owned, he says, and by 2020 "it will probably be closer to 50-50."

More and more companies are recognizing that they don't want to become service providers and they don't want to build a new data center, he says, noting that IDC frequently hears from clients that "this is not where our strategic investments should be spent."

At the same time, "most companies are saying ... we want to take advantage of converged infrastructures and solid state storage and virtualization to run those existing apps for a lower cost ... and do more with less,'' he says. Some of the newer technologies are more advanced than the data center they are housed in, Villars adds. "We call that data center obsolescence."

Pay for what you use

In what may be a sign of the times, Aligned Data Centers (ADC) has started marketing a "pay-for-use" data center. It's a usage-based pricing model designed for enterprises, service providers and government agencies looking to control data center costs while gaining faster time to market. ADC is banking on the fact that this approach will be popular with customers that have become accustomed to a cloud model of buying on demand and paying only for what they use -- with the ability to add and decrease usage based on their needs.

Typically, data center customers are required to sign long-term contracts for power they may or may not use since data centers have static power requirements and fixed densities. Forecasting future power demand is difficult because not many companies can predict what their IT gear will look like in five to 10 years. They may have more or less, depending on several factors, including user demand, adoption of cloud and innovation within the IT stack, among others.

ADC's model gives customers the ability to adjust capacity based on their business needs, says Mark Bauer, managing director for the data center solutions team at Jones Lang La Salle, a tenant broker. He says this approach appeals to customers he is working with.

Customers generally "like to hit 80% of usage" but most only have hit 40% to 50% in their current data centers, Bauer says. Companies are telling him "We're looking for flexibility, we're looking to get a commitment for power, but we want a commitment from the operator to have that power available to us with the ability to take it down or up as needed,'' he says. Most traditional data centers can't accommodate that.

Even if companies opt to build their own facility, customers acknowledge, "we're having to build out more than we need and this model offers us something new," Bauer says.

The pay-as-you-go data center offering came about because customers "have become accustomed to the cloud model of buying on-demand and paying for what you use,'' says Jason Ferrara, chief marketing officer at ADC. "What we're talking about here is deploying capacity incrementally -- in much smaller blocks based on customers' requirements."

In the traditional colocation model, customers are locked into long-term leasing contracts with their data center providers, averaging anywhere from seven to 15 years. This means customers need to predict their IT demand as many years in advance as their contract lasts, explains Ferrara. Predicting IT loads is hard given the constantly changing technology landscape.

"This is the major reason for the industry's waste problem, including comatose servers, because many companies over predict how much infrastructure they are going to need,'' he says.

ADC's pay-for-use data center is essentially consumption-based pricing for colocation. It can minimize the up-front commitment for power and space by up to 70% by not locking customers into a fixed ramp schedule and charging only for what they use, Ferrara says. The model lets customers secure the capacity they need for future growth, add new capacity quickly and pay based on the power they are using.

The model helps reduce stranded capacity and reduces customers' data center costs, Ferrara claims. ADC also provides additional savings by operating its data centers at a relatively low power usage efficiency (PUE) ratio (1.15 guaranteed), which Ferrara says means customers have a lower power bill each month.

ADC customers are being asked to commit to 300 kilowatts, which Ferrara says is one-third less capacity than what a traditional data center requires. ADC reserves the capacity the client needs on day one and then bills the customer based on how much it uses, says Ferrara. The amount of power and space the client is allocated is based on their current and future data center requirements; every customer is different. ADC's data centers support up to 25 kilowatts per rack so clients can grow within their existing space without having to add more. Then, if a company increases its demand to only 600 kilowatts, that's all it'll pay for, he says. Customers are required to commit to a three-year contract.

ADC recently opened a 30-megawatt data center in Plano, Texas that uses 85% less water than traditional data centers of the same size and capacity, according to the company, and has broken ground on a 65-megawatt data center in Phoenix, Ariz.

Owning versus outsourcing

Nightingale, a cloud-based electronic health care record provider, sells two products. Both are apps for storing patient data, handling billing and scheduling. The first is a production system that's based on Windows Server, MS SQL and VMware and runs in a Toronto-based data center. The second is a second-generation, redesigned virtualized system based on Linux, Java and PostgreSQL and hosted by data center operator CenturyLink. Nightingale owns the hardware in the Toronto data center; CenturyLink owns and provides the virtualized infrastructure for the second system, says Ijaaz Ullah, vice president of IT and privacy officer at Nightingale. He declined to name the Toronto data center.

"We have a few hundred thousand dollars of hardware" sitting in the Toronto data center; the bigger concern is "in a few years we have to replace'' the hardware, he says, adding that Nightingale's IT staff is responsible for all maintenance and operations. "When we did the second product we took that out of the equation and moved to a hardware provider, which is CenturyLink."

He says he likes that CenturyLink gives them as many virtual machines as they need when they have to scale up capacity. Eventually, the first system will be replaced by the newer product "and then we can sunset the old one. That hardware has already been replaced once and we'll come to a crossroads in three to five years when the hardware will have to be replaced again."

When that happens, Ullah says they will move the second-generation system to a cloud provider "so we don't have to worry about that hardware again. The cloud hosted model is much better suited" for their business needs, he says.

"There's a big move from capex to opex and we don't have to make these massive investments in hardware,'' Ullah says. "So it's an easier sell to finance. As we grow, I can tell you that each additional user we add will cost us $6 per month."

In the future, he says Nightingale will probably outsource even more of its IT needs, such as desktop and phone support. "We're in the cloud business and if we didn't trust in cloud services how could we expect our customers to do the same?"

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