Real-Time Business, Data Centers & the Colocation Solution

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How much does your company spend on data communications each year? Chances are it’s a lot and growing. Gartner estimates that spending on communication services will make up 35% of the average IT budget this year. 

For organizations that are geographically distributed or moving operations to the cloud, the network is increasingly the lifeblood of the business. And as more business moves online, latency is not just unacceptable, it’s a threat to the health of the business. 

Cloud computing is driving a new focus on network bandwidth and quality as processing expands beyond the on-premises data center. Cisco predicts that 94 percent of enterprise workloads will be processed by cloud data centers by 2021. A survey of more than 300 IT professionals by Enterprise Management Associates found that 84% expect their cloud traffic to grow over the next three years. 

And customers are using more clouds than ever. Rather than settling on a single provider, they use a combination of platforms, software-as-a-service (SaaS) providers, colocation facilities and managed services. Rightscale has reported that 81% of enterprises are using multiple clouds and 45% are using hybrid cloud. Mordor Intelligence valued the global hybrid cloud market at $40.6 billion in 2017, growing 22% annually to nearly $139 billion by 2023. 

At the same time, the distributed processing phenomenon called edge computing is creating new network demand at the corners of the organization. International Data Corp. projects that the world will create 175 zettabytes of data in 2025, or about 10 times as much as in 2016. The research firm also expects that one-quarter of that data will be created in real time, with “Internet of Things” (IoT) devices contributing 95% of that volume. Data growth will challenge organizations’ ability to maintain adequate performance, even as customers demand more responsive online experiences. 

Real-time business

The pace of business no longer tolerates delay.

• The $384 billion digital advertising market is based on automated split-second decisions about where to place promotions based upon auctions that take place in near-real-time.
• Ride-sharing services use stream processing to monitor the precise location of millions of vehicles simultaneously.
• Telecommunications providers keep constant track of the status of millions of customers and share relevant data instantaneously with business partners.
• Transactions of all kinds are increasingly taking place on mobile apps, where a few seconds of delay can drive a customer to a competitor.
• In the financial services industry, the difference between profit and loss on a trade can be measured in milliseconds. Firms that engage in high-frequency trading go so far as to locate their computers and facilities physically adjacent to stock exchanges to gain a few microseconds of performance advantage on their competitors.

Sending large volumes of time-sensitive data over standard IP connections is becoming increasingly impractical. For companies that depend upon high-speed communications to conduct business, the public Internet is no longer an option. High-speed leased lines have historically been the best alternative, but those connections are expensive and too fixed for the constantly changing needs of digital businesses who need the flexibility to connect to multiple clouds and business partners instantaneously and as needed without long and costly setup times. 

For companies that depend upon high-speed communications to conduct business, the public Internet is no longer an option.

The Colocation Solution

Colocation facilities can be valuable partners in reducing IT costs, improving flexibility and creating robust, highly available infrastructure that connects seamlessly to multiple clouds. The colocation concept emerged in the 1990s as businesses flocked to the Internet looking for robust, reliable and secure places to house their computing infrastructure. Colocation facilities provided not only rapid setup in professionally managed data centers, but also reliable on-ramps to the internet through shared high-speed pipes. 

With the rise of cloud computing a decade ago, many organizations began to divest themselves of servers and storage entirely as they shifted infrastructure responsibility to cloud providers. Some people said cloud was a threat to the colocation industry because hyperscale computing would obviate the need for businesses to own equipment. Yet ironically, cloud is fueling a rebirth and a resurgence of colocation in a new form.

A survey of more than 300 IT professionals by Enterprise Management Associates found that 84% expect their cloud traffic to grow over the next three years.

The global colocation market is expected to reach $90 billion in 2024, up from $35 billion in 2017, according to Global Market Insights. A principal driver of this growth is interconnection, or private data exchange between businesses. Interconnection is best done in a vendor-neutral data center where a large ecosystem of vendors, customers and cloud providers are clustered together. The interconnection market is growing even faster than the colocation market, with revenues expected to more than double from $3.48 billion in 2019 to reach $7.65 billion in 2025, according to Mordor Intelligence.

Stay tuned. This special report from CoreSite and Data Center Frontier will also explore the following topics over the following weeks:

• Colocation myths
• Colo business and technical drivers
• Understanding interconnection + why/when to use a colocation provider

Download the full report, How Colocation Can Be the Nervous System of Digital Business, courtesy of CoreSite and Data Center Frontier, that explores how colocation might just be the answer to remain competitive in today’s markets.