Datacentres in demand as tech evolution continues to disrupt business

The evolution of technology and IT is placing ever increasing pressure on businesses.

Across New Zealand, and indeed the world, how and where to store data remains a key question for many CIOs and CTOs.

As the need to increase storage capacity escalates, driven by the growth of data hungry customers and applications, the continued prevalence of cloud and the explosion of Big Data, the need for data centre services continues to grow to new heights.

“IT and data centres are at the centre of everything, not much happens without them these days,” says Andrew Kirker, General Manager of Datacentres, Schneider Electric A/NZ, when speaking at Westcon’s LEAP into the Data Centre event in Auckland.

“They absolutely touch every industry and are changing industries also. The one I’ve noticed most recently is the taxi market.

“If you hop into a cab nowadays, the first thing you notice is a massive mobility shift in taxis but what you don’t realise is that the driver is working for three companies, Uber included.

“The reasoning? The industry has been shaken so much by IT and technology that they would be out of business otherwise.”

Consequently, the race to stay ahead of the game has meant that many online businesses such as Google, Facebook and Amazon have had to invest heavily in their data centre infrastructure to enable the launch of new products and services.

Although prospects for both the local and global economy remain uncertain, recent indications suggest that those central to the data centre market continue to feel positive about the prospects for the industry as a whole, and in line with the macro trends, expect growth in the data centre sector over the next few years.

Globally 69 per cent of respondents, according to a recent DLA Piper - 2014 Global Data Centre Market Report, felt optimistic about the data centre industry with this optimism coming from global developments in online, digital and mobile technology, as well as improvements to service provision.

In terms of feedback from different categories of respondents, the following groups all felt overwhelmingly positive in respect of the outlook for the global data centre industry:

• Financiers are largely positive - 76 percent were positive about the outlook for global data centre industry
• Customers - 62 per cent were positive about the outlook for the global data centre industry
• IT/Telecoms Consultants - 65 per cent were positive about the outlook for global data centre industry

“Looking at when the data centre bubble first burst back in 2000, the big difference was that then, there was no demand,” adds Kirker, providing Kiwi resellers with an overview of the datacentre market of yesterday, today and tomorrow.

“The Internet was only starting to become mainstream and there wasn’t as great a need for datacentres. But these days, the utilisation levels are running at 80 per cent creating a healthy supply and demand.

“This means that the chances of seeing a large service provider going to the wall are very small. It’s a confident market.”

Changing datacentre

Speaking as a channel organisation in Schneider Electric, and echoing his recent interview with ARN, sister publication of Reseller News, Kirker believes that over the past few years the definition of a data centre has changed.

“If you look at the old IDC definition,” Kirker told ARN, “a datacentre was any piece of infrastructure with active compute. That consisted of 100,000 centres in Australia and New Zealand.”

As Kirker explained earlier this year to ARN, the real definition of a datacentre is a “bit more tricky.”

“What is clear from our results is that the data centre market is currently undergoing a seismic change driven by a combination of consumer behavioural, technology and data centre procurement led change,” adds Anthony Day, Legal Director, Technology and Sourcing, DLA Piper.

“The current macro trends driving the growth of data, and in turn the data centre industry, are incredible.”

According to Day, the recent proliferation of tablets and smartphones, coupled with the content required to satisfy the (seemingly insatiable) end user needs, has led to an increased demand on data centre services, which only appears to be heading one way.

“Across the globe billions of dollars are spent on data centre infrastructure in order to meet the growing demands of businesses and their customers,” the report states.

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“Having the right data centre infrastructure has become the new “arms race” for companies trying to differentiate themselves in this crowded, technology driven world.”

Where is the growth coming from?

When asked which type of business in the data centre industry was most likely to grow in the next 12 months, DLA Piper respondents outlined specialised hosting/cloud vendors and co-location providers as the most likely to see growth, followed by managed service providers such as telecoms suppliers.

“Overall, this data aligns strongly with the key messages that we are receiving back from our clients,” Day adds.

“Whereby lack of datacentre capacity in certain markets, the proliferation of mobile and “data heavy” services, the growth of Cloud and the convergence between key players in the market (e.g. telecoms suppliers, outsourcing suppliers and hosting providers all offering different flavours of data centre services) are all contributing to growth in the sector.”

Opportunities

A recent IDC report notes that data storage requirements by 2020 are set to reach 40 zetabytes (i.e. 40,000,000,000,000,000,000,000 bytes of data).

This, along with the other macro trends identified, is going to have a massive impact on the data centre industry.

“However, set against this positive backdrop, there is still huge financial pressure on businesses to reduce their IT spend and be more creative in the way that they use and purchase data centre services (and how they approach their data centre infrastructure),” the report states.

“With a key emphasis being on demand driven or consumption based models, so that customers only pay for what they use.”

Companies that are able to harness these competing factors and recognise the seismic change that is taking place in terms of how customers procure (and wish to use) data centre services, will be better placed to leverage the current opportunities in the datacentre market and achieve growth.

“This macro trend for datacentre growth are compelling but the market must now be seen as a component of an IT solution, rather than the property where the IT solution resides,” adds Andrew Roughan, Commercial Director-Infinity SDC.

“Influences such as virtualisation and Cloud mean end users can get more IT out of less physical datacentres.”

So what does this all mean for businesses and the datacentre sector?

The key theme of growth and overall positive outlook that pervades this report is obviously encouraging for the data centre market as a whole.

“But the most important “take away” has to be understanding how to cope with technology change and the impact that this is having on the market,” concludes Paul Jayson, Real Estate Partner, DLA Piper.

“We can see that technology change is dramatically changing the way end-consumers use and consume data (and has contributed to the prolific data growth we are seeing), Cloud, Big Data, virtualisation and changes to storage technology are all hugely disruptive and having their own impact on different aspects of the market.”

Finally, Jayson believes customers now procure datacentre services in a very different way, focusing on flexibility and being “demand driven” (based on business needs) which is requiring traditional data centre players to re-think their approach and leading to the growth of modular and more flexible data centre solutions.

“Being able to harness the opportunities that technology change is driving will be absolutely critical to those organisations wanting to benefit from the current growth that the market is seeing and continues to expect to see in 2014,” Jayson adds.