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Why Colos Will Not Only Survive but Thrive: Analyzing the Impact of Shifting Workloads on Colocation Providers

Tony Gaunt •

It’s not a big revelation that enterprises have shifted workloads to the cloud hosting.

But it is useful to consider how enterprise requirements are changing based on this shift and how colocation providers can capitalize on the opportunities being created.

To that end, 451 Research, with support from Vertiv, surveyed more than 700 IT decision makers to determine their plans for dealing with the increasing complexity of IT workloads, particularly as related to cloud and IoT.

We’ll discuss the findings from the resulting report, Data at the Edge: The Impact of Cloud and IoT on Data Center Location and Demand, over multiple posts in the next several months. For this post, I want to focus on the results as they relate to cloud services and colocation.

Direct Connectivity with the Cloud Providers for increasing IT workloads

On average, participants in the survey already had less than a quarter of their workloads running on non-cloud, on-premises data centers. Slightly more than two-thirds of workloads are running on some form of cloud service, including private cloud hosting, IaaS/public and SaaS. They don’t expect those percentages to change significantly in the next two years.

What they do expect to change is the size of those workloads. A large majority (86 percent) expects workloads to increase in the next two years, with 40 percent preparing for workloads to grow by at least 50 percent.

One way they’ll deal with that growth is through enhanced connectivity. More than half of participants are evaluating direct connection to cloud providers (57 percent) or internet exchanges (56 percent). This makes colos even more attractive as they can offer enterprises a choice of public cloud and private cloud hosting as well as a diversity of connectivity services.

The Challenges Colocation Providers need to overcome

As colocation providers move more deeply into the cloud space, they must deal with the challenges enterprises face as they move workloads to the cloud. It will come as no surprise that survey participants cited data security as their top challenge. Security also was the leading reason enterprises chose private cloud or hosting over public cloud services. Many colos already have recognized this and are supporting their enterprise customers in addressing these concerns.

Other major challenges to public cloud adoption expressed through the survey include data migration, cloud management, and cost management. Clearly, the more technical services and management tools a colocation provider can deliver, the more competitive they will be in this space. DCIM, in particular, is growing in value based on its ability to provide colo customers with the visibility to track and monitor performance of hosted data centers.

Participants in the survey also emphasized the importance of geographic location in their choice of cloud providers. Specifically, they are seeking providers that can connect them with their customers and other service providers, reduce network latency, and are close to their headquarters.

Again, colos are well suited not only to meet the needs of enterprises seeking cloud services in a specific location, but also to partner with cloud providers to enable them to extend their footprint to specific geographies.

What is yet to come for Cloud Providers and who will benefit the most?

With workload sizes increasing, and their deployment in the cloud commonplace, enterprises increasingly are seeking interconnectivity to other enterprises and service providers in hosted “virtual marketplaces.” Colos that can address data center security and location concerns are uniquely positioned to meet this need and benefit from the expected growth in workloads.

Yet, there is even more change coming in the form of IoT and the analytics that support it. Our research found that almost half of enterprises expect at least 50 percent of their IT resources to be devoted to IoT in the next two years. We’ll consider what this means for cloud and colocation in a follow-up post. In the meantime, feel free to download the full report, Data at the Edge: The Impact of Cloud and IoT on Datacenter Location and Demand


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