Addressing Colocation Industry Questions from the Trenches About Dealing with Rapid Growth

December 19, 2018 Greg Jones

I recently co-hosted a Schneider Electric International Colocation Club webinar intended to help companies plan for the future and deal with the rapid growth in the colocation industry. I was glad we left about 20 minutes for questions at the end because it gave us a chance to hear what’s on the minds of those who are in the trenches, and discuss some of the trends, challenges and best practices we’re seeing in the colocation space globally.

Colocation Market Strategy

My co-host was Steve Wallage, Managing Director of BroadGroup Consulting, who has more than 25 years of experience in IT consulting, the last 12 focused on global data centers. Read more about his bio in a previous blog post.

Colocation Industry Predictions and Trends

Many of the questions focused on the trends we’re seeing and our thoughts on how things may play out.

One colocation provider asked whether scalability is as important in second-tier markets as it is in the major colocation centers. The answer was a definitive “yes.” We’re seeing more demand from cloud players in second-tier markets and they certainly need high levels of scalability. “Once you start to attract hyperscale cloud players, they tend to build big,” as Steve put it.

He also pointed out many second-tier markets are currently under-served in terms of data center capacity, but have tremendous room for growth. Nigeria, for example, has a population of about 190 million people, but is predicted to grow to around 400 million by 2040 – enough that it may soon become a regional hub.

Colocation Webinar

Another provider asked which customers had the best growth potential. An appropriate question given we tend to think so much about the small handful of Internet Giants. But Steve said it’s wise to consider the second-tier players that are growing rapidly. “Uber, Dropbox and others that are going to be very large can be great customers,” he noted.

Another interesting question was about the effect cryptocurrency players are having on data centers. This prompted a discussion about how colocation companies need to decide which vertical markets they want to focus on. Crypto players need highly specialized data centers and focus on scalability, efficiency and reducing power costs. If you want to serve the crypto market, be mindful that other companies may not want to be in your data centers because they fear the crypto firms draw too much power.

Challenges in the Colocation Industry

Power management was another topic that came up a number of times, which is no surprise. As Steve noted, 3 or 4 years ago colocation companies used to ask whether they should think in terms of selling racks and space, or simply power. “Today, absolutely, no doubt, power is what you are selling,” Steve said. “What your customers think, the way they’re looking to use that data center, it’s all about power.”

I agree that power is a critical issue for colocation companies who need to understand how it’s being used and what quality they’re getting. When you have a power issue, you also need to make sure you have the tools that enable you to get to the root cause of the issue and quickly resolve it. But there’s also an opportunity here – more on that in a minute.

Another challenge one colocation provider raised is pressure on price, especially from hyperscale customers. Dealing with that issue gets back to deciding which vertical markets you want to serve and build accordingly, Steve said. If you want to optimize to serve the hyperscale market, you can build at lower cost, but that data center won’t likely be well-suited to serving other enterprise companies. “It’s becoming increasingly difficult to have these generic data centers that fit the needs of every customer, including hyperscale,” Steve said.

Best Practices in Colocation Data Center Operations

Broad questions around data center operations, including power, were predominantly discussed, as I just mentioned. In my opinion, power management is both a challenge and an opportunity on a couple of fronts.

For one, using tools such as the Schneider Electric EcoStruxure framework, and specifically the Power Advisor, it’s now possible to get far more predictive about power issues. It uses advanced algorithms to analyze data coming from power meters and other devices to identify issues and help you proactively address them. That enables colocation providers to lower their maintenance costs while increasing the lifespan of their infrastructure.

When asked about using UPSs to help reduce peak demand charges, I noted that this is something we’re starting to see at the enterprise level, with Lithium-ion batteries making the approach more feasible.

Get Ready for 2020: Access the On-Demand Colocation Webinar

These were just a few highlights from the Q&A portion of our live call that colocation providers and consultants. For the full conversation and recommendations for business strategies and technologies to implement for future success, watch it on-demand now: “Future Data Centers: What Colocation Providers Need to Implement for Continued Business Growth into 2020.” 

The post Addressing Colocation Industry Questions from the Trenches About Dealing with Rapid Growth appeared first on Schneider Electric Blog.

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