The Buzz: Data Center Colocation Use Cases & Trends

IO Phoenix Colocation Data Center

In this issue of The Buzz we’ll explore data center colocation. First, what it is. Then, how prevalent it is. Then, three of the top reasons why organizations choose to colocate their data centers. Finally, the growing trend of modular data center colocation. Enjoy the read!

What is data center colocation?

Data center colocation works like this: instead of housing its servers in its own private data center, an organization houses them in a data center owned and managed by a colocation provider like IO. The organization retains all management control over its servers, but building management (including physical security and network connections), power, and cooling are managed by the colocation data center services provider. In some cases – as with IO – the colocation provider offers additional value-added services to its customers, such as a data center infrastructure management (DCIM) system that provides additional layers of visibility and control.

Data center colocation is growing fast

According to a January 2014 report by DCD Intelligence, almost a quarter of the total data center footprint in North America is outsourced. And colocation is growing fast: in North America alone colocation increased more than 13 percent in 2013, to a total market value of $8.8 billion. DCD Intelligence predicts that the market will grow an additional 15 percent in 2014. That rapid growth is being fueled by increasing IT capacity requirements, reduced IT budgets, and organizations’ need to access new technologies, says Managing Director Nicola Hayes.

3 colocation use cases

1. Colocate for greater scalability – Forrester calls scalability one of the top benefits of colocation. “Additional capacity can be brought on quickly, cheaply, and only as needed.” TechRepublic echoes the same: “The common IT case for data center co-location is that you can scale out your data center quickly, and at 20 percent of the cost that it would take to construct your own data facility. … This is an attractive proposition for IT departments that must be frugal at the same time that they must be able to rapidly scale IT up or down, depending on the needs of the business.”

2. Colocate for lower total cost of ownership (TCO) – As TechRepublic points out, organizations can typically colocate their data center for a much lower total cost than they could build and maintain a private data center. In August 2013, Forrester released the results of research into the total cost of ownership associated with building a traditional raised-floor data center, a modular data center, and data center colocation. The research group found that a modular data center has the lowest aggregate total cost. But data center colocation has significantly lower costs than a traditional build (37-52 percent lower net present value cost).

total-cost-ownership-data-center-colocation Source: Forrester, Build Or Colocate? The ROI Of Your Next Data Center, August 20133. Colocate for greater agility – As Forrester points out, the colocation model turns the capital expenditures associated with building a data center to operating expenditures associated with “renting” data center space. Meaning the organization has greater flexibility, not being locked into a sunk capital cost. As a result, organizations can be more agile. They can more quickly scale IT capacity where they need it, and reduce or eliminate IT capacity where there’s no longer a business case for it.

For example, as Michael Kassner explains, “With the advent of latency-sensitive digital content, a provider like Netflix cannot supply its customers from one central location. The limitations of current networking technology and certain immutable laws of physics just do not allow latency-free transmission over long distances. Knowing that, ‘strategically located’ colocation data centers can offer companies like Netflix a place to set up content servers and interconnects with local network providers.”

A growing trend: Modular data center colocation

A growing trend among colocation providers is reliance on modular data center infrastructure, rather than the “traditional” raised-floor data center. For example, the colocation provider FORTRUST is a Powered by IO® partner, delivering its colocation services through the IO.Anywhere® modular data centers. FORTRUST Sr. Vice President Rob McClary explains why the company decided to adopt a modular approach for completion of its 20 MW data center in Denver:

“Customers in the traditional raised-floor environment were happy, but were asking us to help them raise efficiency, lower capital costs, and push higher densities. So we turned to IO. Relying on IO.Anywhere data center modules to build out additional capacity, we were able to deliver higher efficiency and higher densities, at the same time reducing capital costs by 12% and cutting deployment time from 9 months to 60 days.”