World Titans Collide and Shape Next Wave of Data Center Business

Technology is always shifting, but the latest business headlines provide confirmation that a major shift is underway. Basically, we have the titans of four industries—Web giants, Telecommunications companies, major information technology (IT) providers, and Colocation data center providers or “Colos”—bumping up against each other in the pursuit of who will be the dominant players in the delivery of Big Data via Cloud services.

In one corner, we have Web technology giants like Google, Apple, and Microsoft looking to bolster their infrastructure for Big Data dominance and delivery. The recent headline that Microsoft is acquiring Nokia can be seen as part of this trend, since Nokia’s mobility and device strengths will help Microsoft extend its Big Data offerings all the way out to consumer end points.

We have also been seeing these Web giants build massive data centers, or what I think of as Big Data “mother ships,” to serve as a foundation for their Big Data efforts.

Another type of “titan” chasing Big Data are the Telcos. They are trying to build global scale and figure out ways to gain more profit from data delivery. One of the latest big headlines in this sector is Verizon’s buyout of Vodafone’s share of Verizon’s wireless business, which can be seen as a move that readies Verizon for the next wave of growth in the U.S. market, and gives Vodofone cash to strengthen its position for expansion elsewhere.

Generally speaking, the Telcos aren’t nearly as cashed up as the Web giants, though we’ve seen players like Nippon Telecom (NTT) ready themselves for this new era by expanding into new regions via acquisitions. Again generally, the Telcos have been in a process of modernizing their network infrastructure. For example, traditional switching hubs have needed to become more like data centers (or data caching points of presence, known as “PoPs”).

The other two types of titans chasing the Big Data opportunity are major IT giants like HP and Dell in one corner, and the Colo providers in another. The IT giants need to be less reliant on IT hardware sales, and thus are trying to transform into providers of Cloud services. For their part, the Colos also want a piece of the Big Data opportunity, either by attracting smaller Cloud players into their facilities, or by hoping the Web giants will use Colos for smaller hub sites to support their motherships. An interesting move I am watching closely is by U.S.-based Colo SwitchNap, which is building an ecosystem of cloud players (Web giants, IT providers and Cloud application providers) all within their facility in Las Vegas as a one-stop shop of Cloud services for enterprises.

What’s driving this collision of technology titans? It all ties back to explosive growth in data we’ve been experiencing, fueled in large part by consumer IT trends like the streaming of multimedia content to mobile devices, and faster networks. The overall trend comes back to Big Data. Just consider these facts:

  • The massive growth of data on the Internet. According to Cisco Systems, global Internet traffic will reach 966 exabytes per year in 2015, up from 30 exabytes per year in 2005.
  • Global mobile data traffic will increase 13-fold between 2012 and 2017, again, according to Cisco, for a compound annual growth rate (CAGR) of 66 percent. By 2017, 4G will account 10 percent of connections, but 45 percent of total mobile Internet traffic.
  • Much of this explosive growth in data will be delivered via public Cloud services. According to IDC, worldwide spending on public IT cloud services will reach $47.4 billion in 2013, and should top $107 billion in 2017, for a CAGR of nearly 24 percent, roughly five times that of the IT industry as a whole.

With these sorts of strong underlying drivers, it’s readily apparent why the four types of titans are all trying to position themselves for the Big Data explosion. And while the Big Data trend ultimately will be good for providers of data center solutions, it’s important to realize how profoundly the data center business is changing. A combination of explosive data growth, tight corporate budgets due to the recent global financial crisis, and newer Cloud and Colocation offerings from the titans have had the effect of transforming the data center business from a capital expenditure or “CapEx” outlay for companies looking to build their own data centers, to an “OpEx” proposition for most users. The titans are stepping in with Cloud or Colo offerings that suit many OpEx needs, with much of the growth for data center solution providers tied to helping the titans build reliable, efficient infrastructure for Big Data.

Simply put, the pursuit of Big Data by these tech titans is profoundly changing the dynamics of the data center business. In a follow-on post, I’ll discuss what CIOs, data center solution providers and others need to be aware of as result of the new dynamics. For now, it’s enough to point out how deeply the collision of these titans is transforming the data center business, and we haven’t even hit the peak period of change yet for underlying drivers like 4G. We must prepare for the even greater change ahead.

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