Cloud and the IoT Present Ripe Opportunities for Colocation Providers

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Given the opportunity that trends including cloud computing and the Internet of Things (IoT) present, I’m not sure there’s ever been a better time to be in the colocation service provider business.

That’s was my gut reaction after a roundtable discussion Schneider Electric hosted last November in Miami with 30 executives from colocation companies in 16 countries – and it’s only been reinforced by conversations I’ve had since.

The roundtable covered a number of colocation “megatrends,” including whether cloud computing providers, including Internet Giants such as such as Amazon Web Services and Microsoft Azure, represent an opportunity or a threat to colo providers. There was widespread agreement that both present lots of opportunity on a number of fronts. Colo providers can offer cloud services themselves, partner with cloud providers including the giants, and provide the infrastructure that cloud providers need.

Capitalizing on these opportunities, however, will require colo’s to gain a deeper understanding of their customers than was required in the past. In a previous post we covered how the face of the colo customer is changing. No longer is it just facilities or procurement specialists who are the decision-makers when it comes to buying colo services; now IT managers, CIOs, COOs and CFOs may well be involved.

These decision-makers are trying to navigate their way through this new world of cloud computing and IoT-based applications. In so doing, they need a trusted advisor they can turn to for help. That’s a role colocation providers are in a great position to take on.

With respect to the IoT, the opportunity for colo providers comes down to three building blocks:

  1. The potentially tremendous number of data points that need processing
  2. Cost-effective, reliable content delivery
  3. Familiarity with data governance requirements, such as HIPAA in the U.S. and Safe Harbor in Europe

Taking advantage of these opportunities will require a new level of intimacy with customers, in terms of how they do business and which applications are most important to them. Much of the service delivery from Internet Giants is at the mass level, which leaves an opportunity for colo providers to customize their offerings.

Maybe it’s gaining greater understanding of a particular vertical market, or just taking advantage of the relationships and credibility you’ve already built with certain customers. Colo’s could even fill a broker role, helping customers decide which service providers are the best fit. There’s also an opportunity to bring cloud services closer to end users with a series of edge data centers, to improve performance (a topic covered in this previous post).

One thing is virtually certain; the discussions you’ll be having going forward will be far more business-focused, whereas in the past it was more of a pure IT discussion. Customers may still want to discuss how much power they get per square foot, but they’ll also want to talk about the end game: what a given application is going to mean for their business. Colo providers that are prepared to take on such a trusted advisor role will flourish.

To learn more about the “megatrends” facing colocation providers, check out the free report based on our November roundtable discussion, “Opportunities and threats for colocation providers around the globe.” I suspect it’ll spawn some ideas about how your company can take advantage of some of these opportunities ­– while deflecting the threats.

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