1 Data centre strategies for business growth in a hybrid cloud world A joint report from Pacnet and CIO Custom Solutions Group October 2014
2 Introduction The data centre has become an integral part of the modern enterprise. Each day, businesses rely on in-house and outsourced data centres to house their critical applications and to serve as vital gateways to many global cloud services. With an infrastructure hosting landscape consisting of a mix of on-premise and cloud, the data centre will become an increasingly strategic part of the hybrid cloud architecture. Intended for the CIOs and IT business leaders tasked with managing application infrastructure, this report contains actionable advice from industry experts on the current state of infrastructure hosting and how engaging with data centre providers can reduce capital expenditure without losing control over core systems. This report also identifies how the data centre is more than a place for power and rack space and, with the right engagement model, how it can be a strategic component for business growth. The state of infrastructure hosting Australia s data centre capacity has been steadily expanding in recent years as the demand for server and storage space continues to grow. Both customers and cloud service providers require reliable and cost-effective hosting capacity with their choice of network carrier. Earlier this year, analyst firm Frost & Sullivan reported the Australian data centre services market had recorded revenues of nearly AUD$700 million in 2013, representing a growth of 17.2 per cent from the previous year. Colocation services revenue also increased by almost 17 per cent during 2013 and accounted for just under 70 per cent of total market revenue. According to the firm s Australian Data Centre Services Market 2014 report there was just over 230,000 square metres of outsourced data centre space in Australia at the end of 2013, an increase of 16 per cent year-over-year. Frost & Sullivan analysts believe a growing proportion of Australian companies are outsourcing their data centre requirements, so both colocation and managed hosting services are expected to grow strongly over the next few years with Australia s data centre services market expected to reach AUD$1,737 million by Where are Australian organisations hosting their infrastructure? More than three-quarters of organisations that utilise a data centre are using an outsourced provider to some extent, according to Frost & Sullivan 51 per cent are using an outsourced provider, 24 per cent an in-house facility and 25 per cent a combination of both. This high rate of private data centre use can pose challenges for organisations looking to limit their infrastructure spending while maintaining high levels of security, reliability and service levels. Charles Nolan, chief technology officer at independent
3 data centre consulting firm Difference IT, says that organisations are still hosting infrastructure themselves, but he is seeing a greater mix of colocation. Self-hosting gives a variable risk profile which, in many cases, can t be quantified. One of the problems with self-hosting is that the organisation is often doing its own verification and sometimes just getting the answers it is after, not the answers to important questions, Nolan says. Nolan has designed and built data centres throughout his 30-year career, including private ones for universities and banks. His mantra is that when an organisation runs its own data centre, it loses independent verification. Zoran Sugarevski, director of IT operations within the information technology services group at Victoria University, says in the university s experience the cost of using a data centre is comparable to, or slightly lower than, internal costs. However, the risk profile can increase particularly for organisations that need to comply with the Australian Privacy Act and must know where data is stored. It does require different skills when compared to a traditional IT organisation, Sugarevski says. Victoria University has managed the risk by selecting suppliers that have a viable business model and extensive quality and security management practices. Self-hosting gives a variable risk profile which, in many cases, can t be quantified According to Frost & Sullivan, organisations outsource data centre hosting mainly because they believe an outsourced facility has more advanced security features, disaster recovery (DR) and availability, and lower operating costs. Another key challenge for local organisations is a lack of skills or internal resources to support private data centres. The skills needed to maintain the plant and machinery necessary to provide suitable power and cooling to IT infrastructure are quite specialised and few organisations have suitably qualified and experienced staff in-house. Moving equipment to a professional data centre operator enables you to leverage on their scale and benefit from a resilient plant architecture and a deep pool of expertise, Proctor says. Scale is fundamental to cost effectiveness and data centres can pass infrastructure savings on to clients. Bas Winkel, managing director of LeaseWeb Asia Pacific, says there are many operational benefits to going with an outsourced data centre provider above Charles Nolan, in-house server rooms, including best practices, CTO, Difference IT experience in dealing with numerous scenarios and IT refresh cycles. LeaseWeb Asia Pacific, an infrastructure-as-a-service hosting provider, has based its Asian data centre operations inside Pacnet s facilities. Giles Proctor, vice president of Data Centre Services at Pacnet, says there is still a lot of enterprise IT infrastructure trapped in self-owned computer rooms in commercial office buildings. The challenge with office hosting is that most commercial office buildings aren t designed for it and getting power and cooling to many spaces is difficult, expensive and inefficient. In Australia, commercial buildings are not designed to house high-power workloads. It s also difficult to get resilience in infrastructure in a standard building with redundancy in the available equipment, Proctor says. Unless the organisation has significant scale, providing the necessary plant and infrastructure to achieve acceptable levels of reliability can quickly become economically unviable. The most important factor, however, is scale, Winkel says. Even large enterprises will never reach the scale needed to compete with data centres. In-house hosting usually has just one network operator, whilst the opportunity for multiple connectivity options increases flexibility and redundancy, which reduces risk. On top of that, it improves the enterprise s negotiating position. CIOs still managing infrastructure in server rooms have an increasing amount of data centre space to choose from, with Frost & Sullivan estimating the total amount of outsourced data centre space available could reach 500,000 square metres by 2020.
4 On premises, hosted or cloud? The hybrid architecture emerges With so much talk about cloud computing, it is important not to overlook the fact that the bulk of the world s IT infrastructure is managed internally by organisations with their own application and data processing requirements. The rapid growth of cloud and managed hosting has opened a plethora of options for CIOs looking to reduce infrastructure management requirements, particularly for point applications deemed non-core to the organisation s business. This shift in application hosting is leading to a selective or hybrid delivery model, where an organisation is tasked with managing a combination of on-premise and hosted applications in a cohesive way. Difference IT s Nolan believes the hybrid model is more than strategic, it is essential. Organisations still need to retain some onpremise infrastructure, he says, but if they wish to shift expense from capital and maintenance to operations the only way to do that is by implementing more cloud solutions in order to leverage on the larger installed base of a service provider. CIOs still need to integrate the back end of their in-house systems into hosted infrastructure so the process of moving into the cloud is not an all or nothing proposition. Network services have to be independent of location and capable of recognising virtualisation technologies that are offered by cloud suppliers and network services have to be independent of location and capable of recognising virtualisation technologies that are offered by cloud suppliers. According to Proctor, hybrid is becoming more strategic and provides another benefit of putting infrastructure on-premise but the premise is the third-party data centre, so the customer s systems are close to providers of hosted solutions for fast and cheap connectivity. The quality and flexibility of available network bandwidth is also key to the success of a hybrid cloud architecture. CIOs will want to assure themselves that their data centre provider is carrier neutral and has an open access policy for networks, and has as many network providers installed as possible. It is essential that there is competition for your network business to ensure you can achieve the best pricing, Proctor says. Similarly, to support the hybrid model, Proctor recommends ensuring that there is ready access to cloud service providers Zoran Sugarevski, within the data centre, so director of it operations, that CIOs can easily blend information technology services, their owned infrastructure Victoria University and on-demand hosted solutions. To maximise the hybrid benefit, organisations need flexibility in the network and low-cost access to cloud providers. Integration is the key to a true hybrid cloud as you just can t move it all to a public cloud. Hybrid is about mixing different tiers of data because of sovereignty and other requirements, Nolan says. At Victoria University, moving services to the cloud is part of the greater ICT strategy. However, the university s IT leaders recognise the need for an ongoing investment in internally hosted services, in particular where there is a competitive or service advantage that cannot be obtained from the cloud. To achieve the hybrid architecture, Sugarevski believes network architectures have to be flexible Proctor suggests that a high level of security is a key benefit of outsourcing, but warns that CIOs should seek assurance regarding the ease of operation at the data centre as many are reluctant to surrender absolute control over their physical infrastructure. To overcome this, CIOs should look for both ease of access and ease of operation. If you need to book a visit three days in advance, or be onsite to have a shipment delivered, then the data centre provider is getting in the way of your operation. Make sure you have 24/7 access for your staff and partners, but also look for formal accreditation of the security processes to ensure that a third party has
5 verified the operator s security controls, Proctor says. Regulation also plays a part in an organisation s hybrid cloud architecture. LeaseWeb s Winkel has a background in banking where he was running IT operations across Asia and the organisation was regulated in every market by central banks. Many organisations are regulated in some way and cannot easily move strategic services to a hosting or cloud provider, so there is still a need for investments in in-house IT. Winkel recommends looking at a hybrid cloud architecture to leverage on the economies of scale of data centres. If the organisation is operating in different countries or regions, but its IT is centrally managed, consider a data centre provider that can match that organisational model with the geographical spread of its data centres. Data centre business relationships mean more than floor space With burgeoning options for application hosting, successful providers will increasingly enter into a business discussion with their customers. And CIOs must be prudent in their selection to ensure their organisation is getting more value than just a space for housing racks of equipment. Victoria University s Sugarevski says the fundamentals of data centre selection are equally important even before the business value argument is considered. These include cost effective services, compliance, quality management controls, innovation that is provided to existing customers, and quicker and flexible services. He says data centres can be more of a business partner by offering their expertise in the field to provide solutions quicker so customers do not need to focus on the customisations and components to enable the service. Offer innovation by building architectures and processes that organisations can leverage on as they would have capitalised on R&D budgets, he says. Other value-adds include the ability to link technologies and services together to solve business problems and offering standardisation, automation and orchestration to deliver solutions quickly all of which reduce both operating costs and capital costs. Data centres become a strategic business partner when they offer expertise that is difficult to replicate internally. Too often data centre engagement is seen just as a commercial relationship, not a business relationship, according to Difference IT s Nolan. Look at the relationship with your data centre provider and ask: do we manage it well? Nolan believes a data centre provider can be a strategic business partner, but a lot depends on who is managing the relationship and what the incentive is for each party. If the incentive is only to sell more space then you ll only get a benefit if you buy more space, he says. If there is no cost reduction sharing incentive you will only get more services, not less. We ve seen this sell more attitude before with traditional outsourcing. Nolan also recommends getting the data centre provider involved in the early stages of designing the project as it is good practice to adopt a DevOps-like collaboration model. CIOs must get the data centre involved in how infrastructure is going to be hosted and how it is going to be managed. It is important to scope out the entire project, otherwise the organisation is in the same
6 position as internally when development was thrown over the fence to operations, according to Nolan. At Pacnet, Proctor agrees that CIOs should make the most of the data centre provider s expertise. It is also important to make sure protocols for contacting support and raising service requests at any time are straightforward. The skills and expertise of the data centre operator can also be used to right-size power requirements to help reduce costs. Proctor says by using a data centre, the organisation is less exposed to future year three capacity requirements. Outsourcing should provide flexibility, he says. The data centre operator should be able to help adjust your requirement as your needs evolve, providing additional power and space as you need it. Build a strong relationship with your provider and have monthly or quarterly reviews. Acquiring space in a data centre is not a one-time transaction, it s an ongoing relationship. Acquiring space in a data centre is not a one-time transaction, it s an ongoing relationship there is the PCI data security standard (DSS) and if the data centre provider has this it can be attached to a submission and audit so the physical security is done by the provider s documentation, hence assisting the tenant organisation s own application for certification. LeaseWeb s Winkel believes developing a business service relationship is rapidly becoming an increasingly important role for the data centre provider. The data centre should provide a vendorneutral environment to the enterprise, so customers can choose their network provider, cloud provider and preferred system integrator for on-site services. The data centre also has an important role in Giles Proctor, providing a view on the partners that are available to provide these services, he says. Providing customers with an exposition of colocated network service providers, cloud providers, system integrators and more, will add real customer value when expanding, for example, a private cloud to a hybrid cloud environment. vice president of data centre Services, Pacnet Other business value-adds include audit compliance, which, if achieved by the data centre, can reduce the administration required by tenant organisations. If the organisation is involved in payment card processing, The data centre provider should also be flexible with customer requirements in terms of space and power even during existing contracts. The future of the data centre: Control without compromise As data centres become a more strategic part of the hybrid cloud computing ecosystem, innovation in design and operations will continue to result in more efficiency for customers. Standard colocation operations will be pressured by more integrated data centres that offer more control over facilities and networking use. The key to surviving is offering more than an air conditioned warehouse, according to Nolan. How the data centre operates is key and data centre-as-a-service (DCaaS) is the future, where the value proposition is not just about cheap cooling or floor space. The data centre is part of the cloud and the connectivity and value chain around the services they house blurs the linkage between technology service provider and data centre provider. Eventually they will become one. As part of the journey towards a DCaaS future, the interface to the data centre needs to be more on-demand rather than via the telephone. Customers will increasingly want to change networking and power services within the hour, not in a matter of weeks, Nolan says. At Victoria University, Sugarevski is seeing fundamental changes in technology that will allow data centres to become more intelligent, resulting in new services. The intelligent data centre will focus more on workflow that will allow organisations to move workloads off premise and then move them back. I do not see internal data centres being eliminated; however, there are opportunities for consolidation, Sugarevski says. More service providers will offer complimentary services by augmenting external data centres to existing internal ones. In the hybrid model,
7 when capacity is being reached, workloads can be assessed in terms of business importance and then moved to a cloud provider or hosting supplier. Technologies to watch that will enable the future data centre include the Internet of things (IoT) for efficient monitoring and control, operating environment management including the ability of systems to run at higher temperatures and softwaredefined networking for more efficient carrier management. I don t think people understand what the concept of software-defined data centre is yet, but CIOs are after something more controllable and on demand, Nolan says. Cloud gives organisations an ondemand capability so the software-defined data centre should give them the whole environment. Pacnet s Proctor says the software-defined data centre is about freeing IT infrastructure from the constraints of physical place. Server virtualisation has been readily adopted for several years, and Software Defined Networks I don t think people understand what the concept of software-defined data centre is yet, but CIOs are after something more controllable and on demand Charles Nolan, CTO, Difference IT are bringing the next level of flexibility to CIOs, with the promise of moving workloads from machine to machine, or data centre to data centre, with ease. This frees us from the built environment infrastructure as we are able to abstract both servers and network functions, he says. A huge benefit of the software-defined data centre is the ability to move applications around easily and drive utilisation to higher levels. Data centre operators spend a lot of time, money and energy managing the PUE (power usage effectiveness) of facilities; however, the real dividend for CIOs and the environment is to drive server utilisation higher. At LeaseWeb, Bas Winkel believes the softwaredefined data centre has two sides the end-user side where DCaaS provides IT-as-a-Service, and the data centre operator side where operators are automating the way the data centre is run with building management systems to control cooling and power across the data centre to drive efficiency. Things CIOs should consider when choosing a data centre Carrier-neutral Having access to multiple carrier networks from the data centre is a huge advantage for organisations looking to save on bandwidth costs and interconnect with other data centres and clouds, including on-premise facilities. Availability uptime SLAs Many public clouds offer best effort service levels. CIOs looking to host enterprise workloads off-premise should engage with a data centre provider that stands by its facility by offering service level agreements for availability. Software-defined networking Data centres that allow tenants to control their choice of carrier provide an additional level of agility. SDN turns the provisioning process from one that can take days to one that takes minutes. Business services Data centres should be a strategic part of the customer s business and not just a hosting provider. CIOs should look for value-added services and providers that have a vested interest in their success. Ease of use In addition to ease of operation, CIOs should ensure 24/7 access for staff and partners along with formal accreditation and thirdparty verification of the operator s security processes and controls. Security credentials Security is paramount and if your organisation is processing credit card payments, for instance, the PCI data security standard (DSS) credentials of a data centre provider can assist your own submission and audit requirements. Customers should also look for the ISO information security management system standard.
8 This gives the provider a holistic view of the data centre, from the mechanical layer all the way to the individual customer cabinets. Building management systems set parameters, inform, warn and allow for adjustments to be made for power, cooling, climate control, security and most aspects of the data centre. The benefit for the end user is that this can be used as the basis for SLA reporting and allows IT managers a close-up view of their colocated infrastructure. According to Winkel, the future of the data centre is bright and it will become more important as neutral facilities continue to improve in terms of power efficiencies and become the de facto data floor for enterprises. In the future there will be hardly any companies that run data centres in-house. More services, including the desktop, will run using the cloud and not be tied to physical infrastructure, he says. There is still debate about the energy use of data centres, but compared with every company hosting themselves, there is more efficiency to be gained if this is done centrally. More concentrated usage should contribute to driving down clean energy prices, further enhancing the argument that data centre providers help deliver a greener, more sustainable economic model. Conclusion With a growing number of options for application hosting available to CIOs, the data centre is now a strategic part of the hybrid cloud mix. Organisations with server and storage infrastructure located in private data centres and offices can reduce risk and capital expenses by colocating their infrastructure in a public data centre. Successful data centre engagements involve more than just floor space and both customer and provider should approach the contract with a view to achieving a beneficial business outcome. This avoids a dysfunctional separation between the customer s business objectives and the provider s service capability. The future of the data centre is on demand where facilities and networking can be controlled by the customer. CIOs who take advantage of the data centre-as-a-service model will position their organisations for agility and growth.
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