Third Party Data Centers-Crucial to Market Growth

Datacenters are the nerve center of the digital world. The data center market is constantly maturing and is witnessing dramatic changes due to the virtualization and challenges led by business, technological and global. Data centers are crucial to run IT core business and operational data of an organization. They consume a huge chunk of investments for their computer systems, telecommunications and storage components, redundant power supplies, redundant data communications connections, environmental controls and security devices. Kunwar Kishore, head of data center, bharti airtel says, “Servers are very expensive. It will cost around `150 crore to maintain 1000 racks on 30 sq ft space.”

The data center services market has tremendous potential and particularly the third party data center services. In fact third party data centers services have been a boon to enterprise customers because of the lack of in-house skills, huge investments for investing in infrastructure, rising energy costs and dwindling budgets. “Full-scale passive network sharing is not yet a reality, forcing vendors to look at sharing the 'active' side to rationalize expenses. Cloud or third-party data centers, therefore, provide a practical opportunity for vendors to reduce investment in physical infrastructure as well as operational expenses. Telecom operators will contribute majorly to the wide-scale adoption of third-party data centers that is inevitable in times to come,“ says Pratik Chube, country general manager, product management & marketing, Emerson Network Power in India.

A Springboard Research report has revealed that India third party data center services market is estimated to be $1.1 bn by 2015, representing a CAGR of 29% over the next 5 years (2010-15). The trend of outsourcing data centers is set primarily due to cost-effectiveness and resource efficiency. According to Seepij Gupta, associate research manager, IT services at Springboard Research says, “With almost 65% to 75% of the allocated budget being spent on maintaining the data centers, organizations are now seeking alternatives to bring down this percentage in order to have more capital available for innovation and for further growing their business.”

While talking about the potential of data centers with respect to telecommunications, Chandan Mendiratta, vice president, service provider and system engineering, Cisco India and Saarc, says, “It could be envisaged in 2 different contexts-firstly, telecommunications leading third party hosting and secondly, third party services offered by telecom operators. In both cases there is a huge potential as the telecom industry is happening.” Several telcos are also on an outsourcing services' spree maintaining their core competencies. “Dwindling ARPU coupled with an increase in minutes-of-usage has put the bottom-line of telecom players under severe duress. Considering that about 95% users are in the prepaid segment, improving profitability is a huge challenge. Multiple new players have entered the space, and a fragmented market has resulted in price wars to gain market share,” Mendiratta adds.

Concerns

Major risk factors of data centers are primarily physical security-fire risk elements, maintenance work, natural calamities, petty personal feelings, employee greed resulting in selling of data and corporate espionage. And the other major risk is virtual security-viruses, spam, distributed DOS, hacking, defacing, disrupting and stealing of data. PAC requires maintenance once in every 3 months. Besides these outsourcers will be worried about reliability-respect for SLAs, server downtime, network connectivity, expertise to take up L3 & L4 services.

Foolproofing

After embracing the services of the third party data centers, the next instantaneous question is about the reliability and risk-free functionality of these services. The major risks and concerns of data center are reliability, security-both physical and virtual, and intellectual property. Security has emerged as the most crucial concern of potential customers, and the biggest hurdle in migrating to third party data centers. Hence, there is bound to be loads of skepticism towards such migration en-masse, and would require building requisite credence to broaden the acceptance.

“Enforcing improved service level agreement is prominent. Everything must be clear from the beginning about regulatory compliance with regard to the scalable modular data centers that deliver quality in terms of capacity, availability and security requirements. Dedicated Internet security professionals are hired normally. Security audits should be conducted. Opting tier-III or tier-IV level is essential for the maximum availability. There will be greater accessibility if the tier is higher,” points out Chandan Mendiratta.

A service level agreement should encompass all quantitative and qualitative aspects of engagement with the third party data centers. To begin with, the security and confidentially clauses are of paramount importance. “The key parameters to be considered and agreed upon are uptime and application latency. In times to come, uptime certification will become an essential consideration for choosing a service provider that has been classified as tier III or tier IV ie, fault-tolerant. Disaster recovery plans and availability of remote sites in the unforeseen event of a sabotage or crash must be inquired into and verified in the SLA. Operators could be penalized for breach of confidentiality,“ suggests Pratik Chube.

According to Kunwar Kishore, “It is a fool-proof service as long as the design is appropriate and maintains the set standards of a data center. Data center has to be power tolerant with concurrent maintenance. While energy efficiency is an important aspect and there should be total redundancy. Energy efficiency can be determined by power usage effectiveness (PUE). Larger facilities excel in both physical and data security, with multiple security layers and fail-safes, as well as back-up and recovery systems that protect against data loss. It is not normally immune to data loss.” He reiterates that security can be compromised if design is in place.

“There are several ways in which customers for third party data centers mitigate risks and this has been a long standing practice. Operators do customize space based on the security needs of the customers-an example of this is adding additional security for accessing cabinets or space by using biometric devices, multiple authentication systems, etc. Security and related processes, fire protection and suppression systems, availability of quality and redundant power with backup should be followed at the data center,” asserts CR Sreenivasan, vice president, data center services, Tata Communications. It is advisable to opt for an experienced third party datacenter classified as tier III and tier IV. “Security and redundancy options are usually taken into consideration, though it is also advisable to look into finer aspects such as the operator should have not listed facility addresses, blueprints, and security measures on its website or other communication. In fact along with regular security checks, customers also assess security efforts through detailed questionnaire from time-to-time,“ mentions Pratik Chube.

Potentiality

The major outsourcers of data centers are enterprises, banks and financial institutions at 28%, manufacturing companies at 25%, public sector at 18%, telecom and retail at 9% and 8%, respectively. Third party service providers should differentiate themselves by providing a future roadmap to their clients, in addition to solving their current problems and thereby creating a long term relationship. Seepij Gupta says, “Consolidation, optimization and productivity will be the key areas of focus for enterprise managements in the near future. Captive data centers will undergo optimization and will aim to consolidate and leverage their existing assets, while third party data centers will build capacities aimed towards cloud services-especially Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).”

Third party data centers have great potential and will continue to grow for the obvious reasons, India is less expensive than the US for hosting and companies' realization about optimizing operational expenditure which is a key growth driver. Third party data center guarantees better focus on business, scalability, no capex, expertise and superior infrastructure. Companies have the flexibility of opting platform, software, usage level and degree of support that most closely matches their business needs. They can also determine the length of the commitment and retain control of data, applications and system software. This cost-effective service help to meet changing business demands, to sustain growth and help protect existing technology investments. It aligns business needs with computing resources.

-Malini N
malinin@cybermedia.co.in