Introduction 

Datacenter operators are targeting enterprises in a bigger way than ever before, pitching colocation as a connectivity hub that can easily and securely connect to multiple destinations, especially public clouds. It's a logical argument, but the datacenter providers are challenged with getting colocation onto the roadmap of the average-sized enterprise.

The 451 Take

The 'hub' strategy could serve multiple ongoing trends, including enterprises' growing dependence on clouds (including private clouds) and the expected rise of edge computing. The concept will make even more sense as software programmable interconnection becomes more common, with operators networking their datacenters into fabrics, as Equinix has done. Certain large enterprises are already on board with these ideas, but to really ignite this market, datacenter operators will need to convince the larger pool of average-sized enterprises – what we might colloquially call the 'normal' enterprise. As 451 Research's Voice of the Enterprise data shows, most enterprises don't view colocation in a strategic light. One of the top jobs for datacenter operators is to change that perception, partly by convincing enterprises that the internet alone, or even internet supplemented with SD-WAN, is not enough for mission-critical, cloud-based work.



Details

Enterprise IT has entered the multi-cloud era. 451 Research's Voice of the Enterprise data continues to show that a majority of enterprises aspire toward a hybrid IT strategy, one that mixes public clouds with private clouds and/or on-premises IT. Separately, 43% of enterprises say they have adopted IoT, with another 18% planning adoption within 12 months – meaning cloud usage will likely be augmented by edge computing, which sits outside public clouds and closer to end-user or end-device populations.

In other words, enterprises have many destinations to connect to. The default mode of connectivity has been the internet, but as more mission-critical functions move to the cloud and the edge, it's fair to ask whether all this connectivity should be trusted to the internet's best-effort architecture.

Enter colocation. As outlined in a recent 451 Technology & Business Insight report (Interconnection and the Enterprise: How Colocation and Direct Cloud Connectivity Can Fortify Hybrid IT) datacenter operators want to insert themselves into this equation. Their datacenters already provide interconnection to public clouds, network service providers and SaaS providers. An enterprise colocating inside that datacenter could fluidly establish (or de-establish) private connectivity to these services. The argument is enhanced by software programmable interconnection, whereby many datacenters can be networked together using software-defined networking (SDN) or similar technology, so that a tenant in one datacenter has on-demand access to the connectivity of the entire fabric.

Some large enterprises have bought into this argument. But for most, colocation – if they use it – is a more tactical choice. For example, 53% of the enterprises using colocation do so for disaster recovery, we found in a recent datacenter study. (See Figure 1 below.) They might be using colocation for other reasons as well (34% use it to house a private cloud, for instance) but these use cases don't suggest the kind of grand, strategic plan that datacenter operators envision.

The seeds are there. For example, enterprises do cite reliability and latency as reasons for adding colocation space in the near future. (See Figure 2 below.) Still, datacenter operators need to convince enterprises that colocation can serve a strategic role, essentially replacing what used to be the enterprise LAN. This is a work in progress, and it is certainly not too late; networking often comes late in the IT planning process, and we're witnessing the cloud analogue to that pattern. We'll be discussing the issue further at 451 Research's Hosting & Cloud Transformation Summit, September 23-25 in Las Vegas.

Figure 1: Reason for renting space at a colocation provider
Source: 451 Research, Voice of the Enterprise, VotE Datacenters

Figure 2: Reason for adding colocation space over next two years

Source: 451 Research, Voice of the Enterprise, VotE Datacenters
Dan Thompson
Research Director, Datacenter Services & Infrastructure

Dan provides insight into the Multi-Tenant Datacenter (MTDC) market space. Dan is particularly focused on MTDCs that are trying to move up the stack to offer additional services beyond colocation and connectivity. These services may include disaster recovery, security, various forms of cloud and other managed services. He also assists the 451 Research Information Security group when their interests overlap.

Craig Matsumoto
Senior Analyst, Datacenter Networking

Craig focuses on the confluence of CDNs, interconnect fabrics and cloud access. Craig has covered service-provider and enterprise networking since the dot-com bubble of 1999, including more than 10 years at Light Reading, where he covered broad topics including optical networking, routing and the then-new beat of software-defined networking. He also spent four years at SDxCentral, delving further into SDN, NFV and container technologies.

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