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The days of hyperscale public cloud providers leasing space from the co-location community could be nearing an end and operators must act now to protect themselves, according to several speakers at the Datacloud Europe conference in Monaco.
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Public cloud giants, such as Amazon Web Services (AWS) and Microsoft, have embraced the co-location model over the past few years as a means of establishing a local presence for themselves in a number of areas across the globe.
However, as the popularity of their services has increased, and their economies of scale they operate at have improved, the risk of these firms opting out of co-location and building their own datacentres has heightened.
Steve Wallage, managing director of datacentre market watcher BroadGroup Consulting, claimed investors are already getting jumpy at how much of a long-term competitive threat AWS and co will pose to the co-location community.
"The number one question [we get] from investors is, ‘Will AWS kill that business?’. If not directly, how about on price, because AWS has cut pricing around 40 times in the past five years,” he said.
Wallage added that there is already evidence to suggest public cloud giants are weighing up their long-term position on co-location, with some striking multi-year deals that are shorter than they used to be.
“They might take much space [now], but for how long and on what terms?” he questioned. “We’ve already seen a couple of deals done with the big cloud guys that only have a three-year deal time frame. Some of the demands and terms on flexibility are also making it very difficult for investors to support those models.”
Public cloud providers will continue to represent a good revenue stream for the co-location market in the short-term, continued Wallage, but operators must prepare themselves for the prospect of that drying up over time.
“Perhaps these hyperscale cloud guys are a threat to our industry in the longer term, but in the shorter term – and particularly in the first quarter of the year – these guys have been a great driver for this market,” he said.
“We will see that carry on in 2016, but how much longer that will go on in 2017 is another challenging question.”
That’s not to say the game is up for the co-location market, added Wallage, as there are a number of steps providers can take to position themselves and their services as a credible alternative to public cloud in the long run. Trading on their knowledge of the local market and how their service offerings meet in-country regulations are examples.
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“But we still see a lot of business models that have absolutely no differentiation. They’re nothing but just another datacentre build,” he said.
“There are a number of successful models [in co-location] around cloud, but one of the biggest mistakes we see is they don’t know what their position is on cloud, and they assume they can be all things to all people and just see how the cloud market develops.
“But you need to have a clear position, clear strategy and capabilities to really maximise that cloud opportunity,” concluded Wallage.
The threat the public cloud giants pose to the co-location community was discussed during a presentation by OpenStack co-founder Cole Crawford, who currently heads up datacentre infrastructure management startup Vapor IO.
His advice to the co-location industry was to look at how hyperscale cloud giants build out their sites for inspiration, as the likes of Google prioritise high availability over fault tolerance with their large-scale builds.
“There is massive difference between cloud datacentre build-outs and co-location build-outs,” he said.
“We’re still having the conversation about what it means to be Tier 3 or Tier 4 [in the co-location space] and I think if we’re to survive the next five years, we need to be thinking about something other than fault tolerance and PUE.”