Future of in-house datacentres in the cloud era

It is predicted that companies will spend three times more on the cloud by 2017. But as cloud goes mainstream, are in-house datacentres really dying?

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Many enterprises are no longer building in-house datacentres. Instead, they are opting for third-party datacentres, and scalable and agile cloud infrastructure so they can avoid owning depreciating IT hardware assets.

But does this mean in-house datacentres are dying?

“If I start a new business today, will I build my datacentre? Maybe not. But that doesn’t mean in-house datacentres are dead,” says Daniel Beazer, consultant at BroadGroup, the datacentre consultancy firm hosting the Datacentres Europe 2014 conference. 

“I know of a bank that just bought a mainframe, and late last year Debenhams invested in a mainframe. This proves that these businesses are not about to exit datacentre business.”

“And there may be many such companies heavily invested in datacentres.”

Where an in-house datacentre strategy works

Capgemini is one such company. In 2010 it built a state-of-art, modular datacentre in Swindon. The Merlin datacentre is the company’s newest and best datacentre. Its energy efficiency, responsiveness and resilience are so high that Capgemini is using it as a model for other datacentre facilities.

Today, building a datacentre cannot be taken lightly; it is a huge investment

Paul Hammond, Capgemini

“We have 39 datacentres across the globe with Merlin at the top of the list. Some datacentres are legacy ones,” says Paul Hammond, vice-president of infrastructure services at Capgemini.

“We know IT landscape is changing and we question internally how many datacentres today would be right,” he says. “Five years ago, the answer would have been very different from today. But we do know that 39 datacentres is a bad answer.”

Migrating to cloud

Publisher News UK is also consolidating its datacentres and moving as many workloads to the public cloud as it can. At its peak in 2010, News Corp had 65 datacentres spread globally. Today, after embracing virtualisation and cloud, that figure is down to 46. But its IT wants to exit the datacentre business completely.

“Today, building a datacentre cannot be taken lightly; it is a huge investment,” says Hammond. 

He says internal servers and in-house datacentres are incapable of handling certain IT functions, such as social media data analytics or speedy customer service. “IT needs to know what to what to broker out to the cloud because it will be silly to pump in millions to build a datacentre that can emulate AWS or Microsoft or Google.”

As the desire to move to a more flexible, agile, cloud delivery model becomes strong among enterprises, IT will invest less in in-house datacentres.

It is predicted that the global market for cloud services will touch $79.1bn by 2018. In addition, the big four third-party datacentre and colocation providers. including Equinix, Telecity, Interxion and Digital Realty, are reporting record growth in customer numbers.

More on datacentres

“As cloud becomes a significant enabler, enterprises are getting out of the datacentre business in droves,” says Tim Crawford, CIO strategic advisor at AVOA.  “But datacentres are not dying. Cloud is just enabling more enterprises to use third-party IT services.”

Experts agree that in-house datacentres are not becoming extinct. “There will always be mission-critical apps that firms want to host internally. Then there are emotional or regulatory reasons dictating that data should remain within the company,” says Hammond.

There are other factors that keep in-house datacentres alive: Legacy applications that are business-critical but are not cloud-ready, or when customers demand for dedicated IT.

Then there are those who will want to milk as much benefit out of their datacentre investment as they can. 

“There are those who are running systems that they do not feel can work on an I/PaaS platform, and do not want the expense and business impact of moving their existing kit and software to a co-location environment,” says Clive Longbottom, datacentre analyst at Quocirca.

There will always be some kind of in-house IT, and hybrid IT will be the way forward for most enterprises, estimates Simone Brunozzi, chief technologist for vCloud Hybrid Service at VMware.

We want highly scalable, agile IT and not worry about operating a datacentre

BChris Yeow, OpenWork

“The future is hybrid,” agrees Longbottom. “The role of IT becomes deciding where new workloads should be placed (in-house, colocation or public cloud).”

Experts say enterprises wanting in-house IT should have just one datacentre in every region or, at the most, a couple for high-availability and redundancy.

Zero in-house IT

But some companies want zero in-house IT. Take OpenWork, the network for financial advisers and mortgage professionals in the UK. It has outsourced all of its IT. “We did not want to own hardware assets or worry about power and cooling,” says Chris Yeow, technical architect at OpenWork.

It uses Rackspace’s hosting and managed services. “For the size of our organisation, we knew we would not benefit by owning a datacentre,” Yeow says. OpenWork has about 2,000 financial services professionals and around 500 employees in the UK.

“We want highly scalable, agile IT and not worry about operating a datacentre.

“But we spend a lot of time on developing the SLAs so we get what we want from the service provider,” Yeow adds.

The best answer for a highly scalable IT is the cloud but as OpenWork handles sensitive financial services data, it wanted a private cloud-like infrastructure at a competent third-party provider.

“When the industry is ready, our underlying IT infrastructure is also ready to help us overspill to the cloud,” Yeow says. “This wouldn’t have been possible if we had an in-house datacentre.”

Will the in-house datacentre ever die out? Not before I’m long dead and buried.

Clive Longbottom, Quocirca

An opex model of IT gives the team an assurance that as the company grows, they can easily scale up their IT while continuing to focus on other strategic issues such as applications development. 

Currently, the IT team is busy investing in and re-architecting some of its applications to make them cloud-aware, so it can migrate apps on to the cloud if and when such need arise.

But Yeow appreciates how some industry segments such as banking and finance sector will have reasons to own a datacentre. “These firms have the budget to build a highly resilient and efficient infrastructure that can function as a cloud service,” he says. “But as technology moves on, even they could be left with a large asset-base."

Capgemini’s Merlin datacentre is a highly resilient, multi-tenanted infrastructure replicating a private cloud because the company has invested a lot of money in it.

“Maybe four to five years later, when they branch out a bit more or look as tech refresh, they may think differently,” Yeow says.

Adapting in-house facilities for niche tasks

Experts say in-house datacentres will begin to die away in the same way that the mainframe has ‘died away’, say experts. 

“There will remain those who see an owned datacentre as the only secure datacentre (even though they are patently wrong in the vast majority of cases),” says Longbottom. 

“There are those where an owned datacentre will provide them with the milliseconds or so less data latency that makes all the difference.

“Will the in-house datacentre ever die out? Not before I’m long dead and buried. However, like the mainframe, it will have to adapt and figure out where it fits as the world changes around it.”

They may not completely die away but smart CIOs are changing it – shrinking it, tweaking it, repurposing it to do only certain tasks, and do them efficiently.

“Five years ago convincing the business stakeholders to invest in cloud was a mammoth task, today the same can be said about convincing them to invest in a shiny new in-house datacentre,” concludes Capgemini's Hammond.

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