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The risk posed to the colocation community if the hyperscale cloud firms keep opting to own and operate their own datacentres has emerged as recurring topic of discussion at the 2018 Datacloud Europe Congress in Monaco.
The subject has been picked over by a number of panellists and presenters at this year's show, as its audience of colocation investors and operators grapple with the realities of having Amazon, Google and Microsoft lease server farm space from them.
Speaking at the event, William Barney, CEO of Global Cloud Exchange, a company that specialises in the provision of sub-sea networking cable connections, said a source of concern for the colocation community should be how much money some of the cloud giants are investing in datacentre research and development (R&D).
“If you look at our largest customers, they’re spending a lot of money on R&D in our industry,” said Barney. “They’re building submarine cables better than us, they’re building hyperscale datacentres better than us, and spending billions of dollars on research.”
This trend means the colocation industry could be at risk of running server farms that are the equivalent of “dumb pipes”, he warned.
“The challenge for us as an industry is not to become ‘dumb building' because that could be what happens one day,” said Barney.
Colocation to the rescue
Within London, specifically, the hyperscale cloud players are regularly cited by the likes of CBRE as being major consumers of the colocation community’s available space, as they seek ways to rapidly expand their presence in response to growing end-user demand for their services.
This is a trend that is also playing out in many of the world’s other major datacentre hubs, and is likely to for a long time to come, as the hyperscalers will struggle to meet end-user demand for their services without the help of the colocation providers, said Bruno Lopez, group CEO of datacentre investment firm ST Telemedia.
“The cloud guys are still taking infrastructure from the rest of us,” he said during a panel session at the show. “They cannot cope with the demand they see… and it is something they are continuing to outsource.”
That was a view shared by Jonathan Schildkraut, chief strategy officer at datacentre-focused real estate investment trust CyrusOne.“The very large companies, the hyperscalers, have a certain amount of expertise in a lot of different areas, but their expertise is not in the delivery of datacentre capacity,” he said.
To reinforce this point, Schildkraut claimed that the relatively low returns on investment that Google, Amazon and Microsoft get on their datacentre investments suggests it is unlikely to make financial sense for the hyperscalers to ditch their colocation partners completely.
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During another panel session, Neil Cresswell, CEO of colocation provider Virtus, said it is also important to bear in mind that the cloud market is still in its relative infancy, given that the majority of enterprises are still running most of their IT in-house.
As a result, there is still plenty of pent-up demand within the enterprise space for public cloud, private cloud and colocation capacity, and operators need to be primed to take advantage of it by ensuring their service mix aligns with their workload requirements.
“We do sell to the big five to 10 [hyperscale] accounts, and they are fantastic customers, and we seem to have what they like and we’re in the right place [geographically], and we have lots of other customers as well,” said Cresswell.
“Some of them are very large hyperscalers, and their needs are all around speed, flexibility, efficiency, productivity and the ability to scale massively, and to enterprises that have slightly different needs.”
But the needs of the hyperscale cloud giants are wide, varied and sometimes liable to change at a moment’s notice, said Steve Wallage, managing director of datacentre-focused analyst house Broadgroup Consulting, during his Datacloud Europe presentation.
Optimising for hyperscale cloud
“If you’re designing a hyperscale cloud datacentre, how will you optimise for hyperscale cloud?” he said. “They can be very large datacentres, they can be slightly lower specification, and they can be designed for [whatever their] particular requirement is.”
Some colocation providers are responding by talking up their customer service game, which is an area Wallage said the market has not been renowned for in the past, but is one they need to demonstrate a willingness to embrace when courting the hyperscalers.
“I did a project last year for a construction company, and they said we need to know more about what the datacentre hyperscale cloud giants want and how they work, and the cloud guys came back and said, ‘we’re nightmares’,” said Wallage.
“We have very difficult terms and conditions, and then one day we’ll rip them up. You need to have that flexibility to work with those sorts of players and be optimised to meet their needs.”