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Colocation laggards warned about dangers of ignoring needs of hyperscale cloud giants

Steve Wallage, managing director of datacentre-focused analyst house Broadgroup Consulting, says operators that take the time to forge closer ties with customers stand to benefit from the rise in demand for colocation from hyperscale cloud giants

Demand for colocation space across the continent is soaring as the hyperscale cloud providers rush to build out their European presence, but not all datacentre operators will feel the benefit.

That is according to Steve Wallage, managing director of datacentre-focused analyst house Broadgroup Consulting, who said the demand for colocation space from the major cloud firms has prompted many operators to change how they sell their facilities to win business.

This is backed up by the findings of Broadgroup’s 125-page Datacenter Europe 7 report, which looks at how cloud is shaking up the colocation and cloud market in 19 European countries.

“In the past, I think there has been a sense of ‘everyone wants datacentre space, and I’ve got a datacentre and can sell you some’, and you don’t need to do a lot more than that,” Wallage told Computer Weekly. “But the market is becoming a lot more challenging.

“We are seeing the industry mature, led by cloud, with [operators] doing more to talk up what they can do to help providers, while focusing on the business benefits they can provide.

“Traditionally, the attitude has been much more of ‘here’s a rack and here is some power’ and you can take it or leave it, but the approach is evolving now with more focus on what they can do to really help the customer.”

On the back of this trend, said Wallage, some operators have shifted their focus to ensure their offerings meet the needs of particular vertical markets, and have made an effort to cultivate strong relationships with key organisations within them.

Ark Data Centres, UKCloud (formerly Skyscape Cloud Services) and Virtus are all examples of providers that have pursued this kind of strategy, which has allowed them to make inroads into the public sector, he said.

Forge closer ties

Operators that make an effort to forge closer ties with their customers can be in a better position when it comes to pitching for business because they will have an inside line with regard to what features and functionality their sites need in order to appeal to their chosen market, said Wallage.

For operators looking to court the hyperscale cloud companies – many of which are pursuing colocation investment strategies to build out their cloud presence across the UK and Europe – adopting this approach is essential to win business, he said.

“There are companies that know what the cloud guys want, and they are building their facilities to those specifications, with very flexible designs to accommodate them,” he said.

“For example, they might require different tiers within the same datacentre, and will require the ability to expand. So, although they might want only 1MW of capacity today, they might need 20 in future. And there are people whose whole business model is centred around meeting their needs.”

Future-proofing facilities

Having a close working relationship with customers could also help operators plan for the future, ensuring their facilities are equipped to deal with the demands of new and emerging technology trends, said Wallage.

Much has been made to date about the impact the internet of things and big data will have on the datacentre market, but 5G, artificial intelligence and virtual reality could also have a transformative impact on how datacentres should be kitted out and built, he said.

“How you adapt [the designs] might not always be obvious because the company involved in these new trends may not know what they need yet, but if operators can really work closely with them, it means they are better positioned to adapt things up front,” he added.

Adapt or die

For operators that are unwilling or late to adopt such an approach, the “stickiness” of customers in the colocation space means they may not feel the effects straight away, but they may find their facilities are harder to sell and market later on.

“The thing with this industry is that people tend to stay where they are, but clearly it does become more difficult as customers begin to churn away, and it will become harder for operators to sell space in an older datacentre if they have a newer one in the portfolio that is sold for the same price,” said Wallage.  

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Some of the older colocation datacentres on the continent were built in the 1990s, he said, and – buoyed by recent merger and acquisition activity in the market – their operators may try to sell them off.

But the datacentres’ age and location mean they may not be as attractive to potential buyers as their operators believe.

“There are a number of operators that will look to sell those assets, but they are being very optimistic on the price,” said Wallage.

“Some people will talk about what Equinix paid for Telecity, but clearly the price there was [dictated] by the breadth of assets and the scarcity of alternatives. Over time, some of those assets may be sold, but there won’t be a rush for them.”

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