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Co-Location – the hidden champions in the cloud business

Long-term investments require long-term planning. If one takes the investments or the surface area of ​​the co-location providers in Europe and especially Germany as an indicator, we still have the big part of the cloud- hype in front of us. For example, Equinix, Interxion, eShelter & Co. have expanded their data center capacity by approximately 25 percent in the last 24 months. Currently, more than 120,000 square meters of reserved space are available for the further expansion of data center space in Germany. And that despite high electricity costs and rising house prices. The trend towards outsourcing of IT infrastructure to external locations and cloud computinghave given the co-location providers a special condition. However, since only the operation of data center space (“always electricity, always safe, always cool”) [1] offers only a few differentiating features over the long term, the leading co-location providers are working on the further development of their service portfolio towards the cloud platform provider. The possibilities this offers for CIOs and cloud service providers will be discussed below.

Co-location – fast rise of a capital-intensive industry

The majority of today’s co-location and housing providers have their origins in the late 90s. In times of the Internet boom, Internet companies were in demand for new data center locations and peering points in order to bring their own services quickly to users, without having to build and operate their own data centers. The co-location providers fulfill two basic economic functions:

They reduce the investment risk for service providers and enterprise users and also create hubs for data exchange between participants. This means that connection costs and latencies can usually be significantly reduced compared with the setup, connection and operation of your own data centers at the company site.

In addition, the network of co-location locations of the various providers creates a completely new level of flexibility for the construction of IT infrastructures. To be close to the customer, companies or service providers no longer need to build their own data centers or hand over their IT infrastructures to a managed service provider. You can check them in relatively easily with a co-location provider and then let them operate or operate as they wish.

Co-Location – Secret winners in the Cloud Make-or-Buy game

Over the last five years, co-location providers have benefited greatly from two trends. On the one hand, large user companies no longer build their back-up and recovery in-house data centers, but increasingly in co-location locations. On the other hand, many cloud service providers are shying away from building their own data centers, as demand in recent years has not yet covered capital and operating costs. Even many of the “big” cloud service providers, such as Microsoft, Amazon or Google, rely on the co-location model in Europe to be able to scale their infrastructures and adjust to demand without high capital commitment. For foreign providers, the co-location locations represent the infrastructure “bridgehead” in Germany.

That also pleases the investors. Thus, most co-location providers in Europe have no problems solving the sometimes immense investment in space, development and data center construction. In 2013 alone, more than 200 million euros were invested in new co-location locations in Germany. The total cultivated area currently amounts to approximately 420,000 square meters. Even though high electricity costs put Germany at a disadvantage compared to other European locations, Crisp Research expects continued sales growth of 8 to 12 percent in the coming years. This growth is driven by the general outsourcing and cloud trend as well as the fact that more and more foreign providers are learning that German medium-sized and large customers like to be supplied from German data center locations.

From Rack Hotel to Cloud Hub – Competitive Strategies of Co-Location Providers

Over the last few years, the co-location business has evolved significantly. From the relatively predictable “rental business” (RZ build – rent land) has become a race to build dynamic ecosystems. For a long time, the value of a co-location provider is no longer just the price per megawatt or area. For many customers, it has become much more crucial to which other partners or service providers you can connect to in the respective data center locations and networks. In a world of hybrid cloud and IT environments, closeness (keyword latency) and connectivity to other providers play a key role. To offer selected co-location providers such as Equinix,AWS in Ireland. This allows user companies to establish secure and broadband connections even with public clouds that were previously only accessible via a simple Internet connection. This creates new opportunities and also brings the cloud service providers in the local hubs Frankfurt, Munich and Cologne / Dusseldorf closer together.

In order to be able to offer the widest possible portfolio of peering partnerships and new connectivity and platform services in the coming years, the various providers are currently running a neck-and-neck race for the most interesting partners and cleverest hub concepts. For example, Interxion also offers its Cloud Hub partners and potential customers complete Cloud Test Labs , which provide proof-of-concept environments that can be tested in the data center and matched against their needs. Equinix has recently expanded its ecosystem to include a marketplace where users can choose cloud services that are part of the Equinix network.

For users, it has a positive effect that the co-location providers cooperate with one another and network their infrastructures and locations despite the intense competition. As part of the “Frankfurt DC Direct Connect” project, eunetworks already connects 10 data centers of 4 co-location providers in the Frankfurt area in a secure and high-performance network (4-16G Fiber Channel and 10-100G Ethernet) with direct access to the DE CIX – the world’s largest Internet node. In particular, the association “Digitalhub Frankfurt RheinMain eV” has implemented this customer-oriented cooperation model.a big contribution. He brings the infrastructure providers around the table and advocates better framework conditions for the construction and operation of data centers in Germany. In view of the ambitious goals of the Federal Government within the framework of its ” Digital Agenda “, this is also sorely needed. For despite all the speeches on Sunday, politics is currently misjudging the long-term effects of the settlement or emigration of data centers. Many policymakers are not yet aware that data protection, value creation and taxation in the digital economy are fundamentally linked to the location of data centers.

Outlook – Preparing for Openstack, SDN and DevOps

Although the signs for co-location providers are growth, there are a number of challenges to be met. So the concerns of the industry in Berlin should be heard more. The implementation of the “cloud hub” and “cloud ecosystem” strategies is also just at the beginning for most co-location providers. In addition, in the medium and long term, one has to empathize more deeply with the situation of the CIOs and their RZ leaders. Their agenda will be determined not only by the classics “Hybrid Cloud” and “Enterprise Mobility” over the next two years, but also new topics such as

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