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Data Centers Need to Wake Up and Compete with the Hyperscalers

Data Centers Need to Wake Up and Compete with the Hyperscalers Win Customer Hearts & Minds and Become a Trusted Technology Partner

Data center operators have a choice: either they can expand their cloud offerings and become a trusted technology partner to their customers, or they can retreat and just become real estate companies with a lot of expertise at air conditioning. After all, unless your center is hosting facilities for Amazon, Google, or Microsoft’s public clouds, you will lose business when customers inevitably migrate to the cloud.

Are data center operators listening to their customers and asking why they are deciding to abandon their own cages full of equipment and move everything to the public cloud? This trend is really just the next step in the evolution of computing that created the data center industry in the first place. Fifty years ago, most computing was done on-site, right in the office. Once networks became cheap and ubiquitous, companies decided that they no longer wanted the hassle of raised floors, huge cooling units, backup power, and all the rest, so they outsourced that to today’s modern data centers. Now Amazon and the others have come along and are saying, “You don’t even need to own your own computers, your own storage, your own network gear, or anything. Just let us handle it all.” That doesn’t bode well for data centers that survive by hosting their customers’ own equipment.

Forward-thinking operators

Forward-thinking data center operators are realizing that moving one’s entire IT infrastructure to Amazon or Microsoft isn’t necessarily the best idea for many companies. Many customers would prefer private clouds or hybrid clouds that allow them to offload basic capabilities like raw compute capacity, backup and disaster recovery, security, and data storage. They can then focus their efforts on the technology components that are unique to them and which gives them a competitive advantage. 

In a bold move revealed this month, NTT, Japan’s largest telecom company, is doing just that. My company, Wasabi, recently struck a world-wide deal with NTT to be their provider of scale-out object storage. We become the cloud storage component of the NTT Enterprise Cloud, a suite of services that compete directly with Amazon and the other hyperscalers. NTT sees themselves as far more than a real estate company. They have an enormous consulting operation (having acquired Dimension Data in 2010) and they see themselves as their customers’ technology partner.

As a major supplier of outsourced IT infrastructure in Japan, NTT is fighting hard to maintain their customer base in the face of fierce competition from Amazon, Google, and Microsoft. Rather than staying static, NTT is taking a visionary approach and thinking beyond the traditional model of floorspace, electricity, cooling, and bandwidth.

Fundamentally, NTT offers everything that their large enterprise customers need in order to enjoy the advantages of the cloud while maintaining control of their infrastructure and the unique capabilities that differentiate them in the market. NTT’s Enterprise Cloud promotes the notion of a “Hybrid Cloud” that can grow with each business. In other words, some of the customer’s workload is performed in their private NTT-hosted infrastructure, and some is provided as a service by NTT. Storage falls into that latter category. Basic utility-style storage is something that every customer needs, so why make each customer go through the pain of researching and developing it themselves? You don’t need to be the 59th largest company in the world to do what NTT is doing.

Even small data center operators are finding that they can, for example, buy storage from Wasabi, bare metal compute from Packet, CDN from Stackpath, and so on. They can easily put together an offering of basic computational services that saves money and time and allows them to “move up the stack” to become more of a trusted technology partner to their customers.

Storage Vendors

If you walk through any modern data center and look in the cages of each of their customers, every one of them has had to come up with some storage solution: Dell/EMC gear, NetApp storage, HP, or any number of other storage vendors’ gear. In truth, all these hardware solutions do the same thing. Why not be able to tell your customers, “Forget about that! Just buy ourcloud storage – it costs less than just the maintenance on that hardware you were going to buy!

NTT realizes that data storage should be part of the infrastructure, like electricity or bandwidth. Every customer needs storage, so it makes sense to add it to the data center’s menu of services. It’s one less thing that the customer has to worry about when they move into a data center. One obvious use for this storage is backups and disaster recovery. Everyone does backups, and everyone needs to think about where the backups are stored. When you are an NTT customer, they take care of it. You don’t have to buy and maintain your own hardware. NTT selected Wasabi as a partner because our price and performance beats hardware solutions hands down.

Lessons to be learned from the NTT-Wasabi alliance include the following:

  • First of all, offering infrastructure services like data storage adds “stickiness” and depth to the DC-customer relationship. Once you have someone’s data, it’s harder for them to leave.
    Amazon certainly knows this – they impose hefty egress fees for anyone who actually wants to leave with their data. If the storage is fast and cheap, there is no incentive to leave.
  • Secondly, you can differentiate yourself in a market that has become completely commoditized. All data centers offer space, electricity, and bandwidth and all enterprises need storage too, but data center operators haven’t woken up to the idea of providing it. The first movers will have an advantage and grab market share.
  • Finally, offering storage is a way to increase revenues and profits for both data centers and enterprises. Precisely because buying on-premise storage from the major storage vendors is so expensive, there’s an opportunity to save money for data center customers while adding significantly to the data center’s bottom line.

I am not suggesting that renting space, cooling, and electricity is a dead-end business. But customers are looking to offload anything that isn’t core to their unique businesses. Storage certainly falls into that category for most companies. Just as precious few companies still want to worry about generating their own electricity or digging up the streets to lay their own fiber, most enterprises will prefer letting a data center handle all storage needs. My prediction is that storage will become a commodity and that progressive data centers will follow NTT’s bold initiative to protect their own turf from the hyperscalers and secure their long-term value.

By David Friend

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