Over the last 20 years, the industry has witnessed a significant transformation of data center products. A combination of demand and innovation has transformed the data center from a predominantly real estate segment focus to a value-added business where being competitive means more than simply housing and hosting equipment. To be competitive, data center operators now must be technology partners with customers.

While the data center business largely evolved in tandem with the technology industry in general, economic conditions coupled with technology advancement and trends have emerged to create a perfect storm, propelling the data center business into hyper drive with regard to its evolution and importance (see figure 1).

ECONOMIC TRENDS

The recession has caused financial firms to look for the most secure and cost-effective IT solutions. In doing so, interest in leveraging outsourced options such as data center providers and external expert IT groups will increase as today’s challenging economy forces enterprises in virtually all sectors to continue paying close attention to budgets and overhead.

To illustrate, IDG Enterprise, a publisher of IT/business publications, announced the results of its 2011 Data Center Survey conducted among more than 1,700 IT and security decision-makers from a range of industries. The survey revealed that data center investments are an important focus for organizations, with 28 percent of overall IT budgets being spent in this area. According to IDG, this number is likely to remain consistent over the next two years; however, overall data center investments are even higher.

The decision-making process for data center investments and strategy is lead by IT executives, including CIOs (65 percent), CTOs (64 percent), and IT/networking management (64 percent), according to the results of IDG’s survey. As data centers become a significant IT priority (67 percent), IT decision-makers are focused on preparing for challenges that may arise.

While 58 percent of participants own and operate their own data centers, 33 percent outsource some, and 9 percent outsource all data center equipment and operations. The survey also revealed that organizations are left with significant amount of data center consolidation. About 23 percent say they have a significant amount of consolidation left and 48 percent said a moderate amount of consolidation is left.

TECHNOLOGY TRENDS

According to the IDG survey, virtualization leads as the most significant technology/trend impacting data center investments in the next twelve months. Server virtualization is the topmost trend (48 percent), followed by storage virtualization (37 percent), and desktop virtualization (34 percent). Important factors considered while selecting data center technology vendors include ability to meet security requirements (83 percent), support and service (83 percent), and integration to existing infrastructure (80 percent).

Moreover, the recently released Datacenter Dynamics Global Industry Census 2011 shows that the data center industry outperforms the global recession. According to the report, a number of trends are at play in the increasing importance and evolution of the data center, even in these difficult economic times (see figure 2). According to the report:

In his article, “How Virtualization, the Cloud, and Mobility Are Driving the Evolution of IT,” Michael Otey, technical director for Windows IT Pro and SQL Server Pro magazines writes that virtualization has definitely changed the IT landscape. In just a few years, virtualization has moved from an experimental technology used only in test and development environments to a core infrastructure platform.

Now, many businesses plans for all new servers to be virtualized—and they need to have a reason to implement physical servers rather than virtual servers. Although there are several contributing factors, Otey writes that server consolidation is the primary force that’s driving the wholesale adoption of virtualization. Server consolidation lets organizations increase the rate of server hardware utilization while simultaneously decreasing the power costs and management requirements. In addition, high-availability technologies such as vMotion and Live Migration have also emancipated virtual machines (VMs) from their physical hosts, creating the foundation for the dynamic data center where VMs can be moved between hosts automatically in response to changing workloads. Virtualization is a core mainstream technology that will definitely alter the IT landscape for the foreseeable future. IDC studies have shown that one out of every five servers is virtualized today—but it seems clear that those numbers will be reversed in just a few years, and virtual servers will far outnumber physical ones.

Otey also maintains that the cloud is also an emerging trend that will most certainly reshape IT. Although there’s a certain school of thought that says the cloud is built on top of virtualization, that’s not necessarily the case. Infrastructure as a Service (IaaS) offerings such as Amazon’s EC2 and Azure’s Hyper-V clearly rely on virtualization, and many other services are built on virtual servers. However, there’s no inherent reason that cloud services must use virtualization, according to Otey.

In fact, the abstraction of the services from their underlying implementation is one of the main tenets of cloud computing. Whereas virtualization is well established, the cloud is still in its infancy. Just as virtualization abstracts the server from the underlying hardware, the cloud abstracts the service or application from the underlying infrastructure and lets IT manage multiple servers and applications as part of an overreaching service. The cloud is just beginning to be a viable option for businesses—but services are emerging that will provide businesses with compelling and ready-to-use solutions (e.g., Windows Intune, Microsoft Office 365). The current uptake might be slow, but the adoption of cloud technologies is sure to grow, transferring parts of the IT infrastructure to off-premises hosting companies.

Mobility is the other main force that’s driving the evolution of the data center, according to Otey. Smartphones, such as the iPhone, Android, BlackBerry, and the Windows Phone, have evolved into way more than just phones. They’re mobile computing platforms that connect workers to corporate assets when they are out of the office. Furthermore, the proliferation of mobile apps and widespread Internet connectivity has made smartphones into useful productivity devices in their own right. One of the really interesting trends in the mobility space is the virtualization of mobile devices (see table 1).

In addition, it’s clear that today’s mobile devices are full-blown computers that will soon be capable of supporting virtualized environments—if they don’t already. The use and support of multiple mobile platforms is moving IT out of the office and into the field, as well as stretching the window in which IT assets must be accessible.

Virtualization, the cloud, and mobility are driving the evolution of IT from an on-premises internally managed entity to a heterogeneous multifaceted component that’s composed of a combination of internal resources, such as virtualized servers, and external resources, such as cloud services, that stretch IT outside the office space into an always-on and always-connected workspace. This evolution is occurring quickly and is already well underway.

VERTICAL-MARKET TRENDS

The federal government made a substantial amount of money ($19 billion) available under the American Recovery and Reinvestment Act (ARRA) and the Health Information Technology for Economic and Clinical Health Act (HITECH). This funding is set aside as incentives for health-care organizations to develop the capability for electronic health records (EHR).

In her article, “Healthcare: A Hot Market for Data Center Vendors,” Lisa Huff, contributing editor for Data Center Knowledge, maintains that there are many disparate organizations in the health-care industry that must come together in order to get to a true EHR that can be used by all doctors nationwide.

Right now, most medical information is not structured data, which it must be for all of these different computer systems to talk to each other. And, there must be some kind of centralized storage or “Health Information Exchange,” which in and of itself is a large data center (with backups and disaster recovery sites). In Pennsylvania, this is going to be the PHIX (Pennsylvania Healthcare Information Exchange), and on the federal level it would be NHIN (Nationwide Healthcare Information Network), although this name is expected to change soon (see figure 3).

By 2015, all health-care organizations are supposed to have implemented EHRs. The U.S. Dept. of Health and Human Services has set forth milestones along the way:

• 2011 Goal: Electronically capture health record data in coded format, report health information, use that information to track clinical conditions.

• 2013 Goal: Guide and support care processes and care coordination.

• 2015 Goal: Achieve and improve performance and support care processes and key health system outcomes

How this translates to computer and data center implementations is where most health-care organizations are currently struggling. For example, one health-care company in south-central Pennsylvania built a new data center just a few years ago that is quickly reaching its maximum capacity, even though it has just started implementing its EHR initiatives. It is struggling with these questions:

• Should we expand our current data center, build a new one, or use cloud computing to address growing needs?

• Is a cloud approach secure and private enough for this highly sensitive data?

• How does our data center differ from those in other industries?

• How do we show ROI for the technologies we need to implement to support EHR initiatives and “meaningful use”?

• How do we separate my critical patient-care data from non-critical internal-use data?

Many of these questions can be answered with standard products customized to the organization using them. This is a huge opportunity not only for equipment and components suppliers to enterprise data centers, but also for colocation data centers that could be providing managed services.

FINANCIAL

In his article, “Growth Ahead for Low Latency Colo Market,” Rich Miller notes that as the market for low-latency financial trading continues to grow, data center providers are likely to see growing demand from smaller hedge funds and trading firms, even as the largest players in the game chase seek ever-faster “feeds and speeds.” That need to execute a trade a microsecond ahead of rivals has created an arms race in ultra-low latency colocation, and is reshaping the playing field in the trading industry. Miller noted that there are now more than 30 exchanges, 100 market data vendors, 3,000 sell-side trading funds, and 1,000 buy side funds.

The lowest latency is required for trading as some trades need to be on a millisecond basis. According to TABB Group, if a brokers’ electronic trading platform is 5 milliseconds behind the competition, it could lose at least 1 percent of its flow; $4 million in revenues per millisecond, and up to 10 milliseconds of latency could result in at least a 10 percent drop in revenues. In 2008, 16 percent of all U.S. institutional equity commissions were exposed to latency risk, up to $2 billion in revenue, according to the TABB Group.

CONCLUSION

While a number of factors have influenced and guided the overall direction and evolution of the data center, none have the brute force ability to shape its future like that of the cloud and virtualization. These disruptive technologies have expedited data center evolution and have the ability to revolutionize the data center as we know it. Data centers are truly where the cloud meets the ground.

Financial and health-care firms traditionally aren't known as big risk takers when it comes to security. Yet both of those industries are indicating a strong interest in investing in cloud computing strategies. The Securities Industry and Financial Markets Association (SIFMA) and IBM recently conducted a survey of approximately 250 IT and business managers on Wall Street. The results demonstrate an increasing interest in IT investment among respondents, after a couple of years of reluctance.

According to a release by SIFMA, the financial industry has been holding back due to a lack of IT talent and the intimidating cost of implementing new technologies. However, "to overcome some of these challenges, the industry is showing a larger appetite for disruptive technologies such as cloud computing (61 percent) to force business model change," according to the release.

A similar surge in interest in the cloud is occurring in the health-care industry. According to a recent news story at InformationWeek.com, "Nearly one-third of health-care sector decision makers said they are using cloud applications, and 73 percent said they are planning to move more applications to the cloud, according to a recent report by Accenture."

Cloud computing has quickly moved from a distant vision to an imminent reality over the last five years. As with many large scale technology and business shifts, the trajectory of its progression has not always been obvious, but today, consumption of infrastructure and software services is growing dramatically and data center operators are positioned to both shape and be shaped by these emerging technologies.