Colocation and hybrid cloud – a field that is still evolving

Over the past few months, DCK has been exploring the different ways colocation providers are positioning themselves to take advantage of the hybrid cloud trend. Here is a summary of the key lessons from this series. Also read previous articles in this series, which explore the hybrid strategies of QTS, Equinix, Cologix, CyrusOne, Evoque, Cyxter, database, flexible, and Digital Real Estate.

How can colocation providers stay competitive in a world where companies increasingly expect the opportunity to? integrate colocation infrastructure into hybrid cloud architectures?

The answer, it turns out, varies widely from provider to provider. As we’ve learned in a series of interviews with colo companies about their strategies for thriving in a hybrid-centric world, data center administrators’ hybrid initiatives are quite diverse. This points to the emergence of this particular intersection between colocation and public clouds, where there seem to be more questions than answers at this point.

Some data center providers are focusing on connectivity solutions that allow their customers to optimize network performance for workloads spanning their colo facilities and the public cloud. Others are investing in management platforms that allow users to manage colocalized workloads with the same type of API-centric approaches they would use in the public cloud. Others have chosen to put managed services at the heart of their hybrid strategy.

These are the key takeaways from DCK’s conversations over the past few months with some of the leading colocation providers about their strategies to capitalize on the opportunities presented by the hybrid cloud trend.

The shift from public cloud to hybrid via colocation

First and foremost, all colocation providers agree that serving customers looking to build hybrid architectures is key to bringing in businesses that have come to realize that the public cloud alone is not meeting their needs.

Jacob Smith, VP of bare metal at Equinix, said Equinix saw strong growth from “cloud natives going hybrid”. In other words, many companies that have built their applications in the public cloud from scratch now see an advantage in having a mix of cloud resources and colocated infrastructure to manage.

Interestingly, colocation providers were less concerned about their regular customers deciding to move some workloads from colocation facilities to public clouds, which would put them in a hybrid strategy. The consensus is that the flow is generally in the opposite direction, with companies shifting public cloud investments to a hybrid model involving colocation.

Interconnection as the cornerstone of hybrid cloud

A majority of the colocation providers we spoke to pointed to their connectivity offerings as at least a key part of their strategy to meet the needs of customers looking to invest in hybrid architectures.

QTS has built a complete interconnection platform, Switchboard, partially dedicated to this use case. CyrusOne COO John Hatem told us, “The biggest thing we offer for hybrid cloud is interconnection.”

Chris Sharp, CTO at Digital Realty, which recently announced a major new initiative and partnership around interconnection, said “interconnection is fundamental” to hybrid cloud.

That is of course not surprising. Robust interconnection is a cornerstone of the value proposition of colocation providers and a prerequisite for hybrid cloud. What has changed, however, is that interconnection with public cloud platforms has greatly increased in importance over all other types of interconnection that companies can use within colocation facilities.

Mixed feelings about managed services

Opinions of colocation providers on the role of managed services in hybrid cloud vary widely.

Some have invested heavily in the ability to offer managed design and support services to customers building hybrid environments. For example, Evoque recently acquired a cloud consulting firm, Foghorn, for this purpose. DataBank has “a full integration and migration team dedicated to hybrid cloud.”

However, others don’t see hybrid-specific managed services as a worthwhile investment at all. As Sean Baillie, executive VP for connectivity at QTS, put it, “We don’t do managed services and we don’t plan to.”

New players innovate to differentiate

The difference in their views on managed services may reflect the fact that smaller and/or younger companies see broader offerings as a way to differentiate themselves from the established players.

Most major colos focus on connectivity and data center real estate, allowing customers to build any type of hybrid environment they want.

The smaller or newer colocation providers place more emphasis on differentiated hybrid offerings. Founded in 2017, Cyxtera has built custom APIs that customers can use to manage workloads running in its data centers. Founded in 2018, Evoque has invested in consulting services.

The larger colos have an inherent advantage in the hybrid cloud market, as more data centers and larger, established interconnection ecosystems translate into greater flexibility in building hybrid environments. They are also under less pressure than the newer providers to excel at the hybrid game as a way to build their business.

The future of colocation and hybrid cloud

Hybrid cloud strategies of all collocation providers are still taking shape. We continue to see important new announcements on this front. When you talk to colocation managers, you get the feeling that they are still in experimentation mode, not quite sure which parts of their hybrid strategies will prove to be most effective.

So expect this story to continue as we look at the intersection between the colocation industry and the hybrid cloud.

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