COVID-19: Life between trapezes

Economic activity currently appears more in cessation than recession. It is as if the world is suspended, untethered between two trapezes. As activity resumes, we know inquisitive humans will turn to easy-to-assemble technology to meet the emerging business demands and consumer pain points materializing daily. We will see a flurry of IoT-enabled endpoint applications that will spur new demand. Increased interconnection will pressure networks, with businesses and service providers looking for easy-to-deploy provisioning using traditional compute as the underpinning infrastructure. In short, whatever Horizon 2 and Horizon 3 concepts are being dissected by the strategists will be fast-tracked for trials if they can address the near-term business, social and policy pain points being magnified for us in this once-in-a-century crisis.

In the current climate, strategy really nets down to agile thinking: the ability to make tactical shifts necessary in the heat of the moment to keep operations sage, secure and adaptable. Compute is far more ubiquitous today than in prior economic downturns, and, as such, the problems that can be solved from the practical applications are equally as ubiquitous. Multi-enterprise collaborations built on top of open platforms will create opportunities.

Pervasive compute represents a fundamental difference today compared to the recent economic jolts of the 1987 stock market crash, the dot-com bubble, or Sept. 11. For example, Sept. 11 gave rise to business web conferencing as business travel stalled. Today, with consumerized IT, we are seeing the rise in social conferencing keeping families and friends connected on inexpensive compute devices. We have likewise certainly seen broad shifts in where compute cycles reside since the banking crisis of 2008-2009 when cloud was just beginning to gain market traction. As such, when looking at the implications of COVID-19 on compute, we really have to evaluate an entire suite of compute instances including, but not limited to:

  • Traditional data centers
  • Cloud computing data centers
  • Edge computing or micro data centers
  • Colocation data centers

Traditional centers: Delayed refresh cycles with pockets of modernization opportunities

The short-term outlook for those focused on selling silicon into enterprise data centers is to expect a steep stall out on the refresh cycle rhythm of business. Executives across virtually all industries will put the hammer down on discretionary spend, and a server refresh will be hard-pressed to move forward until the business fundamentals improve to the point where leadership will not want to conserve cash.

However, pockets of opportunity should persist.

  • COVID-19 pressures the traditional “fortress” data center given the need for remote monitoring and management of the data center. Those needing to make the pivot over to greater remote monitoring will be looking for the equipment required to augment that existing infrastructure, whether it is to turn this remote monitoring over to existing staff in work-from-home mode or to take advantage of remote managed services in the event staff illness depletes existing capacity.
  • Networking capacity expansion to accommodate the surge in remote work has been well documented.
  • Colocation (COLO) center compute could well be repatriated back to the data center due primarily to worker safety issues pertaining to entering and exiting COLO centers to perform whatever smart hands work is required.

Cloud computing: The RPMs on the flywheel should spin faster, requiring capacity build-outs

Cloud computing, especially for the exascale cloud providers — Amazon, Azure and Google, or “Amazurgle” — has been well documented for having seen demand surge due to COVID-19. These surges have come from the rapid move to remote work and the uptick in collaboration and video conferencing application usage as well as increases in consumer use of various streaming video platforms these exascalers underpin. This all points to data center expansions and build-outs by the exascalers. This will increase chip demand, but more chips will flow to the ODM market than to the OEM market based on exascaler preference for these lower-cost, built-to-spec systems.

Furthermore, enterprises reluctant to migrate to the cloud will be forced to as part of their business’s continuity planning around the need to keep their IT staffs at home or to shut down data centers where employees exposed to COVID-19 have been working. In this way, COVID-19 will accelerate the prevailing trend of more application migration to cloud. Not all activity moving to cloud under these unique conditions will revert back once the crisis abates. The current economic environment merely accelerates a trend that has been largely anticipated as hybrid multicloud integrations have become more automated and secure.

An offset to this demand surge will be lower transaction volumes in some industries. E-tailers will certainly spin the meter faster, but online travel, hotel bookings and their adjacencies will slow. Ultimately, TBR expects the exascalers’ revenue will grow as a variety of factors, though societally disruptive, positively impact the need to move more compute to the cloud.

The edge will likewise accelerate

Edge compute has more issues influencing demand and activity. There will be the near-term surges to accommodate the need for added remote compute and networking cycles within enterprise. Additionally, we expect to see the rapid assembly of new use reference architectures for a host of point-of-sale configurations as customer and worker safety concerns begin to be addressed with technology-enabled solutions. This demand will not be a one-for-one contribution. Edge deployments need the “killer app” to have enterprises commit to the infrastructure purchase in much the same way that mobile voice put smartphones in people’s hands. As such, some of these rapidly assembled solutions will only be layering an additional app onto an existing edge configuration with new end-point devices being tied into the compute instance.

But in the midterm, TBR expects to see a rapid increase in the reference architecture designs for additional edge services that will pull more software and specialty devices and have a minor, cascading impact on the edge above and beyond the prevailing activities that have been taking place.

The downdraft will be seen in the verticals most seriously impeded by reduced human movement such as the retail and hospitality sectors. Healthcare, on the other hand, will certainly see spikes in new configurations for patient screening within the existing medical infrastructure.

Colocation centers: A still maturing space addressing foot traffic

Few anticipated a human virus as a threat to COLO operations, but recent articles indicate the novel coronavirus can challenge current operating practices. The comings and goings of enterprise employees who may have the virus can lock down COLO centers until sanitation teams can decontaminate the space. Workarounds consist mainly of additional screening of the customer technicians entering the facilities. We anticipate there could be additional remote monitoring done by customers of their COLO instance, potential construction retrofits for better isolation and portioning, and additional services COLO providers can offer to minimize human traffic within the centers.

The need for dedicated cloud interconnections will not abate as more business and streaming activity demands distributed compute across cloud data centers for geographic density. Micro data centers under cellular towers are edge applications that will increase in popularity and potentially take some share of wallet from COLO centers. But, like the cloud and the edge, we expect the COLO segment to weather the current economic climate better than others.

As the COVID-19 tsunami crests, will new opportunities be in the offing?

No one still gainfully employed has navigated a business through a pandemic. No employee with less than 12 years of experience has even worked in an economic downturn let alone a cessation of business activity. Senior leaders will be well served by staying close to their middle management executives to help them stay measured and calm. Companies with sufficient cash to take the long view can use this slowdown to invest in employee training and education on digitally transformative business applications and devices to upskill staff to handle the pent-up business demand when the economy re-engages.

The world as we knew it on New Year’s Day 2020 will not return, but the world that will emerge will be better in the long term. The companies that have been at the forefront of digitally transforming their operations will have better operating methods for the near-term impact; services firms with templated frameworks will have near-term opportunities to help late majority businesses make the leap to the digital world; and from the current tactical firefights will come scalable solutions benefiting society as a whole. As a world, we are suspended between trapeze bars, reaching for the Fourth Industrial Revolution on the horizon.  

The bar is sturdy and well within the grasp of those businesses stewarded by steady hands in these unsteady times.

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