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TBR launches annual Infrastructure Strategy Customer Research

TBR launches five mission systems-specific reports: Boeing Mission Systems, L3Harris Mission Systems, Lockheed Mission Systems, Northrop Mission Systems and Raytheon Mission Systems.

New NTT Global Data Centers facilities in Chicago and Oregon solidify infrastructure footprint and position the vendor for continued growth

As part of parent company NTT’s July 2019 restructuring effort, a separate company called NTT Ltd. was formed, which unified 31 global brands to create a 40,000-person, $11 billion company dedicated to offering IT, cloud and colocation services to large enterprises. At the center of NTT Ltd.’s strategy is NTT Global Data Centers, a separate division that offers a portfolio of global data center assets including RagingWire (Americas), NTT Communications (APAC), e-shelter and Gyron (EMEA), and Netmagic (India). With over 160 facilities, NTT Global Data Centers is now the third largest global data center provider.

Americas expansion to support NTT Ltd.’s growth in 2021

On Feb. 25, NTT Global Data Centers held a virtual event to unveil its two new data centers, in Hillsboro, Ore. (HI1), and Chicago (CH1). Both CH1 and HI1 are currently 36 megawatts (MW) but are expected to expand to 76MW and 126MW, respectively, to support increasingly complex IT workloads for both hyperscale and enterprise customers. NTT’s roots in telecommunications allow it to provide a broad portfolio of carrier-neutral connectivity options within each data center. Meanwhile the company’s IT services arm is also strong with offerings such as Remote Hands, which removes the need for on-site service and maintenance and has been in high demand during COVID-19.

The establishment of HI1 and CH1 marks the beginning of NTT Global Data Centers’ Americas expansion efforts for 2021. The company plans to open a campus in Silicon Valley, break ground in Phoenix, and expand its campus in Ashburn, Va., while the attach of various connectivity products and managed services will continue to support growth throughout the year. In a company press release, Doug Adams, CEO of NTT Global Data Centers Americas, highlighted the openings in the context of plans for the year, which he stated “will be a year like no other for our division, and opening these two new data centers is just the beginning [of] efforts that underline our commitment to put our clients at the center and bring data center services to key data center markets across the Americas.”

New data centers are strategically placed to address varied client needs

As the colocation market in the U.S. becomes increasingly crowded, NTT Global Data Centers expands in strategic markets to support its retail and wholesale colocation strategies and address the needs of clients regardless of size. This includes pursuing markets with access to affordable sources, low risk of natural disaster and the ability to support connections to emerging markets, among other factors.

NTT Global Data Centers supports 100% renewable energy

As technology sustainability remains a top-of-mind concern for CTOs, NTT Global Data Centers continues to operate on a message of clean energy and efficiency. Specifically, the new HI1 facility is an appealing option for customers looking to consume renewable energy options, while the new campus has earned a Level 3 certification from the Cleaner Air Oregon program, setting NTT Global Data Centers apart from competitors as it is the only data center in the region to receive the certification to date.

Local cost-saving opportunities support lower TCO for customers

One of the key attractions of NTT Global Data Centers’ CH1 facility is access to state and local tax incentives on equipment. Additionally, CH1 is powered by local energy company Commonwealth Edison (ComEd), which offers electricity at rates ComEd states are 18% lower rates than the national average. These initiatives are designed to support lower total cost of ownership (TCO) for customers through cheaper electricity, sales tax exemptions and lower cooling requirements.

Subsea cabling

NTT Global Data Centers has targeted the Pacific Northwest with HI1 due to accessibility to subsea cables that can connect across regions. With HI1, locally housed customers have an opportunity to access strategic markets in Japan as NTT Communications acquired Pacific Crossing for its subsea cable in 2009, supporting data communication between the U.S. and Japan. This connection with HI1 allows customers to contract with NTT Global Data Centers on a single cable and eliminates the need for multiple contracts, underscoring NTT Global Data Centers’ approach of leveraging parent company NTT to support clients. TBR believes NTT Communications’ strong foothold in Japan will boost NTT Global Data Centers’ ability to provide customers with low-latency connections between two emerging markets, serving as a growth driver and offering differentiation from other colocation peers.

Emerging hybrid scenarios, coupled with changes in demand brought on by COVID-19, create opportunities for colocation vendors

While slowing to single-digit growth, down from 10.6% in 2Q19, the colocation market continues to expand as colocation vendors address the shifting needs of enterprise and hyperscale vendors. According to TBR estimates, benchmarked vendors’ average data center services and colocation revenue increased 8.1% year-to-year in 4Q19 to an aggregate of $3.4 billion. Moving forward, TBR expects incumbents and smaller players alike to continue driving expansion initiatives, particularly in the U.S. Even Japan-based NTT Communications is moving its overseas subsidiaries to become part of NTT Ltd. to better capitalize on market opportunity abroad.

Colocation has long been an option for the data center space, but the market is taking on greater importance amid recent IT trends. Rising demand for cloud environments, specifically hybrid models, pushes leading hyperscalers and the modern enterprise to seek out co-located facilities and the managed services vendors have to offer. TBR’s Colocation Benchmark covers the financial performance of leading providers in this space and tracks their business strategies across core colocation markets and for complementary data center services.

Total benchmarked revenue growth slowed in 4Q19, but TBR expects the colocation market to remain strong amid COVID-19

Market summary

Colocation market

While slowing to single-digit growth, down from 10.6% in 2Q19, the colocation market continues to expand as colocation vendors address the shifting needs of enterprise and hyperscale vendors. According to TBR estimates, benchmarked vendors’ average data center services and colocation revenue increased 8.1% year-to-year in 4Q19 to an aggregate of $3.4 billion. Moving forward, TBR expects incumbents and smaller players alike to continue driving expansion initiatives, particularly in the U.S. Even Japan-based NTT Communications is moving its overseas subsidiaries to become part of NTT Ltd. to better capitalize on market opportunity abroad.

4Q19 Colocation and Data Center Services Revenue Growth_Percentage and Absolute Dollar Growth

Colocation has long been an option for the data center space, but the market is taking on greater importance amid recent IT trends. Rising demand for cloud environments, specifically hybrid models, pushes leading hyperscalers and the modern enterprise to seek out co-located facilities and the managed services vendors have to offer. TBR’s Colocation Benchmark covers the financial performance of leading providers in this space and tracks their business strategies across core colocation markets and for complementary data center services.

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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