The data centre as castle: digital communities behind the firewall


By Dr Glen Duncan*
Wednesday, 12 March, 2014


Stock.xchange fcl1971

The concept of a community is not a new one. It’s been the bedrock of civilisation for centuries. In recent years, management authors have borrowed the concept from sociology and developed ideas like ‘communities of practice’ in their quest for more efficient and effective running of organisations and the fostering of innovation. The term has found its way into IT with concepts such as the ‘online community’. With the advent of the internet, it has been interesting to observe the creation of virtual - rather than physical - communities. Virtual and physical communities each have their own advantages and disadvantages. Sometimes we overlook the fact that physical geographic communities have advantages that can’t currently be replicated by distributed virtual ones.

Communities afford a number of advantages. They provide: protection and order for their members; an environment for economic and social development; and access to resources (like information), security and joint infrastructure. In a community, individuals are able to do things that they otherwise wouldn’t be able to do. Communities are synergistic: not only are groups able to achieve more than an individual, but also more than the individual contributions of the individuals. There are particular advantages that close proximity gives, particularly the speed at which information is exchanged and the connectivity that is enabled.

One of the challenges faced by enterprise IT since its inception has been convincing the executive of IT’s role beyond that of a cost centre with an efficiency focus. In an IDC ANZ survey of 675 C-suite executives conducted in May 2013, 53.5% of CFOs surveyed did not view IT as a competitive differentiator. This means that they did not view IT as major contributor to innovation and the development of unique core capabilities - the prerequisites for achieving and maintaining strategic competitive advantage. It suggests that many advocates of IT, principally the CIO and IT managers, still have their work cut out for them in terms of convincing their organisation’s executive of the strategic relevance of IT. Such an understanding is critical for how IT is perceived within the organisation and the potential roles that it can play.

In an ANZ survey of 420 end users of data centres in 2012, IDC found that the main reasons enterprises were moving their data centres off-premises were for operational reasons, not strategic ones. 24% of respondents considered the CAPEX costs of building new facilities or upgrading existing ones to be too high. 16% of respondents were attracted to the redundancy and assurances of connectivity that their provider promised. Another 16% of respondents had increasing power demands that couldn’t be met in-house. Finally, 11% of respondents lacked the necessary space or real estate to scale their needs.

However, in order to contribute to the organisation’s competitive advantage, the reason for the decision must add value to core capabilities. CIOs and IT managers need to look beyond the traditional IT terrain of efficiencies and costs for more compelling strategic reasons to move enterprise data centres off-premises. The existence of and potential for participation in a data centre community will be a potential opportunity for CIOs and IT managers to add competitive value for their organisations.

In ANZ, various types of communities (both virtual/digital and physical) are being fostered behind the walls of third-party data centres. These communities vary in terms of focus, scope, reach and catalyst for development.

The Australian Liquidity Centre (ALC) - a separate business unit of the ASX - has developed a digital financial trading community behind the walls (and firewalls) of its Sydney data centre. In the data centre sits the servers (matching engines) for the ASX and other financial markets. These markets (and their associated data repositories) serve as anchors around which an internal digital community has been built using cross-connects.

The first layer around these anchors are the financial brokers, including high-speed traders for whom closeness to the exchange has always been important, and for whom being part of a community is an industry legacy. Around this layer is a second, consisting of market data providers and service providers for the industry. The various stakeholders in each of the markets cross-connect across markets to form a financial markets ecosystem. Participants in the community outside the data centre are still able to connect via ASX-Net or a communications link. Customers chose to co-locate their servers in the ALC not just to reduce latency, but also for the access and availability afforded.

Equinix has developed a similar financial trading community around Chi-X, an alternative exchange in the Australian cash equities market. Equinix is also using its international network of data centres and communications network density to develop international non-financial communities. An example of this is the company’s internet advertising community which links ad exchanges, demand side platforms and ad networks through the internal Equinix network to reduce latency and associated bidding times. The company also leverages its international network of data centres to create an international supply chain community through its Marketplace service. This service facilitates market and partnering connections between internal Equinix customers which can then be supported by internal network connectivity.

Communities can be fostered through the efforts of the data centre facility provider. They can also develop more organically between data centre tenants. In Equinix, enterprises and cloud service providers such as Amazon Web Services (AWS Direct Connect) cross-connect with each other. In iseek’s Brisbane and Sydney data centres, as well as its network of partners across Australia, significant business communities have developed organically. In Sydney, a number of cloud providers including CN Group, ITonCloud, ASE IT and Data People have cross-connected with each other to work on mutual business opportunities within iseek. Tenants are also able to cross-connect with private clouds within iseek utilising their national MPLS network.

The general trend in the IT industry is towards geographical independence of the computing experience through mobility and the cloud. However, there is still a strategic place for geographically bound infrastructure. In the future, the development of communities within data centres will escalate. Data centre providers need to be aware of this phenomenon and to consider strategically which communities they wish to proactively engage with, foster and encourage. Other industries where communities are developing or may exist include health care (iseek), pharmaceuticals and government (Metronode), but there are potentially many more. A characteristic of some data centre provider fostered communities is some sort of anchor.

This anchor may be a key piece of infrastructure such as network POP or supercomputer, a particular central tenant or a data repository. The most effective engineered communities seem to be those that are open rather than closed, where even competitors are permitted to participate. Enterprises and service providers need to be aware that a potential community may exist for a data centre-based community in their industry. Participation in such a community has the potential to contribute to organisational strategic outcomes, not just operational, and should be a factor when deciding on a third-party data centre provider.

*Dr Glen Duncan is an analyst (Research Manager) at IDC ANZ and is also an Adjunct Lecturer in Management at Charles Sturt University. He researches widely in a diverse range of technology and management areas, including CXO research, data centres, managed print services and the mid-market.

Image credit: ©stock.xchng/profile/fcl1971

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