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Experts say data centers to shrink as hosting, cloud services boom

IT pros discuss the pros and cons of maintaining a private data centers vs. outsourcing to managed data center hosting and cloud services.

In the age of cloud computing and data center outsourcing, fewer companies will see value in taking on the expense and liability of building and managing their own data center, some IT pros predict.

“It’s a large layout of funds to build a data center — you have to consider power, generators, UPSes, racks and cooling before you even put a server in the room,” said Tim Antonowicz, senior architect at Salem, N.H.-based Mosaic Technology. “If you’re virtualized, compute resources are a commodity – let someone else buy servers.”

That’s not to say private data centers will disappear. Instead, they will shrink as some organizations choose at least partial outsourcing or consolidation.

Either way, over the next 5 to 10 years, the “infrastructure footprint is going to be drastically reduced, and their costs will come down drastically as well,” said Christopher Steffen, principal technical architect for Kroll Factual Data, a verification services firm based in Loveland, Colo.

Data center hosting  vs. cloud services
Companies such as IBM and VMware Inc. encourage customers with private data centers to move to the cloud. Meanwhile, data center managed service providers argue that building out a private data center today isn’t worth the effort.

Cloud computing refers to services delivered over a network. Companies can build private clouds, but the last decade has also seen the rise of public cloud service providers like Amazon Web Services, which delivers an elastic set of computing resources to users on demand. Data center hosting refers to housing data center equipment off-premise in the data center of a managed service provider, which may own and manage the equipment and rent it to the user, who still sees and operates the discrete resources making up the infrastructure.

There are mixed feelings about the options among data center pros.’s State of the Data Center survey conducted in March 2011 found a combined 24% of respondents planned to use Infrastructure as a Service (IaaS) or managed hosting providers in the next 12 months; this was up from 19% who reported having used such services in the previous 12 months. Meanwhile, 34% said they haven’t used data center services in the last 12 months and 36% predicted they wouldn’t use services in the next 12 months.

Data center outsourcing benefits
For many organizations, the economic downturn has spurred interest in outsourcing the data center to lower costs, according to Julius Neudorfer, CTO of North American Access Technologies, which consults with organizations looking to build out data centers. Neudorfer said he’s seen data centers in the range of 5,000 to 10,000 square feet shrink as midsize organizations look to service providers to cut capital costs.

“People were faced with the fact that their data center was obsolete, full or didn’t have enough power available to expand,” he said. “They looked at the cost of building a new one and they fell off their chairs – and all of a sudden, outsourcing looked pretty good.”

Some organizations want to move beyond collocation facilities and into hosted data centers with some managed services to keep up with 24/7 uptime demands.

“We’re a [Software as a Service] business and even though our core users are the traditional 8 [a.m.] to 5 [p.m.] business users … everyone wants to do everything at any time, so we need to be always on,” said Kevin Armour, CTO of Paycor Inc. a payroll processing company.

Paycor’s current data center is located in a business building with little room for expansion. Over the next 18 to 24 months the company will look for service providers with “a true raised-floor data center … multiple power sources coming into the building, multiple ISPs coming into the building, all these different things that data centers provide,” said Armour.

Data center outsourcing concerns
Some organizations, particularly in the financial and health care sectors, are reluctant to let go of control over where data resides.

“Customers’ faith in us is part of the brand, so we take data security very seriously,” said Robert Crawford, lead software engineer for a financial services company based in Texas. “We would like to be able to control who goes into a machine room, what goes into a machine room, control the environment around it and be able to change when we want to.”

IT pros also worry about bandwidth and network reliability, according to Robert Rosen, a CIO at a government agency.

“We’ve looked at some of our applications and the cost of the bandwidth we’d have to buy to get to the cloud exceeds the cost of building a data center,” he said. “It’s a huge issue, especially as we’re talking big data.”

For companies that aren’t located near data center hosting providers, outsourcing would hurt performance.

“We’re fairly rural. You’re talking about a long-haul data link — 100 miles or more — to connect to a managed service provider,” said a systems analyst for a health-care provider in the Northeast. “Realistically, we don’t see moving everything to a remote data center anytime soon.”

The middle ground: a shrinking data center
In many cases, companies are adapting their private data centers to maintain control and reduce costs while outsourcing some things.

Kent Altena, a technical engineer with an insurance company based in the Midwest, expects 5% to 10% of his data center’s footprint to go to cloud service providers over the next two years or so, and up to 30% to 50% over the next three to five years.

“I don’t see the private data center going away, but it is shrinking,” he said.

One IT manager with a quick-service restaurant company based in the Northeast recently consolidated the company’s main data center from two big rooms full of equipment down to two rows. It’s urgent that companies consolidate now before the cost of upgrading data centers is greater than that of moving to the cloud, he said, “[o]therwise you’ll have the business pushing the cloud button.”

Beth Pariseau is a senior news writer for and Write to her at

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