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Telcos purge colocation data centers, open door to neutral connections

Enterprise customers in Verizon and CenturyLink's colocation data centers should expect better cloud and network connection options -- but not upheaval -- after being sold in 2017.

The shake-up of the colocation data center market could mean greater interconnection options for customers in data centers once owned by Verizon.

The latest move comes as Equinix Inc. purchased 24 Verizon data centers in a $3.6 billion deal.

"Equinix has been a frequent acquirer of data centers across the world," said Jabez Tan, research director at analyst firm Structure Research Ltd., in Toronto. "This is not something new to them in transitioning legacy customers onto their platform."

Also in the works is the sale of CenturyLink's 59 data centers to a venture capital group that includes Medina Capital for $2.3 billion. The CenturyLink deal is expected to close in the first quarter of 2017, and the Verizon deal is expected to be official in mid-2017, the companies involved in the deals have said.

Enterprise customers in Verizon's non-network access point properties could benefit if they are locked into the Verizon network or a limited network. Equinix's Cloud Exchange will give those customers more variety and connectivity options, managed service providers and cloud networks, Tan said.

And even enterprises that are in Verizon data centers by design -- maybe originally chosen for noncritical workloads to save on the costs associated with greater connectivity -- must consider a transition every two to three years into a world where all workloads run in the cloud and are based on interconnection, Tan said.

And while some Verizon properties lacked carrier neutrality, that was not the case with the 11 properties Verizon bought from Terremark in 2011 for $1.4 billion.

"A lot of these customers have experienced a carrier-neutral environment," Tan said.

Both Tan and Bob Gill, research director at analyst firm Gartner, agreed there's no reason why customers shouldn't expect a smooth transition as part of the ownership changes. Tan said customers experienced a smooth integration previously when Equinix purchased properties in Europe and Japan.

Gill added that he expects Equinix to honor Verizon service-level agreements (SLAs) and contracts.

There have been instances where the sale of a data center to a lesser-known company was cause for concern. Gill cited the lesser-known vXchnge's purchase of eight Sungard Availability Services data centers in 2015, which had some customers initially uneasy -- but that's not the case with Equinix taking over Verizon's data centers.

As a customer, it is hard to track the buying and selling of colocation data center companies, said Jake Azachi, senior director of enterprise IT at the Association of American Medical Colleges in Washington, D.C., a CenturyLink customer that has previously decided to move from colocation to a managed agreement.

Given CenturyLink's large size, Azachi said he expects he will be able to receive a volume discount after the sale.

"My only hope is to create a contract with the correct SLAs that have incentives and disincentives associated with them," he said. He added that the incentives would include a monetary bonus for a vendor that meets the SLA and credit for the customer when the SLA is not met, or the ability to cancel a contract if the SLAs are not met for multiple months.

Cloud is our friend -- it has become a driving event for people to really rethink their IT architecture.
Karl Strohmeyerpresident of the Americas at Equinix

Verizon has some managed customers in its data centers. It will continue to manage those customers even as the data center ownership transitions to Equinix, said Karl Strohmeyer, president of the Americas at Equinix.

Equinix doesn't offer managed services, except in Brazil, and instead provides infrastructure and interconnection and uses its marketplace for customers in data centers to provide managed services to enterprises.

Enterprise customers often use colocation data centers for disaster recovery, or to fulfill a company's remaining data center needs after it placed many of its application in the cloud. They might want to retain control of a few applications, Strohmeyer said.

"Cloud is our friend -- it has become a driving event for people to really rethink their IT architecture," Strohmeyer said.

For Verizon customers, their options to expand will likely be increased, Tan said, in cities where Equinix already has a presence. Previously, if those customers needed more data center space, they would have had to start with a new provider.

News director James Montgomery contributed to this report.

Robert Gates covers data centers, data center strategies, server technologies, converged and hyper-converged infrastructure and open source operating systems for SearchDataCenter. Follow him on Twitter @RBGatesTT or email him at [email protected].

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