New Business Models for Multi Tenant and Hosting Data Centres

Demand for MTDC/Hosting is set to increase over the next few years as Europe “catches up” with the US in terms of Enterprise outsourcing and cloud. As space and power have been commoditised, being able to differentiate with new business and financial models will mean the difference between success and failure.

By Simon Allen

I run the UK Data Centre Interest Group and have the opportunity to attend many sector conferences and discuss issues and trends with a range of Data Centre Operators from Enterprise to Multi Tenant, Co Lo and Hosting providers.

Recently I attended the BroadGoup’s excellent Finance and Investment Forum (FIF London) which is a great place to take the temperature of the sector. I learnt that Europe is 1-2 years behind the US in terms of enterprise outsourcing and cloud. For example, in the UK 75% of enterprise data centre space is still in-house. Market experts attending FIF London have determined that we will “catch-up” with the USA over the next 2 years which represents a terrific opportunity for growth in MTDC/Hosting.

Another growth indicator is the activities of  the fibre companies who are considered a key part of the supply chain for data centres and, I learnt at FIF that these guys are especially excited about the European opportunity right now.

This all sounds great – right? But I hear you asking, if the market is that good, won’t it be killed off by oversupply and maybe, longer-term, won’t any increased demand be simply sucked up by the hyperscale cloud players?

These questions were exercised at FIF as well, and, on one hand, over-supply, historically, hasn’t happened due to funding issues, conservatism, planning approvals, access to power and suitable sites. On the other hand, MTDC/Hosting can be a more attractive option to the Enterprise market when considering the data sovereignty, compliance and business/consumer pressures on the hyperscale cloud players.

However, market experts are still seeing business and financial models with very little differentiation or obvious competitive advantages.

Limited Differentiation in a Crowded market – How can MTDC/Hosting providers stand out?

I believe that the commoditisation of space and power means MTDC/Hosting providers need to be able to differentiate through value-added services if they are going to gain any share of this growth in a fiercely competitive market.

Anticipating demand and, more importantly, how to ensure you can exploit demand more effectively than the competition, can mean the difference between success and failure.

Gartner Analyst David Cappucio summarized as following:

“Change the perception of the Data Centre to a provider that delivers services – not just iron”

 

From a customer’s perspective, value is determined by the service quality and associated delivery parameters as well as clear presentation of the options available (i.e. available variants – such as space, power, storage, 3rd party services, hybrid options, version of IP, access, security, remote hands, back-up, etc.), performance parameters, contractual terms and pricing.

The MTDC / Hosting provider must be able to deliver these services and products with a standardised level of quality, at clearly defined prices, and with defined service levels in order to win in a tough competitive environment. We will see a product-orientated approach overtake the traditional project focused response – and see more providers using Product Catalogues to present the services that are available and can be delivered to the customer.

When I speak to some MTDC / Hosting Companies – particularly the sales team – and ask about their plans to adopt a Catalogue driven approach – a common answer is that “this approach isn’t relevant as many opportunities are treated as projects” and that a USPs is that “management will quickly sign off on any bespoke proposal” and “quickly” react during the ensuing negotiations.

However, we all know what “quickly” can mean in reality. When we explore this further, and the sales team realise the commercial advantages of a Product Catalogue (being able to instantly build a “bespoke” proposal containing exactly what the customer wants with pricing already approved by default) they quickly see the competitive benefit – particularly when negotiating different options with the customer.

The Solution: Act customer-centric, But, use proven industrialisation principles to best advantage.

So, how to create and implement a product catalogue…? If we look back in history, Henry Ford perfected the process for building configurable products to massive scale in a highly standardised manner:

  • Minimizing changes to the Model T platform.
  • Many components of the chassis were the same for every body style.
  • Reducing the number of factory hours required to produce each car.
  • Setting aggressive target prices then finding ways to achieve those prices
  • Producing cars with standard parts in factories all over the world
Source: https://www.quora.com

Ford defined a process to efficiently create and deliver based on the features the customer desires – why don’t we adapt this approach as a benchmark for Co-Location industry? It can be that easy, if we just stick with the 4 industrial production principles that apply in order to define a flexible product catalogue:

1.    Standardisation (Predictability and ease of maintenance)

2.    Modularisation (Flexibility and Organisation)

3.    Variant Management (Possibility for customer to tailor)

4.    Variable Vertical Integration (Production Efficiency and Cost Control)

In this scenario, the product catalogue serves as a centralized data hub for products and services, supplying information for all participating roles to wherever it is required, be it an end user portal, a service monitor, ERP system, CMDB, or helpdesk. This approach enables product managers to bridge the gap between marketable units and the resources required to make and deliver them. It can strengthen the chain between sales, operations and delivery teams as they work more efficiently together and share the same perspective on data center resources.

From my point of view, I think this is as interesting topic as it is important to MTDC/Hosting. Please drop me a note or visit our website if you’d like some more information on how to implement at Catalogue Driver Data Centre including Case studies, ROI data and proven available methodologies.


About Simon Allen

Simon Allen has worked in the Data Centre sector for over 20 years and sits on both the UK Data Centre Professional Steering Group and UK Data Centre Technical Committees.
In 2011 Simon founded the UK Data Centre Interest Group to share experiences amongst Data Centre Operators, Design Consultants and Policy Makers and to explore innovative methodologies and technologies and discuss how forthcoming legislation and policy will impact the sector. The group is non-profit and represents over 250 UK Data Centres with over 500 members.
Simon works with UK MTDC to help them recognise the value and benefits of an ITSM based Catalogue Driven Data Centre approach and how to effectively implement and operationalize.
Email Address: Simon.Allen@fntsoftware.com 

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