Data Center Outsourcing Gathering Momentum

The demands on data centers are outpacing budgets and resources, so like the rest of the IT world, doing more with less is critical, said Chandrashekar Kakal, Senior VP and Global Head of Business IT Services, Infosys. “With the global economy and uncertainties, everybody is looking at cost reductions and not compromising on scalability and agility. Data center outsourcing will give you that higher scalability and agility.”

Infosys, the huge India-based IT service and solution vendor, says according to Gartner research, 60% of new data centers will be 40% smaller while supporting a 300% increased workload by 2016. Organizations are expected to spend close to $46 billion in data center outsourcing in 2012.

IBM is one of the companies competing in the data center outsourcing market that is expected to reach $46 billion in 2012.

Gartner said in North America, hosting (42%) and cloud IaaS have achieved the highest level of client adoption, while the markets in the rest of the world are dominated by data center outsourcing (80%). Data center outsourcing (DCO) in North America was $33 billion in 2011, while Web hosting and colocation were $23 billion. DCO in Europe was $38 billion in 2011, and $10 billion in Asia/Pacific.

In October IDC reported that the total number of US data centers declined for the first time since 2009, and while the decline was small (0.7%), capacity was up slightly (1%). “CIOs are increasingly being asked to improve business agility while reducing the cost of doing business through aggressive use of technologies in the data center,” said Rick Villars, VP, Datacenter and Cloud Research, in a prepared statement. “At the same time, they have to ensure the integrity of the business and its information assets in the face of natural disasters, data center disruptions, or local system failures. To achieve both sets of objectives, IT decision makers had to rethink their approach to the datacenter.”

By 2016, IDC expects the total number of data centers in the U.S. will decline from 2.94 million in 2012 to 2.89 million, while total datacenter space will increase significantly, growing from 611.4 million square feet in 2012 to more than 700 million square feet in 2016. By the end of the forecast period, IDC expects service providers will account for more than a quarter of all large datacenter capacity in place in the United States.

Another recent survey of 1,100 global data-center owners and operators from the Uptime Institute found that 30% of respondents will run out of data center capacity at one of their sites in 2012. Compared to the 2011 survey, 10% fewer planned to build new data centers while 10% more planned to push workloads to the cloud.

“Large companies had data centers in house,” said Kakal. “Now they have too many in their organizations, so consolidation and outsourcing makes greater sense.”

There are a number of factors driving DCO in addition to cost reductions (i.e. equipment, power, people and real estate) and not compromising on scalability and agility, he said. “There are more players in the market offering more capabilities.” There are legacy players like IBM and HP, hardware players, telcos like AT&T and BT, and other players like Amazon entering.”

Infosys has over 700 customers, including 160 of the F500, and infrastructure and application outsourcing are growing in demand, said Kakal. “We are seeing that picking up, especially with the cloud.” And while he doesn’t expect DCO to replace in-house data centers, it is gathering momentum.

Author: Steve Wexler

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