Data Centers on the Rise

Enterprises will gain from collocation centers as outsourcing continues

March 2, 2004

2 Min Read
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Internet data centers are likely to become the leading environment for IT development and innovation as a result of increased outsourcing. Indeed, traditional outsourcers -- including Electronic Data Systems Corp. (EDS), Cap Gemini, and IBM Corp. (NYSE: IBM) -- are now themselves outsourcing elements of their businesses to maximize profits.

This makes sense. Outsourcing involves transferring critical end-user activities and responsibilities to third parties, and providers will not be able to afford to assume these responsibilities in areas where they do not excel.

The result may be a good thing for end users. If this outsourcer-outsourcing trend continues, the level of service delivered to end users should improve, thanks to niche skills being applied to each core business.

In the IT sector, I anticipate development of specific skill-sets in areas such as networking, security, and business applications. Of course, some companies will be dominant, but none will be able to do everything alone. Specialized companies will orbit around these centers of excellence -- these data centers -- in a versatile and ever-changing configuration. Innovation will make some appear and others disappear at a rapid pace.

This multifaceted world of services will require neutral places to meet and interact. Collocation centers are ideal for this. They house loads of equipment, and the barrier to organizations building their own data centers is economically too great.Tier 1 outsourcers will win the lion's share of the outsourcing market, but they will, in turn, need to outsource data center floor space. The largest of them may choose to acquire bankrupt sites, while they are still around, but the medium-sized or smaller ones will probably look for space in existing sites where they will be able to find scaleability.

The natural gravitational pull of independent data centers as the hub of IT and computing will put the collocation industry in good stead for the future. That is excellent news for end users looking for stable and long-term outsourcing partners.

Mike Tobin, Chief Executive Officer, RedBus Interhouse

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