The Early Days of Cloud
In the early 2000s, cloud computing revolutionized IT infrastructure. “The Cloud” quickly gained popularity among small to mid-sized businesses, and everyone wanted in on the excitement. This was a ripe opportunity for those who wanted to build data centers and their cloud hosting empire. Furthermore, this was an opportunity for SMBs to leverage the power of the cloud by outsourcing their data hosting. Data centers are expensive, so building and managing one was typically too costly for a small business.
Local and regional cloud hosting companies swiftly followed the trend. With heavy investing into building data centers, they aimed to capitalize on the booming cloud movement. Seeking to build return on their investments, they concentrated on expanding their customer base. The focus was to migrate clients to their data centers, regardless of whether it made sense for clients’ data to reside in the cloud or on-premises. They were driven by the need to justify substantial investments in these data centers, which were oftentimes millions of dollars.
The Growing Cloud Market & Data Center Usage
The Shift in the Cloud Marketplace
Fast forward a few years, and the local cloud market began consolidating. Data center consolidation resulted in two major global players—Amazon Web Services (AWS) and Microsoft Azure—dominating the cloud market. The competitive price points these tech giants offered made it challenging for smaller, local data centers to maintain profitability. Data center hosting can be a herculean effort! There are high costs associated with maintenance and equipment refreshes. For your insight, refreshes usually occur every three to five years to meet evolving security standards and regulatory requirements. Such standards add further complexity for data center providers in managing their hardware and software. As a result, many smaller/regional players with local data centers could no longer sustain competitive pricing against the global giants and began fading from the market.
Data Centers for Everything
Data centers have become the powerhouses of the digital age. They support a variety of crucial functions for everyday life, for business, professional, and personal activities. Data centers provide safe, reliable, and efficient storage for critical business data, ranging from documents to sensitive information. Additionally, data centers handle data backup and recovery, providing peace of mind in case of data loss. Data centers offer advanced security measures to protect valuable data from threats.
For businesses of all sizes and functions, cloud based data centers can offer storage and processing power without the need for physical infrastructure. Beyond storage, data centers perform calculations and process tasks, making them useful for data analysis and research.
Processing financial transactions, distributing multimedia content, supporting machine learning and artificial intelligence (AI) applications, and managing human resources are also part of their repertoire. They also are what is keeping your favorite websites and e-commerce platforms alive online! In essence, they are the backbone of modern digital operations, providing a wide range of essential services.
The Cloud & Data Centers Today
Data centers have a huge market today, and their usage and functions are continually evolving. The data center colocation market is estimated to reach $136B by 2028. As of March of 2024, the US has maintained it’s position on the top of the international leaderboard of data centers – we’ve got over 5,000!
The rise of AI has placed high demands on data processing power. AI continues to influence industries globally, and its driving new interest in local data centers. Businesses are realizing the importance of efficient computing and speed when processing vast amounts of data for AI applications – regional data centers can provide just that. Being close to end users and the ability to meet local data governance requirements makes local data centers attractive for some business leaders and decision-makers.
AWS and Azure have both announced significant investments in AI development, with tools like Copilot (Microsoft) and AWS’s AI Suite. These services aim to streamline AI implementation, offering new age solutions to businesses. But as companies race to use AI, local data centers can offer specialized services and reduced latency, filling gaps that larger players might overlook.
The Cloud and Data Centers for SMBs
For small and mid-sized businesses considering cloud infrastructure and, understanding data center trends is crucial. Here’s how decision-makers should approach this evolving landscape:
- Evaluate Latency Needs: If your business heavily relies on AI or real-time data processing, local data centers may offer the low-latency environment required for optimal performance.
- Understand Data Governance & Compliance: For businesses with strict regulatory requirements, understanding where your data resides and how it’s managed is key. Some regulations require data to be stored on a more local scale vs internationally. Local data centers can usually provide specialized compliance services.
- Compare Pricing Models: Global cloud providers offer cost-effective solutions at scale, but don’t discount the costs/savings of local data centers. Not all data center solutions come with the same pricing – understand your data needs and map out the costs for providers you are considering.
- Dig Into Security: The security threat landscape is continually evolving and data centers are susceptible to modern cyber threats. Cloud malware is a growing threat facing SMBs and data centers alike. Understand the security standards and protocols in place at the data centers you are considering. Know what the data center will be responsible for, and where you may be liable/vulnerable, in the event of a data breach.
- Anticipate Refresh Costs: Investing in, or relying on, a local data center means understanding their equipment refresh strategies. Check that their pricing remains competitive even after accounting for necessary refreshes.
- Prioritize Partnerships: Whether working with global or local cloud providers, align your data strategy with a partner that understands your specific business needs and goals.
The Future of the Cloud
The future of cloud computing will continue to be shaped by technological advances and business needs. While AWS and Azure dominate, the increasing attention on AI is reviving interest in data center solutions on local, national, and international scales. The demand for data centers is driving further innovations in data center designs and technology. Business leaders must recognize the strengths and limitations of both local and global cloud solutions. Educating yourself on current and future opportunities with your data and cloud strategy will help you maximize the benefits of this dynamic ecosystem.
