Many New Zealand organisations, for a variety of reasons, grow more reluctant to commit in-house resources to their ICT needs. We’ve seen evidence of this over many years, as Software-as-a-Service has grown from suspect trend to commonplace. In 2012, due to the impact of natural disasters, lack of staff/expertise, changing business strategies, financial redistribution and more, the Infrastructure-as-a-Service (IaaS) and Data Centers-as-a-Service (DCaaS) models are on the rise, with no signs of  slowing.

As many of New Zealand’s data centers are reaching their end of life (at 15-20 years), organisations are realising it is cheaper to level them and start again, and cheaper still – by a long shot – to go the hosted route.

There are almost endless variants of managed data center hosted services, and not all data centers are created equal. There is no one-size-fits-all model, and setups can range from fully managed and outfitted hosting to co-location services. The right fit for one business would likely not suit the needs of another at all.

"The term ‘hosted data center services’ doesn’t entirely reflect how organisations approach data center and hosting requirements,” says Roger Cockayne, general manager for Revera. "A better term might be the ‘as-a-Service’ computing stack. For example, for some, co-location is all that’s required. Others may have more complex requirements for IaaS or PaaS (Platform-as-a-Service). All these things are provided by data centers and ‘hosted’ arrangements, but today’s client needs focus on services addressing specific elements within the overall computing stack. It’s more fluid and focused on client outcomes rather than static offerings.”

It costs far too much and takes far too long to make designing and building a new data center a functional reality for most businesses. At the same time, facilities like the Level 3+, $80 million IBM data center facility launched last year provide centres specifically oriented to managed, hosted services. The IBM data center provides mid-sized to large organisations with a range of services, from strategic outsourcing and managed hosted services through to virtual server services, and was named the sixth greenest data center in the world by Wired magazine.

And in May this year, Gen-i announced plans to complete a new, purpose built $10.5 million data center in Christchurch by the end of the year, providing clients with a range of services from co-location, outsourcing and virtual servers through to network delivered and cloud services.

As New Zealand’s larger organisations continue to unbundle services, the demand for co-location, rather than fully managed hosting, is high. Co-location is often the first step of the journey toward IaaS, as a business consolidates and virtualises its platforms. This step is often seen as a way to test the waters before committing fully to the cloud.

There are typically three major components to moving to a fully managed solution, says Jeremy Nees, enterprise architect for Maxnet. These include the move from on-premise to off-premise, the move from physical to virtual services, and the move from in-house support to outsourced. Making all these changes at one time can be too much. Breaking these steps down into manageable pieces and looking at hybrid models, even if temporarily, can be the best way for an organisation to realise the full value of an existing investment or to retain control of certain parts of its systems.

"We recently migrated a law firm into our Auckland data center,” Nees explains. "We started by ensuring they had appropriate connectivity in place to support their availability and performance requirements, before deploying test systems onto our virtual platforms. Once testing was complete they moved their existing equipment to our co-location environment, with us providing managed firewall and network services. We are now working with them on a project to provide backup services, and fully managed hosting (on our virtual platform) for one of their core business applications. Once that is complete, and as their hardware ages, we will continue to migrate services to a hosted model.”

In contrast, however, for infrastructure and cloud computing expert ICONZ, the greatest demand over the past five years has been for cloud-based services, due to the benefits of high availability and flexible commercial agreements. "Co-location is definitely an alternative,” says Deidre Steyn, head of marketing for ICONZ. "But the downside is that companies are back into investing in capex and equipment, which needs to be managed.”

"Co-location is a wonderful first step, but it’s simply transference,” adds Revera’s Cockayne. "On its own it won’t save you money. The high cost of data center builds and modernisation has stalled industry capacity expansion, and as capacity shortage bites, third-party co-location is seen as a quick fix.”

Game changers

Data Center growth in New Zealand is proceeding at an unprecedented rate. Revera, a 24/7 mission critical services provider of data centers, IT infrastructure and software, has commissioned a new data center every two years for the past 10 years (and is now currently running five interlinked Homeland data centers).

While IaaS and its counterparts have been on the rise for some years, recent mega-growth has been attributed, in part, to global natural disasters, and the Canterbury earthquakes locally.

"The Christchurch earthquake made the risks [of disaster] that have always existed seem all the more real," says Nees. "The interest in offsite data centers has certainly increased as more companies look to replicate their systems in a second physical location. Refreshes of infrastructure equipment and data center facilities are also happening more quickly as a result of the earthquakes. Despite the risk of natural disasters, some organisations have other considerations to take into account before moving to a hosted service. This could include their philosophy around capital vs operational expenditure and whether they feel their applications are ready to be hosted.”

Hosting isn’t automatically the answer to risk mitigation, however. According to Cockayne, "Certainly, many Christchurch businesses were forced to re-evaluate their IT [following the earthquakes]. There simply wasn’t any choice. Many businesses have relocated their IT to a local data center provider in a simple co-location model. But unless those systems are re-potted in a services platform connected to a network of synchronised, geographically dispersed data centers, then local risks haven’t been mitigated. Co-location is just that. When IT is moved to a local Christchurch data center and sits isolated from service platforms, it remains vulnerable to the same risks.”

IBM NZ’s Integrated Technology Services business manager Paul Douglas referred to a statistic he heard recently that said insurance on infrastructure for equipment held in Canterbury-region data centers costs some four times that in Auckland, while Wellington costs twice that of Auckland. While the statistic is unconfirmed, it speaks to the risk factor associated with the various New Zealand regions in which data centers tend to be built and maintained. Interestingly, when IBM built its latest facility, Hamilton was theoretically shown to have the lowest geographic risk.

Every business can leverage a hosting  facility

There will always be organisations that opt to build and manage their own data centers. Size, revenue and security risk all play a factor. The University of Auckland, for instance, New Zealand’s largest tertiary institution, is nearing completion of its own data center at its Tamaki Innovation Campus. The data center will house DR facilities, the National eScience Infrastructure (NESI) and other eResearch initiatives for the university. Scheduled for completion in July, the facility been designed to use efficient cooling and to handle the high-density racks required for research.

As the popularity of cloud computing increases, services are being scaled both up and down, increasing accessibility to businesses of all sizes.

"I don’t think there is a type of business that is not appropriate to having a solution hosted, and the reality is any business who can afford the cost of high speed network access can and should at least consider outsourcing,” says Adrian Grant, managing director for Digiweb. "In terms of justifying building their own data center, that decision point will be based on scale and core business – scale in the sense that they have the size to do it themselves and core business being the decision as to whether running a data center is core business or not. By and large I cannot think of any business where the ‘core function’ test is used that would not want to consider outsourcing.”

"Naturally, I’m biased, but anybody and everybody should be leveraging a hosting facility,” agrees IBM’s Douglas.

For businesses that do not regard IT as core to service delivery, the DIY model is proving less attractive. "As computing demands for power and cooling have increased dramatically in recent years, businesses are now finding that this model can no longer provide the resilience they need and that they do not have the ability to invest in the specialist technologies required to meet these demands. Virtualisation, consolidation and the growth in storage demands have been the major catalyst for this,” explains Lloyd Selby-Brown, Gen-i’s business manager for Data Centers.

At the end of the day

There is an increasing movement in New Zealand to recognise that data center management is not core business for more organisations. Adding to that, it is capex-intensive and inflexible.

"The current economic climate has made companies examine their business to understand what is core to them and drives the bottom line. It’s often after these assessments, regardless of the business size, that a cloud hosting option is investigated,” says Steyn.

There are very few disadvantages for businesses where IT is non-core, agrees Gen-i’s Selby-Brown, but he cautions that there is still a perception of less control when platforms are hosted. "We believe that service providers have matured significantly and the move to cloud will see more performance driven contracts and SLAs giving businesses more confidence in the hosted model.”

The beauty of infrastructure services is that it is a very clean business decision, because businesses can change IT from a management headache into contract-based service delivery issue, while in the process minimising risk, capital cost and the IT footprint.

"I’d challenge any business to tell me what their IT is costing them,” Cockayne says. "There are so many hidden costs, which are often dispersed. Outsourcing makes the costs visible. You know exactly what you’re buying and how much it is going to cost. You’ve got a flat operational cost line for your core systems, which is not going to change for three years.”

This article originally appeared in the June issue of IT Brief.