New research from IDC on the impact of the COVID-19 pandemic confirms enterprises are accelerating their migration out of their on-premises data centers choosing to colocate their IT operations in a third party, multitenant data centers.
IDCs annual Data Center Operations Survey showed that 72 percent of the respondents plan to increase their usage of colocation over the next 12 months primarily due to what is expected to be a new normal for IT taking shape beyond the pandemic.
According to IDC, "The pandemic created a business necessity for increasing technology investment and accelerating digital transformation timetables," said Meredith Whalen, Chief Research Officer at IDC. "What we are learning is that many of these initiatives that started as ways to mitigate the economic impact of COVID-19 have become permanent roadmap requirements for Future Enterprise's success in the digital economy."
Respondents cited post-pandemic concerns about COVID-19 creating new limitations and risks associated with on-premise data centers:
- Diminished real estate values associated with any previous plans for on-site investment and expansion. Colocation allows them to expand virtually without having to hire additional resources that require office space.
- Enterprises moving away from CapEx intensive physical upgrades in favor of OpEx friendly outsourcing
- Limitations on the ability to achieve digital transformation goals
- Increased risks associated with co-mingling of employees and data center staff.
In contrast, multitenant data centers are built and managed to deliver maximum uptime, reliable power, strong security and a plethora of connectivity options. Outsourcing colocation to these facilities removes the risk and expense of handling all of these requirements by the enterprise and frees capital and operating expenses to flow to support the enterprise’s digital strategy.
Data Digitization Increasing Data Center Investments
This process of data digitization is often referred to as digital transformation, and it is profoundly changing the shape of business today affecting companies in every industry and consumers around the world. Since 2016, the digitization phenomena have generated 90% of the world’s data and this astonishing growth shows no sign of slowing.
The flood of digitized data, combined with new, compute-intensive technologies such as artificial intelligence, machine learning and predictive analytics, is increasing enterprise requirements for even larger technology stacks to store, compute, analyze and move the data. As a result, enterprises IT deployments are expanding and starting to take on hyperscale-like requirements for power and connectivity ecosystems.
As data center investments increase, they become more visible to stakeholders and the selection of a data center provider becomes a much more scrutinized process. Conventional data center selection criteria such as location, economics, flexibility and scale are now considered table-stakes requirements that must be met to make it to the next round of the selection process.
QTS’ experience with large enterprise and hyperscale customers has given us a unique perspective on how the requirements are changing. As IT deployments expand in size and scope, data centers are becoming core strategic long-term partners.
As a result, enterprise and hyperscalers are seeking providers that can demonstrate a higher level of sophistication and operational maturity that extends beyond the basic requirements for location, economics, flexibility and scale. This higher level of sophistication is what QTS refers to as Operational Excellence.
Operational Excellence Has Become a Deal-Maker
Achieving a higher level of sophistication takes years and requires a commitment to excellence, operational partnership, and discipline across every organizational department. Becoming operationally mature is not a final state - in fact, the highest degrees of maturity involves constant evaluation, refinement, and innovation of policies and procedures, all aimed at making the customer experience the best it can possibly be.
QTS’ operational excellence comes from 15 years of operating massive data centers with complex customer requirements for documentation and strict compliance standards that enable QTS to optimize our competitive advantage in this important area. Examples of operational excellence include:
- Financial maturity. A track record of sustained growth and sophistication in future financing strategies is very important to hyperscale and large enterprises making a long-term investment in the provider. What growth are they reporting in topline revenue and margin? How are they financing the business? What is their debt maturity schedule?
- Tax incentives – Mature data center providers typically work closely with state and local and economic advisors to pioneer data center tax incentives. QTS successfully spearheaded legislative activity in Georgia and Illinois that now provides tax incentives specifically targeted at attracting data centers as part of expanded economic development efforts. QTS participates in similar tax incentives in Virginia and Oregon as well. The benefits flow to our customers in the form of low or no sales tax paid on equipment deployed in our data centers.
- Project management and procurement – Operational excellence is manifested in a mature supply chain and a robust, best-in-class repeatable build strategy that delivers predictability and true total cost of ownership transparency.
- An integrated approach to compliance – Mature data center providers understand the need to take a comprehensive approach to manage compliance, ethics, and risk that are inextricably linked.
- Environmental sustainability – Achievement in sustainability is rapidly emerging as a key attribute of operational excellence in the data center industry. QTS recently published its second Environmental, Social and Governance (ESG) Initiatives report that documents the industry’s first formal commitment to provide 100% renewable energy across all of its data centers by 2025.
- Industry-leading customer service – Mature providers recognize the powerful impact of great customer support and will focus on it as a visible validation of operational excellence. QTS has led the industry in Net Promoter Score for four consecutive years.
- Technical and process innovation supporting a long-term plan – Mature providers typically have the financial backing and foresight to invest in new technology adoption such as artificial intelligence and machine learning to drive service delivery innovation and customer experience. QTS was the first to invest and develop a fully-digitized, API-driven Service Delivery Platform providing the highest levels of IT infrastructure transparency sought by hyperscalers and enterprises.
QTS has been very fortunate during the pandemic. Our operational maturity as an organization has long promoted rigor, structure, and processes that have made the uncertainly of COVID-19 feel almost familiar to our security and operations teams. Operationally, there was absolutely no disruption – not even from the customer perspective.
QTS’ operational excellence coupled with the increased demand of the market, and the pandemic speaks volumes about QTS’ ability to deliver quality and instill certainty during these unprecedented times.
For more information, check out QTS Collaborate.Innovate.