What's driving the colocation feeding frenzy? • The Register

2022-06-15 13:10:48 By : Ms. Rachel Yang

Analysis Colocation facilities aren't just a place to drop a couple of servers anymore. Many are quickly becoming full-fledged infrastructure-as-a-service providers as they embrace new consumption-based models and place a stronger emphasis on networking and edge connectivity.

But supporting the growing menagerie of value-added services takes a substantial footprint and an even larger customer base, a dynamic that's driven a wave of consolidation throughout the industry, analysts from Forrester Research and Gartner told The Register.

"You can only provide those value-added services if you're big enough," Forrester research director Glenn O'Donnell said.

The past few months have seen this trend play out en masse, with the latest being private equity firm DigitalBridge Investment Management's take over of datacenter provider Switch Inc in a deal valued at $11 billion.

Switch operates datacenters specializing in high-performance infrastructure. The company completed its fifth Prime datacenter campus in Texas last year, but this is only the latest colo acquisition in recent memory.

"There have been a pile of smaller colocation providers that have been coming together, either being acquired by the big boys, or they've been merging," O'Donnell said.

There's been a flurry of colocation mergers and acquisitions over the past few months. Here's just a sampling: NorthC acquired Netrics, LightEdge bought NFinit, EdgeConnex made off with GTN, Unitas Global snapped up INAP, VPLS nabbed a Carrier-1 datacenter in Texas, and Digital 9 absorbed Finnish colo Ficolo and Volta's London datacenters.

So what's driving this ramp in M&A activity? You might think it's the cloud, and while there's certainly some truth to that, O'Donnell says it's not the full story.

"I always like to remind people that just because cloud is so big and growing does not mean the datacenter is dead," he said, adding that to some extent cloud has actually driven people to colos more than it has hurt them.

"I won't give cloud all of the credit, but cloud certainly proved that this is a viable way of doing things," O'Donnell added.

What the cloud has managed to do is force colocation providers to innovate around new consumption models and platform services, while simultaneously expanding their reach closer to the edge.

The major cloud providers operate a relatively small number of extremely large datacenters located in key metros around the world. By contrast, colocation providers like Equinix and Digital Realty operate hundreds of datacenters around the globe.

This reach is not only one of the big attractions of colocation providers, Gartner analyst Matthew Brisse said, but it also turns out to be one of the biggest drivers of M&A activity.

"Size matters in this business because customers, especially multinational customers, want datacenters in a lot of different places," O'Donnell said.

According to Brisse, when enterprises start looking into colocation facilities, their main concern is getting workloads spun up in the right place. "The main reason that people go to colos, is location, location, location," he said.

And this demand has only accelerated as colocation providers look to offer services closer to the edge.

"We see the colocation providers starting to build out their edge offering as opposed to a simple hoteling experience for your infrastructure," Brisse said.

These aren't necessarily large datacenter facilities in the traditional sense, either, he explained. These can be as small as a half-sized shipping container positioned at the base of a cell tower.

Smaller regional colocation providers also serve an important role because they tend to build in places the larger players overlook, Brisse explained.

"A lot of companies don't have the luxury of sitting right next to an Equinix facility," he said. "There's lots of opportunities out there for colocation market in totality."

And as colocation providers inch closer to the edge, Brisse argues networking and automation are only becoming more important.

One of the most potent value adds offered by major colocation providers today is networking.

"As you look at the colocation services, the networking services have become a pretty big deal to differentiate them from just being a simple chunk of real estate to plop your servers," O'Donnell said.

And here again the larger players have the advantage. "Networking connectivity requires a big provider with lots of locations connected by their own fiber," he added.

These backbone networks allow workloads running in a datacenter on one side of the country to communicate with another without ever going out over the open internet.

But it's not just networking between colocation datacenters that's important. Many of these colocation facilities are located directly adjacent to the major cloud and software-as-a-service providers.

"So AWS, for example, or Microsoft Azure might be in the same building as you and connecting to it is just a matter of connecting to a different cage in that same building," O'Donnell said. "Smaller players can't do that, but the bigger guys can."

However, as customers increasingly turn to colocation providers for edge compute and networking, complexity rears its ugly head, Brisse argues.

In the future, "we're going to have lots of datacenters everywhere; we're going to have lots of data distributed in the right location; we're going to have edge facilities everywhere bringing data close to the edge," he said. "It is not going to be possible for humans to monitor all of that activity."

So, in addition to growing their footprint and network services, Brisse believes colos will also need to invest in AI operations capabilities to manage this complexity.

Both Brisse and O'Donnell expect the colocation market to continue to consolidate as macroeconomic forces put a pressure on smaller players.

"If the economic troubles we're seeing are persistent, I think we will see an acceleration of this kind of [M&A] activity," O'Donnell said.

It's important to remember that while colos may look like tech companies on the inside, on the books, they're really real estate investment trusts, he said, adding that in the current economic environment, colos are a comparatively safe bet in an otherwise dismal commercial real estate market.

"Colo is a hot market and getting hotter," O'Donnell said. ®

Concern is growing that a World Trade Organization (WTO) moratorium on cross-border tariffs covering data may not be extended, which would hit e-commerce if countries decide to introduce such tariffs.

Representatives of the WTO's 164 members are meeting in Geneva as part of a multi-day ministerial conference. June 15 was to be the final day but the trade organization today confirmed it is being extended until June 16, to facilitate outcomes on the main issues under discussion.

The current moratorium covering e-commerce tariffs was introduced in 1998, and so far the WTO has extended it at such meetings, which typically take place every two years.

A Linux distro for smartphones abandoned by their manufacturers, postmarketOS, has introduced in-place upgrades.

Alpine Linux is a very minimal general-purpose distro that runs well on low-end kit, as The Reg FOSS desk found when we looked at version 3.16 last month. postmarketOS's – pmOS for short – version 22.06 is based on the same version.

This itself is distinctive. Most other third-party smartphone OSes, such as LineageOS or GrapheneOS, or the former CyanogenMod, are based on the core of Android itself.

Lenovo has officially opened its first manufacturing facility in Europe, to locally build servers, storage systems and high-end PC workstations for customers across Europe, Middle East, and Africa.

Why build a cloud datacenter yourself, when you can rent one from Hewlett Packard Enterprise? It may seem unorthodox, but That’s exactly the approach Singapore-based private cloud provider Taeknizon is using to extend its private cloud offering to the United Arab Emirates (UAE).

Founded in 2012, Taeknizon offers a menagerie of services ranging from IoT, robotics, and AI to colocation and private cloud services, primarily in the Middle East and Asia. The company’s latest expansion in the UAE will see it lean on HPE GreenLake’s anything-as-a-service (XaaS) platform to meet growing demand from small-to-midsize enterprises for cloud services in the region.

“Today, 94% of companies operating in the UAE are SMEs," Ahmad AlKhallafi, UAE managing director at HPE, said in a statement. "Taeknizon’s as-a-service model caters to the requirements of SMEs and aligns with our vision to empower youth and the local startup community.”

Judges in the UK have dismissed the majority of an appeal made by Facebook parent Meta to overturn a watchdog's decision to order the social media giant to sell Giphy for antitrust reasons.

Facebook acquired GIF-sharing biz Giphy in May 2020. But Blighty's Competition Markets Authority (CMA) wasn't happy with the $400 million deal, arguing it gave Mark Zuckerberg's empire way too much control over the distribution of a lot of GIFs. After the CMA launched an official probe investigating the acquisition last June, it ordered Meta to sell Giphy to prevent Facebook from potentially monopolizing access to the animated images. 

Meta appealed the decision to the Competition Appeal Tribunal (CAT), arguing six grounds. All but one of them – known as Ground 4 – were dismissed by the tribunal's judges this week. And even then only one part of Ground 4 was upheld: the second element.

Here:s a novel cause for an internet outage: a beaver.

This story comes from Canada, where CTV News Vancouver yesterday reported that Canadian power company BC Hydro investigated the cause of a June 7 outage that "left many residents of north-western British Columbia without internet, landline and cellular service for more than eight hours."

That investigation found tooth marks at the base of a tree that fell across BC Hydro wires. Canadian mobile network operator shares the poles BC Hydro uses, so its optical fibre came down with the electrical wires.

The cross platform email client Thunderbird is to launch an Android version, which will be based on the existing K-9 app.

A month after Thunderbird's product manager, Ryan Lee Sipes, tweeted that a mobile version of the email client was "coming soon", the project has announced how it will do it.

It has acquired the FOSS Android email client and one-time Register app of the week K-9 Mail, which will become Thunderbird for Android.

Adobe-owned cloudy video workflow outfit Frame.io has apologized and promised to do better after a series of lengthy outages to its service, which became part of Adobe's flagship Creative Cloud in 2021.

Frame.io bills itself as "The fastest, easiest, and most secure way to automatically get footage from cameras to collaborators – anywhere in the world" because its "Camera to Cloud" approach "eliminates the delay between production and post" by uploading audio and video "from the set to Frame.io between each take." In theory, that means all the creatives involved in filmed projects don't have to wait before getting to work.

In theory. Customers say that's not the current Frame.io experience. Downdetector's listing for the site records plenty of complaints about outages and tweets like the one below are not hard to find.

As Intel plans to start construction on a massive chip manufacturing site in Germany, chipmakers GlobalFoundries and STMicroelectronics are reportedly mulling a joint venture to build a fab in France.

The proposed fab in question – reported by Bloomberg – would help Europe fight future chip shortages and support the European Union's goal of producing 20 percent of the world's semiconductors by 2030.

New York-based GlobalFoundries and Geneva-based STMicroelectronics are hoping to get government subsidies for the French fab as part of the EU's proposed European Chips Act, the report suggested, citing sources familiar with the discussions. The potential focus for the France factory could be "energy efficient chips with advanced technology," it said, without offering specifics.

Lenovo has struck an agreement with Hong Kong comms conglomerate PCCW to create a jointly owned services company, advancing its strategy of growth through services.

PCCW operates a globe-spanning software-defined network, some of which uses its own submarine cables. The company also owns PCCW Solutions – an IT services provider with a big footprint in Hong Kong, mainland China, and parts of Southeast Asia.

Lenovo and PCCW Solutions will create an entity dubbed PCCW Lenovo Technology Solutions (PLTS) that will see the Chinese kit-maker and the Hong Kong services company offer "one-stop customer solutions that integrate services, devices and digital infrastructure" according to a joint Lenovo/PCCW announcement.

A Malaysia-linked hacktivist group has attacked targets in India, seemingly in reprisal for a representative of the ruling Bharatiya Janata Party (BJP) making remarks felt to be insulting to the prophet Muhammad.

The BJP has ties to the Hindu Nationalist movement that promotes the idea India should be an exclusively Hindu nation. During a late May debate about the status of a mosque in the Indian city of Varanasi – a holy city and pilgrimage site – BJP rep Nupur Sharma made inflammatory remarks about Islam that sparked controversy and violence in India.

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