Business Continuity Fears Favor Growth in Data Center

April, 2020

Our research shows that many IT organizations are shedding infrastructure in order to “get out of the data center business.” However, the amount of the data center workload that companies are outsourcing has been volatile, with rather large swings over the past few years. Nevertheless, those swings should lessen over the next couple of years with the growth of infrastructure as a service (IaaS). In addition, the ongoing COVID-19 pandemic is accelerating the trend, as service providers can offer business continuity capabilities that typically exceed what organizations can maintain on their own.

As shown in Figure 2 from the full report, Data Center Operations Outsourcing Trends and Experience, the outsourcing frequency of data center operations is the same in 2019 as it was in 2015—38%. However, the line hasn’t been flat, with decreases to as low as 35% in 2018 and increases to as high as 41% in 2017. One of the major reasons for this is that one type of data center outsourcing, IaaS, is increasing. Use of the cloud in general is increasing quickly and has strong service and cost success. IaaS is eating into other types of data center outsourcing such as co-location.

CE Outsourcing Frequency Fig2 1030x687 - Business Continuity Fears Favor Growth in Data Center

We define data center outsourcing as any service that enables an organization to significantly reduce the amount of internal resources devoted to managing servers, storage, and other data center equipment and facilities. Those assets may be owned by the customer or service provider, in whole or in part. Under this definition, one could even consider the use of software as a service (SaaS) as a type of data center outsourcing, provided it enables a significant reduction in data center infrastructure. Generally, however, while we consider the use of IaaS as a form of data center outsourcing, we do not consider SaaS as such. We also have a different category for outsourcing network management, which would include outsourcing of the network operations center.

“Over the next few years, we expect less volatility and a steady increase in data center outsourcing,” said David Wagner, senior research director at Computer Economics, a research and analyst firm based in El Segundo, Calif. “Not only will IaaS continue to grow over the long term, but COVID-19 has revealed the value of data center outsourcing from a business continuity point of view. Data center service providers tend to have more flexibility, scalability, and ability to remotely manage their systems than most enterprises can afford on their own.”

In the full report, we provide IT executives with insight into how broadly their peers are undertaking data center outsourcing as a strategy. We also examine the success rates for organizations in reducing cost and improving service through outsourcing this critical function. Finally, we report on the extent to which IT organization size and sector affect data center outsourcing adoption.

This Research Byte is based on our report on this subject,  Data Center Operations Outsourcing Trends and ExperienceThe full report is available at no charge for Avasant Research subscribers, or it may be purchased by non-subscribers directly from our website (click for pricing).