Asia firms not replacing data centers with public cloud

Public cloud services are increasingly attractive for companies in the region, but many will continue wanting to own or manage their data centers instead of relying on third-party operators.
Written by Kevin Kwang, Contributor on

Public cloud services provided by vendors such as Salesforce.com, Workday and Microsoft will continue to entice business customers to run their applications off third-party, shared IT environments. However, while the technology is ready for companies to shift more functions to cloud operators, many in Asia will continue to rely on traditional outsourcing or hosting services providers to externalize their IT functions.

Analysts also believe organizations in verticals such as government or banking will still want to own their data centers due to industry regulations.

Tips to manage data centers in Asia efficiently

1. Scale up first
To achieve management efficiency, Gartner's Rasit suggested Asian companies adhere to the "cardinal rule" of scaling up their data centers before scaling out. For example, ensure one's servers are utilized to a high average via thin provisioning or deduplication to reclaim unused storage capacity.

2. Streamline IT processes
He also said beyond rising power cost, employment costs are another big contributor to the expense of running one's data center.

"Deploy the right amount of management and administration software to simplify IT operations and improve IT processes. A more efficient IT operations may mean internal resources can be reallocated or the number of contractors can be reduced."

3. Get more granular insights
Companies will benefit from having datacenter management tools that provide deeper insight into how different applications and systems are working in real-time. This will aid the overall efficiency of running the facility, said Frost & Sullivan's Kapoor.

NextDC, an Australia-based datacenter hosting provider, is one company that is offering customers real-time, remote control over their data centers with its OneDC tool, he pointed out.

Jim Fagan, president of managed services at Pacnet, told ZDNet Asia more companies were looking to offload their IT functions, particularly non-mission-critical ones. "Unless it is an IT company or a mission-critical program, there really is no need for them to own the data center," Fagan stated.

In Asia-Pacific, companies want to move out their IT functions and applications and closer to their employees and customers regardless of their geographic location, he added. For instance, "non-core" applications such as human resources (HR), customer relationship management (CRM), marketing and sales are increasingly moved out of the company's data center in order to scale faster and for the organization to introduce new applications without more capital expenditure, he explained.

Legacy apps such as enterprise resource planning (ERP) are also shunted out, Fagan said, adding that he believes such migration to cloud services will pick up in the next two to three years and beyond.

Verticals still hesitant about cloud

Errol Rasit, research director at Gartner, agreed, noting that cloud-delivered IT services represent an increasingly attractive alternative option for private or in-house delivery offerings. Besides lower cost of IT service delivery, this route offers further value for organizations that fully re-architect and optimize IT applications for cloud delivery, which can be achieved on the platform-as-a-service (PaaS) level, Rasit noted.

That said, he pointed out that there already were many organizations which used outsourcing or hosting providers to externalize parts of their IT, and cloud computing is just another way to augment these activities.

While cloud offerings may be attractive, there are other "gating factors" that prevent some companies from migrating. "Security concerns, data location, regulatory compliance or even corporate financial practices [are some of these factors]. Some organizations prefer to see capital expenditure on their books rather than operational expenditure," Rasit said.

Kris Kumar, senior vice president and Asia-Pacific regional head at Digital Realty Trust, concurred. Depending on how large or complex a company's operations were, it could outsource some applications to the cloud but still would need a core systems infrastructure housed in its data center or with a hosting provider, Kumar said.

Companies with specific security requirements, such as those in financial services, were more likely to need a dedicated datacenter environment for their core business processes, Kumar added. Other verticals included government, military and telecommunications, and these were unlikely to consider cloud computing services from broad, shared service providers, Rasit pointed out.

"We expect to see a growth of regulated, or ruggedized, cloud offerings or brokers emerge to cater to these verticals," he said. "Additionally, many of these organizations will develop private cloud capabilities before considering public cloud offerings."

Integration a stumbling block

Mayank Kapoor, Asia-Pacific industry analyst for Frost & Sullivan's ICT practice, highlighted integration as another challenge for companies considering public cloud services. He noted the issue of how to make the different cloud applications "talk" to each other in a corporate IT setting is still being worked out.

Furthermore, companies will need to consider whether to retool existing programs to communicate with new ones, or phase them out despite the capital invested in implementing these legacy applications, Kapoor explained.

In a previous report, Frost & Sullivan analyst Ganesan Periakarruppan noted that software-as-a-service (SaaS) was difficult and costly to integrate into existing IT frameworks. He said while certain SaaS vendors claimed their applications were easily integrated, general feedback from the industry had been negative as integration not a seamless process and application security tended to be compromised as a result.

This state of affairs was why Gartner's Rasit believed cloud computing has a "long way to go" before it can measure up to traditional external service providers' market share, and in turn, replace enterprises' need to have their own data centers or co-location datacenter services. In 2012, for instance, infrastructure-as-a-service (IaaS) revenue as a proportion to IT outsourcing and hosting was 2.8 percent, he noted.

"We believe the private datacenter model will still be very valid for a large proportion of organizations, [though] we expect cloud computing will continue to nibble away at the edges," he said.

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