The role of Datacenters

The State of Play

Current Enterprise ICT Environments are a mix of various technology stacks.  Critical and second-tier systems are from different eras.  A mix of modern and legacy applications sit alongside each other.  The common challenges are security, manageability and integration of disparate parts.  There is some use of public cloud services, but most applications are hosted in on-premises or third-party datacenters.  Against this is the demand from the business for more responsive service provision, innovative use of data to solve problems and relentless downward pressure on spending.  This complexity and conflicting demands have inherent risk and ICT departments across the world are wrestling with their response.

ICT departments are attempting to reduce their exposure to technical debt, operational risk and costs.  This could be called “Getting out of IT”.  It means still delivering applications and services to the business but avoiding the necessity of owning the risk.  This can be achieved in two main ways:

  • Outsourcing.  The risk of operating the environment is handed to a third party with a series of service level agreements the business accepts.  While this works the reality is that ICT still wears the pain and risk when services fail.  Complexity is not reduced it is merely abstracted.
  • Software as a Service (SaaS).  Applications become the commodity rather than infrastructure.  A tapestry of services is purchased from software vendors and services providers.  ICT’s role is to integrate these higher-level components.  This places risk where it is most easily mitigated, with the software vendor themselves.

It is not an either-or scenario.  Generally, there is a mix of both approaches with a progressive move towards SaaS over time.

How should we deliver services?

The business currently consumes Software as a Service already.  That is how they think of it despite ICT departments having to deal with all the problems.  Applications the business uses are the top of a complex stack of services.  The key to a successful transition to lower risk and cost is to choose which parts of the stack you need to be responsible for and which should be consumed as a service.  The best place an ICT department can position itself is where it provides the maximum value to the business and its activities for the lowest cost.

The Application Delivery Stack shows, for each model where the primary responsibilities lie.  This stack can be used to evaluate delivery models for the whole environment or for individual applications.

Application Delivery Stack

DIY Model

The ICT department owns everything in the stack.  There is support from Software and hardware vendors but most responsibility for delivery lies with the ICT department

  • A large amount of effort and cost is spent in activities that do not offer value to the business. 
  • You are required to be good at everything.
  • There is little capacity to scale
  • Operations will be brittle, and the business will experience varying service levels.
  • You must orchestrate the various vertical support contracts to deliver service.

Outsource Model

The ICT department owns issues closest to the business and outsources lower layers of the stack to one or more service providers

  • ICT is responsible for application delivery.
  • A variety of providers are responsible for different parts of the stack leading to unclear responsibilities.
  • ICT still owns the burden of complexity and technical debt despite having outsourced the lower level components.

IaaS or Private Cloud Model

The ICT department owns application delivery and some platform services, but the majority of the stack is operated by a single vendor.

  • An option for hosting venerable systems where no SaaS model is available.
  • Depending on the vendor chosen more or less of the Platform Services may be viable.
  • A good combination with SaaS and to use as a steppingstone.

SaaS Model

The ICT department owns delivery of the application to the business.  ICT also owns the problem of integration between components. The effort and risks of making services available is placed with those best able to deal with it.

  • You own the problem of using the application to achieve business outcomes.
  • The application vendor provides the software in its own datacenters and owns its operational burden.
  • There is an aligned self-interest between the SaaS provider and the customer given that an outage or service interruption affects many customers.

Its pretty clear that SaaS is the way to go. So the goal should be to move towards that over time. The role of the three main delivery models (collapsing outsourcing and IaaS together) looks like this…

Market Share Over Time

What is the role of the Datacenter?

After setting the scene for the current and future direction of ICT it’s possible to put the role of a datacenter in context.  They are critical parts of an ICT landscape, but their role is evolving.

The case for Datacenters

At the bottom of the Application Delivery Stack is the Datacenter.  Whether you operate on-premises or in public cloud there is always a Datacenter.  Should a business operate its own Datacenters?  Only in limited circumstances.  Generally, a business will not be as good at datacenter operations as a dedicated third-party datacenter provider.  Levels of security, availability, power are uneconomical to provide internally.  Pooling these costs and risks reduces the costs to users.

Beyond being mere “bit barns” for servers, storage and networking the modern datacenter provider can be best considered a real estate play.  In the same way that shopping centers aggregate demand from shoppers and sell that demand to shop owners, datacenters can be thought of in the same way.  They are often not just places to house servers but marketplaces for valuable services.  The larger the datacenter, the more services available there.  It becomes convenient to connect to these services if your operations are collocated nearby.  The business model in many datacenters focuses on this market aggregation capability.  Revenue from cross-connection in datacenters is sometimes the source of profit with racking/power charges merely cost recovery.

The case against Datacenters

The case against datacenters is more a case against the sort of services they offer.  In the Application Delivery Stack there are four delivery models presented.  The best way to deliver services to the business is to leverage SaaS offerings.  In this case the role of a datacenter is limited.  They are a critical part of the service delivery model for each SaaS provider.  More often, datacenters are critical to the public cloud provider upon which the SaaS offering is built.

So this is less a case against datacenters, more an argument that you should be in a position where they no longer matter to you directly.


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