Australia's data centre blitz: If you build it, will they come?

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This article appeared in the August 2015 issue of CRN magazine.

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Australia's data centre blitz: If you build it, will they come?
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Barely a month goes by without news of another data centre opening or expanding in Australia. Are all these new racks simply meeting market demand or future-proofing as the world moves to cloud? Is there a shortage of capacity, or a glut?

The short answer is: perhaps, but only in Sydney, and even then, it’s complicated. CRN spoke with a range of data centre providers and related companies to try to get a handle on what’s happening with capacity in Australia.

New kids on the block

Everyone CRN spoke to recalled the pain five to 10 years ago when data centre capacity was constrained. Lack of substation capacity was common, and floor space was at a premium. Data centres were relatively old and cramped, in dingy locations.

Many were owned by telecommunications providers: Telstra, Optus, and the like. When customers or IT service providers leased space with them, they were often corralled into choosing the telco as their network provider as well. Cross-connect costs were high, discouraging customers from choosing a competitor’s network services. Other space was available as part of the outsourcing binge, but this was with your choice of outsourcer, such as IBM, EDS, Accenture, and came as part of the overall deal.

“Space was scarce, but then there were some big moves by Digital Realty, NextDC and Equinix,” says Chris Deere, deputy CEO at Vocus Communications. “There was a need in the market. There wasn’t a lot of capacity. It was a good time to get in.”

Damien Spillane, APAC director of sales engineering at Digital Realty, agrees. “Particularly two to five years ago, there was a real lack of high-quality provider space in Australia. You had a scenario where a lot of organisations were building their own data centres.”

Then the new providers arrived, seemingly all at once. Equinix, Global Switch, NextDC and Metronode all built out large amounts of capacity in shiny new data centres. Suddenly, there was a lot of space to choose from. But that was a few years ago, and the market has had time to absorb some of the capacity. Is there a glut now?

Data centres take a while to plan and build. While it’s easy enough to turn on a new virtual machine with a few clicks and a credit card, building a Tier 3-rated data centre takes a lot longer. If a new facility is full on day one, you’d need a lot of other buildings online one after another.

“There’s going to be a lot of demand,” according to Bob Sharon, executive director at consultancy Green Global Solutions. “A lot of spaces are filling up, even though on the floor it looks quite empty. There’s a lag between order and kit on the floor.”

Tim Gentle, general manager at Australian IT Services, which perform cleaning and maintenance work  for data centre providers, agrees. “Twelve months ago, maybe there was a glut, but now it’s really taking off, over maybe the last six months in particular. Global Switch [Sydney] East is full now.”

Multiple markets

Getting a handle on the capacity available in the market depends on understanding the market’s structure, and this is where things start to get complex. Not all data centres are created equal, and they are different in multiple ways.

The traditional model of co-location is the most well known – selling power and space in a big warehouse built for IT systems, with the provider managing the facilities, but the systems owner looking after their own kit. Then there’s the managed service provider model, which adds a lot of additional services on top of the co-location of physical gear. 

Traditional providers such as IBM still use this model, but there are a host of other companies, like Dimension Data and Interactive, who also provide this model. These providers use a mix of their own, purpose-built data centres, such as Interactive’s new facility in Port Melbourne, and co-location space leased from organisations like NextDC.

Then there’s old versus new. Older facilities are less energy efficient, tend to be smaller, and won’t have the same power or network capacity of newer buildings. Even the relatively new Metronode Sydney 1 facility has only 2,900m2 of space, compared to the Sydney 2 facility with nearly triple the space, at 7200m2.

Newer facilities also tend to have extra, non-computer facilities, such as comfortable break rooms with TVs and snack machines. While the computers that sit in the halls probably don’t care about foosball, the humans who occasionally need to tend to them (and have to sign the contract in the first place) sometimes do.

“It’s getting very competitive. If you’ve got a dowdy entrance, you’ll have trouble selling stuff,” says Tim Gentle. “With the co-los now, it’s very much a show thing. Meeting rooms, the breakout rooms, BCP facilities, staging rooms. It’s all got to be ‘A1’ now. The data centre managers themselves are becoming more accomplished salespeople as well.”

Then there’s the question of geography. People want data centres close to them, and there are plenty of good reasons why: physical access to load gear in and out, proximity to major network links, access to a network of service providers, such as specialist cleaning and security staff. There are also more psychological reasons, such as the sense that you can get in your car and drive to the data centre if you should need to, for some nebulous future reason.

Next: who has data centres in Australian capitals?

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