Reverse migrations and their effect on physical data center space
In the early days of cloud computing, many enterprise CIOs and other IT leaders were skeptical of migrating their workloads to cloud offerings. At that time, private clouds were attractive for the potential of federated or hybrid clouds for certain workloads—but never public clouds. Security, reliability, control and protection were the reasons ascribed to such views. As capabilities and service providers matured, and IT professionals became more comfortable with cloud offerings, workload migration, even to public clouds, began to accelerate.
One of the alluring promises of workplace cloud migration is that companies can use the operator’s data center space instead of building or expanding their own, reducing data management costs and promising agility and flexibility. Yet, a recent IBM-commissioned study by McKinsey & Company shows most enterprises are only 20 percent of the way into their cloud journeys. The simplest workloads are in the process of migration but the remaining 80 percent of workloads are still on-premise.
Many articles make bold predictions about the future of enterprise and cloud computing, showing the movement to be virtually unstoppable. IDC reports that the rate of cloud computing spending has been growing at 4.5 times the rate of IT spending since 2009. Their study “IDC FutureScape, Worldwide IT Industry Predictions 2019” report claims that by 2022 90% of organizations will have a multi-cloud environment including both public and private cloud.
Clearing the cloud
What has been notable, is a comparatively small but growing discussion about enterprises moving in the opposite direction. Reverse cloud migration, or what is increasingly being called unclouding, is the return from the cloud of data or applications to on-premise solutions.
While Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform, the “Top Three”, have hundreds of data centers encompassing tens of millions of square feet, the enterprise data center footprint is much larger—by a factor of seven to eight times.
How these proportions will change over time is a function of how quickly workloads migrate to cloud infrastructures.
David Wright, Sr. Director Analyst at Gartner polled an audience of over three thousand participants at the 2019 Gartner IT Infrastructure, Operations and Cloud Strategies Conference in Las Vegas. He asked the question “Has your company moved more than one workload from a cloud provider back on-premises?”. While 70 percent of respondents reported that they had not moved any workloads back, 30 percent reported that they had—a figure that surprised Wright, who expected less.
In fact, research shows this number is even higher. Netwrix Solutions' recent Cloud Data Security Report states that “48 percent of organizations that store sensitive data in the cloud would consider moving that data back on-site”, citing that their initial goals of cloud migration were not achieved. The same study reports that 53 percent of organizations have no plans to implement cloud-first strategies.
Reasons given for moving away from the cloud include unexpectedly high costs and cloud security incidence, especially with sensitive personal information data. Additionally, issues integrating cloud-based applications with local enterprise applications and/or the lack of in-house skills to manage a multi-cloud/on-premise environment.
So, as the creation of data and the resulting need for processing continues its meteoric rise, who will build, own, occupy and operate data centers in the future and in what proportion?
The demand for space
The tremendous growth of the Top Three and other global providers have illustrated that the cloud is capturing an ever-increasing amount of new and growing workloads.
Statista projects that the value of the cloud services market will exceed US$350 billion in 2022, with 49 percent of the market share going to Amazon Web Services (2018). In contrast, Data Center Map’s database accounts for 4,616 colocation data centers around the globe in 2020. 451 Research’s Market Monitor also reports that 60% of all data center space is still enterprise on-premise server rooms and closets.
On the other hand, it is estimated that more than 70 percent of the existing white floor space today is “last generation” space. This space is technically (if not functionally) obsolete, lacking in capacity and not up to today’s sustainability standards. To avoid the high costs of replacing obsolete infrastructure, many enterprise strategies consider moving workloads to the cloud in an effort to avoid having to build, own and/or operate more data center space.
But as technology and architectural solutions evolve the economics of data storage could shift back towards on-premise solutions. One innovation that could change the current landscape is Hyper-Converged Infrastructures (HCI) that consolidate servers, storage devices, hypervisors and networking stacks into single easy-to-use appliances.
What clouding/unclouding could mean for real estate
If the migration to the cloud is slowing at all due to issues related to security, integration and costs, enterprise IT and real estate professionals need to be prepared for the ensuing impacts on location, be it on or off-premise.
There are hundreds of issues to consider when moving workloads on and off the cloud. In many of the models, the cost of the real estate is bundled into the “whatever” as a service pricing. We are also seeing situations where real estate terms and conditions are being mixed up in Master Services Agreements (MSAs) with colocation providers.
The question from an enterprise real estate perspective is challenging. After server hardware, the dominant costs in the data center are power distribution and cooling equipment followed by the price of the actual power itself. The real estate costs, by comparison, are smaller but non-trivial.
As such, a true “apples to apples” comparison of cloud vs uncloud needs to fully account for all of the apparent and hidden costs (or benefits). The Total Cost of Ownership (TCO), as always, is critical along with security and management considerations.
For more information on Cushman & Wakefield’s Global Data Center Advisory Group, contact us.