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Data Center Infrastructure

How Data Center Outsourcing Fuels AT&T NetBond Growth

Toward the end of 2015, a lot was being made of the move by telecom service providers to divest their data centers -- Windstream did it, CenturyLink said it probably would, and Verizon was rumored to be selling as well.

Against that backdrop, data center operator Digital Realty Trust Inc. announced a new deal with AT&T Inc. (NYSE: T) that will allow that communications service provider to offer its NetBond cloud connectivity service from Digital Reality's data centers, and allow the two companies to work together on colocation services, increasing AT&T's connections in Digital Realty facilities and expanding AT&T's colocation capacity significantly. (See AT&T Adds Digital Realty to Boost Colocation Services.)

The move lets AT&T grow its data center capacity without the capex investment of building that out on its own, notes Mike Bohlig, director of Global Alliances at Digital Realty. It's an indication of how telecom is outsourcing its critical data centers.

AT&T was already a significant partner for Digital Realty, he says, but this extends that partnership in a new direction. "They can use our expertise in building and managing data centers combined with our capital, that they don't have to deploy, and get the best of both worlds," he says. "They get state of the art data center capacity for their customers without capital requirements on AT&T's side so they can focus that on strategic investments of whatever kind."


Stay up-to-date on data center strategies including connectivity in the data center connectivity section of our data center page here on Light Reading.

And while this is a significant deal for his company with a Tier 1 service provider, Digital Realty's biggest customers remain the web-scale operators -- Amazon Web Services Inc. , Facebook and that crowd. For its entire market, network connectivity is becoming more important, Bohlig noted, thus fueling Digital Realty's recent series of expansions.

Chief among those was the Telx acquisition, completed last year, which brought major colocation and carrier hotel presence to the Digital Realty portfolio. That's significant because colocation and data center facilities are increasingly intertwined, to deliver cloud services and networked content and data. It also brings the Digital Realty portfolio to more than 140 properties and 198 buildings in 32 global markets. There is now speculation that will grow further with a rumored acquisition of Interxion, a European data center and colocation provider, once thought to be a future partner of Telecity, until it was snapped up by Digital Realty rival Equinix. (See Digital Realty to Buy Telx in $1.9B Deal and Equinix Confirms $3.55B Bid for UK's Telecity and Equinix Expects Explosive Enterprise Growth.)

The AT&T deal extends the reach of NetBond, which gives customers single-pane access to multiple public clouds. Customers can now access NetBond from Digital Realty locations, just as today they can access IBM's Softlayer cloud services and others. The two companies will jointly deliver colocation services, something Digital Realty also does with companies such as Level 3 Communications Inc. (NYSE: LVLT), Zayo Group Inc. (NYSE: ZAYO) and others. (See SDN Powers AT&T, IBM On-Demand Cloud Connections and AT&T, IBM Team on Private Secure Cloud Connections.)

What Bohlig sees evolving is a hub-and-spoke arrangement of data centers and colocation, which manage to tie together the typical carrier hotel locations in downtown urban areas, offering a wide diversity of carrier connection options to cloud services, customers or partners, with data center facilities that offer larger amounts of colocation at a lower price. These tend to be located away from the downtown carrier hotels, and so there is the need for high performance networking connections.

"You see this hub-and-spoke arrangement being super popular in a lot of locations with us," he comments. "That is one reason the Telx acquisition was so strategic for us. It gave us new options -- for example in New York, 60 Hudson or Avenue of Americas -- to have that downtown connectivity and tie that back to our other data center assets that are in New Jersey. That kind of architecture we see as being more and more popular."

He can't comment on whether Digital Realty might acquire some of the data centers expected to be shed by telecom operators, as has been speculated by some. There is also industry speculation that those facilities are not state-of-the-art at this point and may not fit the company's portfolio.

As a data center operator, Digital Realty provides space, power and cooling, but the company also offers managed IT services through a series of partnerships, Bohlig notes, to distinguish its offerings from some other wholesalers.

— Carol Wilson, Editor-at-Large, Light Reading

cnwedit 2/3/2016 | 11:38:39 AM
Re: Strategizing I've been writing a bit about it and there is much more to come. This is a big deal - impacting the metro market significantly.
mendyk 2/3/2016 | 11:34:51 AM
Re: Strategizing So the data center hotel business is alive and well -- and becoming a big part of the CSP environment. Seems a little under the radar right now.
cnwedit 2/3/2016 | 11:28:19 AM
Re: Strategizing Web giants are using this model as well - Facebook is one of Digital Realty's biggest customers. FB, Google and the like have their massive data centers but they also need to have content cacheing and data nearer to the customer, thus they use Digital Realty and others.

Where the telecom giants and the Webscale behemoths seem to separate is on the massive data center infrastructure. Telecom folks don't have that as a core competence and may well be wiser to outsource. FB, Google, AWS and others have built their businesses on that competence, hence their success as cloud computing providers. 
mendyk 2/3/2016 | 11:24:12 AM
Strategizing So while the Web giants are firmly set on building and owning their own data centers, CSPs are moving to the rental model. That's a pretty stark difference in business models, no?
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