Could the future of metro networks lie somewhere other than the interconnection of central offices or 4G/5G infrastructure? Could shared hosting facilities play a role in the future of the cloud, as shared towers have in mobile networking? All this is possible, if there’s going to be a lot of edge data centers in our future. Traffic, and revenue opportunity, set the focus of any infrastructure deployment, and those factors may be shifting in a new direction.
If we are to explore parallel-to-the-Internet sources of network resources, we have to consider parallel-to-the-cloud hosting. Wall Street, in fact, is seeing this space as being one of the main drivers of incremental IT growth for both 2020 and 2021, and yet we don’t really see much discussion of the topic. What’s going on here could be important, not only for the cloud but for the specific growth opportunities in the server and platform software spaces.
We think of public clouds as massive data centers where shared resources live. More careful assessment shows that public clouds are almost always made up of multiple data centers, with each one serving an associated market area. Clouds have spread from their first form of concentrated resources to something more distributed, but how far can that spread continue if we rely on per-provider hosting facilities?
We think of edge computing as a collection of shared resources close to the point of user attachment. The problem with this vision is that users are everywhere, and so a presumption of edge opportunity presumes that somehow we’d be able to extend the edge close to a large percentage of the user population. Can that happen if we demand that every edge provider deploys its own edge data centers?
Look up at a cell tower the next time you pass one. Do you see one big antenna on top? There are normally quite a few antennas on a cell tower, because many (most, in many areas) towers are owned by third parties who lease tower space to providers. That eliminates the need for every provider to build unique facilities, something called “competitive overbuild”, and that reduces the cost of providing services, thus helping to contain pricing.
Obviously, the reason I mention this is that the same sort of competitive overbuild risk exists for the cloud, and in particular for edge computing. If that’s true, then the same remedies are also likely to be needed, meaning that we should expect to see third-party data centers offering hosting to the cloud and edge providers, in areas where dedicated per-provider facilities can’t be justified. The Street is already seeing growth in what they would classify as “second-tier” data center providers, driven primarily by growing interest in cloud services (particularly hybrid cloud) from enterprises headquartered there.
Another possible growth opportunity for these shared data centers is the 5G and “carrier cloud” activity. 5G and other carrier-cloud services are likely to deploy first where there’s significant demand, which means where there’s a large population of users. These areas can probably justify per-provider facilities, but eventually successful services have to expand to a wider base. Since signaling applications like 5G are probably better examples of latency-sensitive applications than most cloud applications would be, there’s a good chance that edge facilities in an expanding 5G/services market will need shared data centers.
We know from the experience of Equinix (who happens to be one of the leaders in the shared-data-center space) that one of the biggest requirements for this sort of hosting is access to a bunch of ISPs, easiest to achieve if you’re an interconnect yourself (as Equinix is) or if you’re near one. You need access to high-speed fiber paths or the value of these shared resources is limited. That means that it’s not unlikely that some of the shared-data-center players will create at least metro networks using fiber transport. This will not only drive up the parallel-to-the-Internet network capacity available, it will also shift the focus of metro transport toward data-center interconnect (DCI).
One of the potential impacts of a DCI shift would be an increased role for SDN, which has been deployed more in the data center than in the wider area. That may not be the most important impact; it may in fact be a symptom of a broader shift. We might be seeing so much capacity built into DCI connections to support positive revenue opportunities at the edge, that non-DCI traffic could end up piggybacking on those connections. The future of metro might be the data center interconnect space, not traditional connection services.
This doesn’t mean that your Internet traffic is going to pass through an edge host, but that the data center networks and their associated switching would make up part of the path for access (including wireline and wireless) and metro traffic. It could shift the focus from building a multi-service metro fiber network (like the old SONET/SDH rings) to building metro DCI and then exploiting it.
There are good reasons for this, beyond just taking advantage of in-place DCI capacity. If we assume (again) that things like 5G and IoT will actually justify edge computing, then some of the services we’re connecting will actually require some feature support from locally hosted virtual functions. Where better to extract and reinsert this sort of stuff than in a data center that traffic is passing through anyway?
This broad truth is what makes SDN a more likely play for DCI, and even for metro. Most hyperscale data centers accept the idea that you really need “composed connectivity” rather than “Ethernet switching” in complex data centers, and the presence of what’s basically transit traffic within a data center network is an almost sure driver of SDN. So is the need for multi-tenancy within a data center, which of course is the driver of growth in these shared data centers in the first place. The earliest “commercial” SDN offerings were aimed explicitly at multi-tenant management, and if the tenants are competing cloud providers, the requirement for isolation of tenants (major tenants like cloud providers and “sub-tenants” like their customers) is even more acute.
What excites Wall Street is that all this might create a kind of land-rush mindset among the larger cloud providers or edge-computing aspirants. There are only a limited number of companies with any real market mass in the shared data center space; somewhere between 10 and 20, depending on how stringent your criteria for selection happen to be. About half of these are public companies, so we’ve got a mixture of potential for IPOs and potential for stock appreciation.
What excites vendors about this is that whether we call this part of the edge computing trend or not, it’s a new place to sell servers and platform software, and the land-rush mindset I’ve noted would likely fund at least some anticipatory deployment of infrastructure. In a market that’s looking for some demand strength, that’s a powerful situation.