Companies have jumped on data center co-location as a way to rapidly scale out (or scale down) data centers. The data center “rental” premise of co-location makes CFOs happy because it helps them avoid making new capital investments to expand their own data centers, and it also saves time. The most common model for co-location is the simple rental of floor space in a third party data center where you can place your own servers and storage. From here, you have the option of providing your own staff for onsite maintenance of your equipment, or of contracting with the co-lo vendor for these management services.

Co-location for these situations is working because virtualization and cloud-based technologies have made it less necessary to house every IT asset in a specific physical building. Nevertheless, as the co-lo market matures, so will the expectations of the companies that are using it.

What more will companies want from their co-lo vendors? They will be asking for value-added services that can augment basic co-lo.

Here are two different value-added use cases that are rapidly emerging:

SaaS, IaaS and PaaS

Organizations are beginning to revisit SaaS (software as a service), IaaS (infrastructure as a service), and PaaS (platform as a service). In a SaaS model, you are not only outsourcing equipment and applications — but you are also contracting for an industry- (or application-) specific knowledge base that can fill in gaps where your IT or business knowledge is weak. These “gap” areas are most often found in:

  • External business processes that internal IT systems were never designed for (a good example is trading partner transactions for a corporate supply chain);
  • Non-mission-critical (but necessary) functions like employee benefits, payroll, and accounts payable;
  • New technologies that require resources and expertise that IT lacks, such as high performance computing (HPC), big data, and business analytics.

IaaS and PaaS services are frequently sought out for “take down and put up” IT environments for application development and testing, or for “spike” processing windows that some organizations encounter at peak business times (i.e., the holiday season, if you are a retailer). The value here for IT is that it only pays for what it actually uses-an ideal situation when application development and testing resource usage (and also peak processing windows) are temporary.

Sensing these opportunities, many SaaS, IaaS and PaaS vendors are now more narrowly defining their offerings into sets of value-added services that companies can relate to.

Industry collaboration

But there is also another value-added model of co-location that enterprises are taking a hard look at. This model utilizes an enterprise’s own data center by leveraging the services and the capacity that the data center can provide to medium and small businesses (SMBs) in the same industry niche.

This collaborative computing model has been used in banking, where one large bank leverages its banking systems and its data center resources by also extending these services to smaller subsidiaries or even competitors. The smaller banks pay for these services, and these revenues offset the large bank’s data center costs. In turn, the smaller banks gain access to resources and applications that they could never afford on their own. Additional advantage is gained because everyone participating in these industry collaborations has the same set of regulatory and security requirements to achieve, so there is confidence that these regulations will be met.

Regardless of which value-added co-lo arrangements companies consider, the new technologies and business models emerging in SaaS/IaaS/PaaS and in collaborative industry computing will push traditional co-lo vendors to also add more value-added services. This could revolutionize (and enrich the strength) of the co-lo market for its enterprise and SMB clients — and this bodes well for IT.