Synergy Research Group: Hyperscale Data Center Count > 500 as of 3Q-2019

New data from Synergy Research Group shows that the total number of large data centers operated by hyperscale providers increased to 504 at the end of the third quarter, having tripled since the beginning of 2013. The EMEA and Asia-Pacific regions continue to have the highest growth rates, though the US still accounts for almost 40% of the major cloud and internet data center sites.

The next most popular locations are China, Japan, the UK, Germany and Australia, which collectively account for another 32% of the total. Over the last four quarters new data centers were opened in 15 different countries with the U.S., Hong Kong, Switzerland and China having the largest number of additions. Among the hyperscale operators, Amazon and Microsoft opened the most new data centers in the last twelve months, accounting for over half of the total, with Google and Alibaba being the next most active companies. Synergy research indicates that over 70% of all hyperscale data centers are located in facilities that are leased from data center operators or are owned by partners of the hyperscale operators.

Hyperscale DC Q319

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Backgrounder:

One vendor in the data center equipment space recently called hyperscale “too big for most minds to envision.” Scalability has always been about creating opportunities to do small things using resources that happen to encompass a very large scale.

IDC, which provides research and advisory services to the tech industry, classifies any data center with at least 5,000 servers and 10,000 square feet of available space as hyperscale, but Synergy Research Group focuses less on physical characteristics and more on “scale-of-business criteria” that assess a company’s cloud, e-commerce, and social media operations.

A hyperscale data center is to be distinguished from a multi-tenant data center as the former is owned and operated by a mega cloud provider (Amazon, Microsoft, Google, Alibaba, etc) while the latter is owned and operator by a real estate company that leases cages to tenants who supply their own IT equipment.

A hyperscale data center accomplishes the following functions:

  • Maximizes cooling efficiency. The largest operational expense in most data centers worldwide — more so than powering the servers — is powering the climate control systems. A hyperscale structure may be partitioned to compartmentalize high-intensity computing workloads, and concentrate cooling power on the servers hosting those workloads. For general-purpose workloads, a hyperscale architecture optimizes airflow throughout the structure, ensuring that hot air flows in one direction (even if it’s a serpentine one) and often reclaiming the heat from that exhaust flow for recycling purposes.
  • Allocates electrical power in discrete packages. In facilities designed to be occupied by multiple tenants, “blocks” are allocated like lots in a housing development. Here, the racks that occupy those blocks are allocated a set number of kilowatts — or, more recently, fractions of megawatts — from the main power supply. When a tenant leases space from a colocation provider, that space is often phrased not in terms of numbers of racks or square footage, but kilowatts. A design that’s more influenced by hyperscale helps ensure that kilowatts are available when a customer needs them.
  • Ensures electricity availability. Many enterprise data centers are equipped with redundant power sources (engineers call this configuration 2N), often backed up by a secondary source or generator (2N + 1). A hyperscale facility may utilize one of these configurations as well, although in recent years, workload management systems have made it feasible to replicate workloads across servers, making the workloads redundant rather than the power, reducing electrical costs. As a result, newer data centers don’t require all that power redundancy. They can get away with just N + 1, saving not just equipment costs but building costs as well.
  • Balances workloads across servers. Because heat tends to spread, one overheated server can easily become a nuisance for the other servers and network gear in its vicinity. When workloads and processor utilization are properly monitored, the virtual machines and/or containers housing high-intensity workloads may be relocated to, or distributed among, processors that are better suited to its functions, or that are simply not being utilized nearly as much at the moment. Even distribution of workloads directly correlates to temperature reduction, so how a data center manages its software is just as important as how it maintains its support systems.

References:

https://www.zdnet.com/article/how-hyperscale-data-centers-are-reshaping-all-of-it/

https://www.vxchnge.com/blog/rise-of-hyperscale-data-centers

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Synergy’s research is based on an analysis of the data center footprint of 20 of the world’s major cloud and internet service firms, including the largest operators in SaaS, IaaS, PaaS, search, social networking, e-commerce and gaming. The companies with the broadest data center footprint are the leading cloud providers – Amazon, Microsoft, Google and IBM. Each has 60 or more data center locations with at least three in each of the four regions – North America, APAC, EMEA and Latin America. Oracle also has a notably broad data center presence. The remaining firms tend to have their data centers focused primarily in either the US (Apple, Facebook, Twitter, eBay, Yahoo) or China (Alibaba, Baidu, Tencent).

There were more new hyperscale data centers opened in the last four quarters than in the preceding four quarters, with activity being driven in particular by continued strong growth in cloud services and social networking,” said John Dinsdale, a Chief Analyst and Research Director at Synergy Research Group.

“This is good news for wholesale data center operators and for vendors supplying the hardware that goes into those data centers. In addition to the 504 current hyperscale data centers we have visibility of a further 151 that are at various stages of planning or building, showing that there is no end in sight to the data center building boom.”

Reference:

https://www.srgresearch.com/articles/hyperscale-data-center-count-passed-500-milestone-q3

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About Synergy Research Group:

Synergy provides quarterly market tracking and segmentation data on IT and Cloud related markets, including vendor revenues by segment and by region. Market shares and forecasts are provided via Synergy’s uniquely designed online database tool, which enables easy access to complex data sets. Synergy’s CustomView ™ takes this research capability one step further, enabling our clients to receive on-going quantitative market research that matches their internal, executive view of the market segments they compete in.

Synergy Research Group helps marketing and strategic decision makers around the world via its syndicated market research programs and custom consulting projects. For nearly two decades, Synergy has been a trusted source for quantitative research and market intelligence. Synergy is a strategic partner of TeleGeography.

To speak to an analyst or to find out how to receive a copy of a Synergy report, please contact sales@srgresearch.com or 775-852-3330 extension 101.

 

 

AT&T announces cloud partnership with Microsoft 1 day after similar deal with IBM

AT&T has entered into a multi-year, cloud-based collaborative effort with Microsoft the day after announcing an alliance with IBM [1] that also focused on  cloud computing. The teleco and media giant will move many of its non-network apps to Microsoft Azure and use the company’s 365 software suite while Microsoft will deploy new AT&T technologies, such as 5G, to build edge computing applications.

Comment: This is yet another proof point that telco cloud computing has been a dismal failure.  AT&T and Verizon have both sold off many of their data centers and given up on cloud computing/storage in favor of the much bigger players (e.g. Amazon, Microsoft, Google and IBM in the U.S.). This new agreement appears to be a big win for Microsoft Azure, and probably at the expense of Amazon AWS, Google and IBM cloud rivals.

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“AT&T and Microsoft are among the most committed companies to fostering technology that serves people,” said John Donovan, CEO of AT&T Communications in a prepared statement. “By working together on common efforts around 5G, the cloud, and AI, we will accelerate the speed of innovation and impact for our customers and our communities,” he added (John is NEVER at a loss for words!)

Microsoft.jpg

Microsoft CEO Satya Nadella with AT&T Communications CEO John Donovan

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Observation:

The AT&T Microsoft partnership appears to be broader than the just announced AT&T IBM deal (see note 1 below). That deal is cloud-focused as well but is limited to the AT&T Business Solutions business unit, helping to better manage internal applications. A key objective of the IBM deal is to provide tools for AT&T Business solutions to better serve enterprise customers.

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AT&T partnerships on edge computing:

AT&T and Microsoft had earlier announced a deal on mobile edge computing which we reported here.  Earlier this year, AT&T said it will work with Hewlett Packard Enterprise (HPE) to help businesses harness powerful edge capabilities. The two companies have agreed to a go-to-market program to accelerate business adoption of edge connections and edge computing.

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Note 1.  AT&T – IBM Cloud Parthership:

AT&T Communications will work with IBM to modernize AT&T Business Solutions’ internal software applications, enabling migrations to the IBM Cloud.  IBM will provide infrastructure to support AT&T Business’s applications. AT&T Business will use the Red Hat open source platform to manage workloads and applications.  IBM will be the primary developer and cloud provider for AT&T Business’s operational applications and will help manage the AT&T Communications IT infrastructure, on and off-premises and across different clouds –private and public.

As part of the agreement, AT&T Business will be IBM’s primary provider of software defined networking and will leverage the carrier’s latest technologies including 5G, Edge Compute, and IoT as well as multi-cloud capabilities using Red Hat.

Additionally, the two companies will work together on edge computing platforms, which will help enterprise clients capitalize on the power of 5G network speeds and the internet-connected devices and sensors at the edge of the network.

“In AT&T Business, we’re constantly evolving to better serve business customers around the globe by securely connecting them to the digital capabilities they need,” said Thaddeus Arroyo, CEO of AT&T Business, in a prepared statement. “This includes optimizing our core operations and modernizing our internal business applications to accelerate innovation. Through our collaboration with IBM, we’re adopting open, flexible, cloud technologies, that will ultimately help accelerate our business leadership.”

References:

https://about.att.com/story/2019/microsoft.html

AT&T Taps Microsoft for Broad Strategic Cloud Partnership

AT&T tests 5G and network edge computing with Microsoft Azure; Partners with Vodafone Business for IoT

https://www.business.att.com/products/multi-access-edge-computing.html

AT&T owns >630 MHz nationwide of mmWave spectrum + HPE partnership for Edge Networking & Computing

 

IHS Markit: Microsoft #1 for total cloud services revenue; AWS remains leader for IaaS; Multi-clouds continue to form

Following is information and insight from the IHS Markit Cloud & Colocation Services for IT Infrastructure and Applications Market Tracker.

Highlights:

·       The global off-premises cloud service market is forecast to grow at a five-year compound annual growth rate (CAGR) of 16 percent, reaching $410 billion in 2023.

·       We expect cloud as a service (CaaS) and platform as a service (PaaS) to be tied for the largest 2018 to 2023 CAGR of 22 percent. Infrastructure as a service (IaaS) and software as a service (SaaS) will have the second and third largest CAGRs of 14 percent and 13 percent, respectively.

IHS Markit analysis:

Microsoft in 2018 became the market share leader for total off-premises cloud service revenue with 13.8 percent share, bumping Amazon to the #2 spot with 13.2 percent; IBM was #3 with 8.8 percent revenue share. Microsoft’s success can be attributed to its comprehensive portfolio and the growth it is experiencing from its more advanced PaaS and CaaS offerings.

Although Amazon relinquished its lead in total off-premises cloud service revenue, it remains the top IaaS provider. In this very segmented market with a small number of large, well-established providers competing for market share:

•        Amazon was #1 in IaaS in 2018 with 45 percent of IaaS revenue.

•        Microsoft was #1 for CaaS with 22 percent of CaaS revenue and #1 in PaaS with 27 percent of PaaS revenue.

•        IBM was #1 for SaaS with 17 percent of SaaS revenue.

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Multi-clouds [1] remain a very popular trend in the market; many enterprises are already using various services from different providers and this is continuing as more cloud service providers (CSPs) offer services that interoperate with services from their partners and their competitors,” said Devan Adams, principal analyst, IHS Markit. Expectations of increased multi-cloud adoption were displayed in our recent Cloud Service Strategies & Leadership North American Enterprise Survey – 2018, where respondents stated that in 2018 they were using 10 different CSPs for SaaS (growing to 14 by 2020) and 10 for IT infrastructure (growing to 13 by 2020).

Note 1. Multi-cloud (also multicloud or multi cloud) is the use of multiple cloud computing and storage services in a single network architecture. This refers to the distribution of cloud assets, software, applications, and more across several cloud environments.

There have recently been numerous multi-cloud related announcements highlighting its increased availability, including:

·       Microsoft: Entered into a partnership with Adobe and SAP to create the Open Data Initiative, designed to provide customers with a complete view of their data across different platforms. The initiative allows customers to use several applications and platforms from the three companies including Adobe Experience Cloud and Experience Platform, Microsoft Dynamics 365 and Azure, and SAP C/4HANA and S/4HANA.

·       IBM: Launched Multicloud Manager, designed to help companies manage, move, and integrate apps across several cloud environments. Multicloud Manager is run from IBM’s Cloud Private and enables customers to extend workloads from public to private clouds.

·       Cisco: Introduced CloudCenter Suite, a set of software modules created to help businesses design and deploy applications on different cloud provider infrastructures. It is a Kubernetes-based multi-cloud management tool that provides workflow automation, application lifecycle management, cost optimization, governance and policy management across cloud provider data centers.

IHS Markit Cloud & Colocation Intelligence Service:

The bi-annual IHS Markit Cloud & Colocation Services Market Tracker covers worldwide and regional market size, share, five-year forecast analysis, and trends for IaaS, CaaS, PaaS, SaaS, and colocation. This tracker is a component of the IHS Markit Cloud & Colocation Intelligence Service which also includes the Cloud & Colocation Data Center Building Tracker and Cloud and Colocation Data Center CapEx Market Tracker. Cloud service providers tracked within this service include Amazon, Alibaba, Baidu, IBM, Microsoft, Salesforce, Google, Oracle, SAP, China Telecom, Deutsche Telekom Tencent, China Unicom and others. Colocation providers tracked include Equinix, Digital Realty, China Telecom, CyrusOne, NTT, Interion, China Unicom, Coresite, QTS, Switch, 21Vianet, Internap and others.

AT&T tests 5G and network edge computing with Microsoft Azure; Partners with Vodafone Business for IoT

AT&T  announced  at MWC 2019 that it is working with Microsoft on a proof of concept to integrate network edge compute (NEC) capabilities with its 5G network and Microsoft Azure cloud services.  The solution would be important for the industries and Internet of Things (IoT) use cases of retail, healthcare, public safety, entertainment, and manufacturing, AT&T said, as it would provide businesses with lower latency, access to high compute power, and network routing without needing on-premises hardware.

“We’re testing our ability to substantially reduce latency and improve user experience by deploying advanced cloud services in specific geographic locations closer to business sites. A fully-scaled deployment will give businesses access to compute power, lower latency and optimized network routing without the need for dedicated on-premises hardware.”  These advantages will be important for the low-latency cloud and IoT solutions used by retail, healthcare, public safety, manufacturing and entertainment.

Last month, AT&T* announced its approach to 5G for businesses, laying out three key pillars: mobile, fixed and edge computing.

“Our collaboration will pave the way to enable Microsoft Azure cloud services to connect to more customers and devices across the US through AT&T’s nationwide wireless network,” Microsoft corporate VP of Azure Networking Yousef Khalidi said.   “Our two companies are working together to achieve the low-latency connectivity needed for the explosion of devices and immense amount of data being created by computing at the edge,” he added.

AT&T is using drones to test the network edge compute capabilities with Azure, working with Israel-based startup Vorpal in its foundry in Plano, Texas.  Vorpal’s VigilAir product detects and geo-locates drones in real-time, which could be used by law enforcement agencies and airports.

“By running their VigilAir application using Azure cloud services delivered through the Plano AT&T test environment, and connecting their drone-tracking sensors using AT&T LTE and 5G networks, Vorpal could achieve the low latency and compute scalability required,” the carrier said.

AT&T expects to share more details about NEC services with Microsoft Azure later this year. NEC is part of AT&T’s broader edge compute strategy that also includes AT&T Multi-Access Edge Compute (MEC).

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Earlier at MWC 2019, AT&T announced it’s working with Vodafone Business on IoT applications for the automotive space, including safety, security, and entertainment.

“This alliance with Vodafone Business is a natural extension of our existing relationship,” said Chris Penrose, President, Internet of Things Solutions, AT&T. “We each have rich experience in connected vehicle technology.  By working together, we can innovate faster and help our global customers bring connectivity, entertainment and telematics to more vehicles across our respective footprints.”

“Our work with AT&T will benefit automotive manufacturers and their customers around the world as we simplify processes and provide a consistent experience to accelerate IoT adoption in this fast-moving market,” said Stefano Gastaut, IoT Director, Vodafone Business. “As technology complexity increases, this is the right time to make technology adoption easier for the automotive industry to help them achieve their business outcomes. This is the goal of this alliance.”

The two companies said they would develop connected car solutions across 5G and autonomous vehicle technology; vehicle-to-everything (V2X) capabilities; in-vehicle entertainment; connected car applications and services; global service quality models; and the intersection of connected cars and smart cities.

The companies will prioritize projects to enhance safety, security and entertainment capabilities. Key areas of focus will be:

  • 5G and autonomous vehicle technology
  • V2X capabilities (vehicle-to-everything)
  • In-vehicle entertainment
  • Connected car applications and services
  • Global service quality models
  • Connected car/ smart cities intersection

AT&T and Vodafone Business each provide connected car services and products for the automotive, fleet and insurance industries. They integrate electronic and telematics systems into complex vehicles, both at the point of manufacture and beyond. Together, the companies bring more than 50 years of experience in the automotive industry. And they collectively work with nearly 50 global automotive brands and connect more than 43 million cars and trucks on the road today.

References:

https://about.att.com/story/2019/att_nec.html

https://www.zdnet.com/article/mwc-2019-at-t-tests-5g-and-edge-computing-with-microsoft-azure/

https://www.prnewswire.com/news-releases/att-and-vodafone-business-team-up-to-drive-internet-of-things-iot-connectivity-in-the-automotive-industry-300800916.html

NTT Communications leads APAC telco cloud market; Telstra and Orange close behind

Japanese telecommunications network provider NTT Communications is the market leader in the Asia-Pacific telecom cloud segment, and is well placed to maintain its position, according to GlobalData. In a new report, the market research company said NTT Communications has carved out a lead due to its software-defined capabilities, wide network and data center coverage and an expanded portfolio thanks to its integration with sister companies.  According to the report, the cloud market landscape is evolving in the Asia-Pacific region. While web-scale players such as Amazon, Google, Microsoft and Alibaba are continually expanding in the regions, telecoms operators are carving out a niche by offering integrated network and cloud services.

NTT Communications is the leader in the APAC telco cloud services market with the highest overall score based on four categories – cloud portfolio, data center footprints, software-defined infrastructure and supplemental services.

“Cloud products offered by telcos are comparable in terms of technical capabilities and ecosystem partners,” GlobalData analyst Alfie Amir said. “What differentiates NTT Communications from the rest is its wide footprint and presence in the region to address data residency and latency requirements, as well as its software-defined capabilities which offer better workload management and service orchestration,” he added.

Australia-based Telstra and France-based Orange Business Services are in second and third place. While these providers have similar capabilities to NTT Communications, they are slightly behind with their footprints in the region. However, they are rapidly closing the gap, with Orange Business Services having partnered with Huawei to drive expansion in the region – particularly in China, and Telstra recently announcing a partnership with Equinix for direct access to more infrastructure globally.

The initiatives by telco cloud providers to add software defined capabilities, expand their footprints and enhance service capabilities are in-line with enterprises’ digital transformation directions. Enterprises today are looking for cloud providers with extensive cloud portfolios, not just the traditional IaaS, PaaS, and SaaS, but also cloud-based IT services such as IoT platform, UCaaS, security and marketplace that offer various horizontal and vertical applications.

“The APAC cloud market is still growing fast as the market emerges, while the competition is getting more intense driven by the web-scale players,” Amir said. “Telcos need to continue to leverage their network strengths and at the same time, include latest technologies such as self-service tools, analytics and AI in their offerings to gain competitive advantage,”  he added.

Above illustration courtesy of K-Hits which has a report on the global telecom cloud market.

Reference:

https://www.globaldata.com/ntt-communications-poised-to-retain-lead-in-asian-telecom-cloud-market-says-globaldata/

 

Synergy Research: Cloud Service Provider Rankings (See Comments for Details)

Cloud services market remains top heavy, with the large providers dominant. Synergy Research

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According to Larry Dignan of ZDNET, “the cloud computing market in 2019 will have a decidedly multi-cloud spin, as the hybrid shift by players such as IBM, which is acquiring Red Hat, could change the landscape. This year’s edition of the top cloud computing providers also features software-as-a-service giants that will increasingly run more of your enterprise’s operations via expansion.

One thing to note about the cloud in 2019 is that the market isn’t zero sum. Cloud computing is driving IT spending overall. For instance, Gartner predicts that 2019 global IT spending will increase 3.2 percent to $3.76 trillion with as-a-service models fueling everything from data center spending to enterprise software.  In fact, it’s quite possible that a large enterprise will consume cloud computing services from every vendor in this guide. The real cloud innovation may be from customers that mix and match the following public cloud vendors in unique ways. ”

Key 2019 themes to watch among the top cloud providers include:

  • Pricing power. Google recently raised prices of G Suite and the cloud space is a technology where add-ons exist for most new technologies. While compute and storage services are often a race to the bottom, tools for machine learning, artificial intelligence and serverless functions can add up. There’s a good reason that cost management is such a big theme for cloud computing customers–it’s arguably the biggest challenge. Look for cost management and concerns about lock-in to be big themes.
  • Multi-cloud. A recent survey from Kentik highlights how public cloud customers are increasingly using more than one vendor. AWS and Microsoft Azure are most often paired up. Google Cloud Platform is also in the mix. And naturally these public cloud service providers are often tied into existing data center and private cloud assets. Add it up and there’s a healthy hybrid and private cloud race underway and that’s reordered the pecking order. The multi-cloud approach is being enabled by virtual machines and containers.
  • Artificial intelligence, Internet of things and analytics are the upsell technologies for cloud vendors. Microsoft Azure, Amazon Web Services and Google Cloud Platform all have similar strategies to land customers with compute, cloud storage, serverless functions and then upsell you to the AI that’ll differentiate them. Companies like IBM are looking to manage AI and cloud services across multiple clouds.
  • The cloud computing landscape is maturing rapidly yet financial transparency backslides. It’s telling when Gartner’s Magic Quadrant for cloud infrastructure goes to 6 players from more than a dozen. In addition, transparency has become worse among cloud computing providers. For instance, Oracle used to break out infrastructure-, platform- and software-as-a-service in its financial reports. Today, Oracle’s cloud business is lumped together. Microsoft has a “commercial cloud” that is very successful, but also hard to parse. IBM has cloud revenue and “as-a-service” revenue. Google doesn’t break out cloud revenue at all. Aside from AWS, parsing cloud sales has become more difficult.

IBM is more private cloud and hybrid with hooks into IBM Cloud as well as other cloud environments. Oracle Cloud is primarily a software- and database-as-a-service provider. Salesforce has become about way more than CRM.

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CenturyLink offers Multi Cloud Connect L2 Service for Fiber-fed Buildings

CenturyLink has unveiled its Dynamic Connections, a Layer 2 (L2) based offering that provides access to many different cloud computing services. The third biggest U.S. wire-line carrier has partnered with Amazon Web Services and AWS GovCloud, saying it will add connections to Google Cloud and Microsoft Azure in coming weeks, then will add IBM, Oracle and other cloud computing services.

With growing day-to-day operations, organizations need a fast and easier way to connect their locations and data centers to cloud service providers. CenturyLink says they offer a complete portfolio of solutions for cloud connectivity. The company’s global access and extensive wavelength, Ethernet and IP VPN connectivity options are designed to meet today’s hybrid cloud requirements.

CenturyLink says they will provide high-performance connections to AWS, Microsoft Azure, Google Cloud, IBM Cloud, Oracle Cloud Infrastructure, and other leading public and private clouds along with more than 2,200 third-party data centers.

Dynamic Connections is available to enterprise and government customers in fiber-fed buildings globally.  CenturyLink has about 130,000 of those today, via an optical Ethernet port.

According to CenturyLink, the customer needs the right hardware and the right size port, but assuming that, they can turn up bandwidth from “as small as 10 Megabits/sec to up to 3 Gigabits/sec,” says Paul Savill, senior vice president of core network and technology solutions at CenturyLink.

“They would use log-in credentials to pull an inventory of all Ethernet ports they have at that enterprise in their locations across the world and they can then see that either in a map view or a list view,” Savill explains. “Then they can drill down to whatever location they want to connect- pick that Ethernet port and then pick the cloud service provider they want, at wherever location that is in the world, whatever data center it is running in, and then indicate the size of the bandwidth.”

Savill said that competing multi-cloud connect offerings –from AT&T’s NetBond, Verizon’s Secure Cloud Interconnect and Orange Business Services’ private and public cloud connections, etc. “can’t match our scale and flexibility.”  [There is also Equinix Cloud Exchange Fabric].

As a L2 service, it doesn’t touch the Internet, which thereby provides greater security. In addition, CenturyLink is offering an open API for the service so that enterprise customers can build it into their own back-office systems and use those for provisioning instead of the portal.

Editor’s Note:

After CenturyLink acquired Savvis in 2011, the combined company attempted to promote its own cloud computing service using MPLS IP VPN for customer access to it.  This new multi-cloud connect service is a huge improvement over that earlier solution.  It will be interesting to see how it competes with AT&T Netbond, Verizon’s Secure Cloud Interconnect service, and Equinix Cloud Exchange Fabric.

References:

http://www.lightreading.com/services/cloud-services/centurylink-adds-dynamic-cloud-connections/d/d-id/746673

https://www.nasdaq.com/article/centurylink-introduces-cloud-connect-dynamic-connections-cm1035159

Cignal AI’s Optical Customer Markets Report: Optical spending up in China & NA; Down for cloud service providers & other regions

Cignal AI’s (Andrew Schmitt) latest  Optical Customer Markets Report states that spending growth by cable Multiple System Operators (MSOs) led all other North American industry verticals during first quarter 2018. The report also reveals that contrary to continued increase in China’s optical spending, incumbent network operator spending in North America and Europe, Middle East and Africa (EMEA) on optical transport equipment continues to decline.  Spending in North America grew 30 percent and outpaced all other customer verticals, including cloud operators.

Indeed, optical equipment spending by cloud operators has stalled due to rapidly declining prices and the use of IP-over-WDM as a substitute. Despite the downward trend, however, Ciena and Infinera continue to increase market share in the cloud optical network market.

“In North America, cable MSOs were the strongest performing customer market during the first quarter of 2018,” says Andrew Schmitt, lead analyst at Cignal AI. “Cloud operators are not increasing purchases of optical equipment, though common belief right now is just the opposite. The revenue growth from cloud operators experienced by Ciena and Infinera came at the expense of other vendors’ sales.”

Other key findings in the report include China being the largest source of optical hardware market growth, almost single-handedly representing the one-third global spending by Asia. Global spending by cable MSOs grew 5% year-over-year in the first quarter, with North America increasing 30%.

Other findings of the report were outlined in the press release and included:

  • Ciena and Infinera sales growth in the cloud and colo market came during a period of overall spending decline among these customers (see above chart).
  • Optical equipment spending by cloud operators has stalled, which contradicts the common perception that cloud operators like Amazon, Google and Microsoft are increasing spending on optical transport equipment. Growth in the cloud market has been inhibited by rapidly declining prices and the use of IP over WDM as a substitute.
  • One third of global spending on optical hardware is in Asia, with almost all coming from Chinese incumbent operators.
  • Cable MSO global spending grew 5 percent year-over-year in the first quarter.

Cignal AI’s Optical Customer Markets Report is issued quarterly and quantifies optical equipment sales to five key customer markets as well as equipment vendor market share for sales to cloud operators.

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From a separate Cignal AI market research report, here’s the latest YoY Revenue % increase/decrease for various segments of the optical networking market by country or region and Grand Total:

 

Chart courtesy of Cignal AI

China Permits Virtual Telecom Operators vs Amazon Virtual Private Cloud (VPC)

China has granted the official go ahead for virtual telecom operator businesses after piloting the practice for almost five years. The China Ministry of Industry and Information Technology has issued official licenses to 15 private virtual telecoms to resell internet access, the ministry said in a statement released Monday on its website.   These virtual operators, including Chinese tech giants Alibaba and Xiaomi, do not maintain the network infrastructure but rent wholesale services like roaming and text messages from the country’s three major telecom infrastructure operators China Mobile, China Unicom, and China Telecom.

In a move to further open up the telecom sector, China started to issue pilot licenses in May 2013 to private companies to allow them to offer repackaged mobile services to users. It issued pilot operation licenses to eleven ‘mobile virtual network operators’, or MVNOs, at the end of 2013  which has gradually increased to A 42 virtual telecom businesses.

Granting virtual telecom operators official licenses is aimed at encouraging mobile telecom business innovation and improving the sector’s overall service quality, the statement said.

Reference:

http://usa.chinadaily.com.cn/a/201807/23/WS5b559eb4a310796df4df82ed.html

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While Amazon is not a virtual ISP, they do offer Virtual Private Cloud (VPC) service:

To securely transfer data between an on-premises data center and Amazon Web Services (AWS), consider implementing a transit Virtual Private Cloud (VPC).  Transit VPCs not only manage your networks more efficiently, but also add dynamic routing and secure connectivity in your cloud environment. Because these transit VPCs are deployed with high availability on AWS, downtime is limited.

Amazon’s VPC lets a company or enterprise provision a logically isolated section of the AWS Cloud where you can launch AWS resources in a virtual network that the user defines. The user has complete control over the enterprise virtual networking environment, including selection of IP address range, creation of subnets, and configuration of route tables and network gateways. You can use both IPv4 and IPv6 in your VPC for secure and easy access to resources and applications.

These AWS resource requests are implemented virtually and can be used to connect Amazon VPCs, whether they are running in different parts of the world and/or running in separate AWS accounts, to a common Amazon VPC that serves as a global network transit center. This approach uses host-based Virtual Private Network (VPN) appliances in a dedicated Amazon VPC and helps to simplify network management by reducing the amount of connections required to connect multiple Amazon VPCs and remote networks.

Simplify network management and reduce your total number of connections by deploying a highly available, scalable, and secure transit Virtual Private Cloud (VPC) on AWS.

Download the eBook to learn more about:

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Cloud services to reach $374 billion in 2022; Integration of AI & ML into enterprise business apps to drive growth

by  IHS Markit analysts Clifford Grossner, PhD and Devan Adams

Executive Summary:

To grow market share, many cloud service providers (CSPs) are introducing specialized compute instances, which target data-intensive workloads and ease the integration of artificial intelligence (AI) and machine learning (ML) into enterprise business applications as a strategy to capture market share. This type of activity is expanding the high-growth cloud-as-a-service (CaaS) and platform-as-a-service (PaaS) segments. The off-premises cloud service market is expected to reach $374 billion in 2022, at a five-year compound annual growth rate (CAGR) of 17.7 percent.

Innovative service offerings by CSPs are multiplying, including the introduction of blockchain technology in PaaS service offers. They are also introducing new services focused on enterprise verticals, including the following: healthcare, to aid diagnosis; energy, for oil and gas exploration; financial services, for transaction monitoring; and supply chain efficiencies in retail and government, for smart city infrastructure. These services package expert domain knowledge acquired by CSPs and make it available to enterprises.

“Amazon made a smart move when it integrated Alexa into Amazon Web Services business applications — and by launching several machine learning services, further expanding its breadth of intelligent solutions,” said Clifford Grossner, Ph.D., senior research director and advisor, cloud and data center research practice, IHS Markit. “Google and Cisco also upped their AI and ML game, targeting hybrid cloud deployments with a collaboration aimed at running these tasks, both on-premises and from Google Cloud.”

As certain market segments mature, consolidation continues for two reasons: buying competitors for access to their client base and expanding service portfolios. Some recent notable mergers and acquisitions include the following: Equinix announced its intention to buy Infomart Dallas, GTT Communications is planning to acquire Interoute, INAP acquired SingleHop, Google agreed to acquire Xively and Microsoft agreed to acquire Avere Systems.

The types of partnerships CSPs are striking evolved from partnerships with enterprise software vendors, as a way to gain a foothold in on-premises data centers, to establishing relationships between providers for cross selling. Some recent noteworthy partnerships include the following: SAP and Microsoft announced a partnership to integrate SAP’s S/4HANA ERP suite with MS Azure; China Unicom plans to expand its reach across various industry verticals, by partnering with YonYou; British Telecom partnered with IBM, to extend its BT Cloud Connect Direct multi-cloud platform; and Salesforce also partnered with IBM, to enhanced its go-to-market strategy.

Highlights:

  • The CaaS category is expected to grow 56 percent in 2018, with a five-year CAGR of 29 percent; PaaS will grow 55 percent, with a five-year CAGR of 31 percent.
  • North America, the birthplace of off-premises cloud services, will remain the lead market through 2022, delivering approximately 53 percent of all global off-premises cloud service revenue.
  • IBM continued to lead the market for software-as-a-service (SaaS) in 2017, with 18 percent of revenue; Amazon led infrastructure-of-a-service (IaaS), with 41 percent of revenue; Microsoft topped the list for PaaS, with 26 percent of revenue; Microsoft’s lead in CaaS continued, with 21 percent revenue; and Equinix led the physical facility market, with 15 percent of revenue.

Research Synopsis:

The biannual IHS Markit Cloud Services for IT Infrastructure and Applications market research report tracks public or private network delivered services offered by a third party (cloud service provider or telco); cloud brokering is not tracked. The research service provides worldwide and regional market size, cloud service provider (CSP) market share, forecasts through 2022, analysis and trends. CSPs tracked include Amazon, Alibaba, Baidu, IBM, Microsoft, Salesforce, Google, Oracle, SAP, China Telecom, Equinix, Digital Realty, Deutsche Telekom Tencent, China Unicom and others.

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