The global data centre industry is entering a new evolutionary phase. Driven by a generational shift in the ways in which data centre networks are designed, mass cloud adoption, exponential data growth, a shifting regulatory landscape, and changing approaches to interconnection, the sector is poised for revolutionary change.
“What we’re seeing is a mosaic of services coalescing around the data centre in ways that haven’t happened before,” explains Robert Davidson, Director of Network Services, APAC for global data centre operator Digital Realty. “All these different points of entry are converging at the same time in a way that's allowing us to create an environment where the ecosystem surrounding the data centre is combining connectivity, data storage, application service providers, data service providers, and the interconnectivity to move all that data back and forth between locations.”
With more than 290 data centres, ranging in size from traditional colocation facilities to massive hyperscale campuses, Digital Realty is in an unparalleled position to adapt, react, capitalise on, and drive this monumental transformation throughout the digital space. From his home in Hong Kong, Davidson sat down with us to dig deeper into Digital Realty’s strategy for success in APAC - the world’s fastest-growing data centre region.
Staggered Evolution and a Cloud Revolution
From a regulatory perspective, the process of freeing up markets and reducing barriers to entry started in the US about 25 years ago when the company deregulated in a way that meant data centres were no longer the sole province of telecom operators. A decade later, Europe did the same. “Five years ago, that same process started happening in Asia,” Davidson explains. “What you're seeing now is that the tier one markets - Japan, Singapore, Hong Kong, and Australia - are already open. Then you have the tier two markets like South Korea, India, and Taiwan which are starting to follow suit. There are still a number of tier three markets in Asia that haven't really opened up yet but will probably start to do so over the next few years.”
Intersecting with the deregulation of APAC’s data centre industry is a dramatic increase in cloud adoption throughout the region. It’s this entry of overseas firms (as well as diversification and growth from domestic players), twinned with widespread digital transformation, that’s driving the “mosaic of services” that Davidson describes.
As a result, he explains, things are getting a lot more complicated. “If we were talking 10 years ago, we'd be talking quite generally about a ‘data centre’; now, we can't have that same simplified conversation,” he says. Traditionally, data centres were - as Davidson explains - just ‘data centres’: enterprise colocation facilities that resided within a city’s central business district, resulting in market interconnectivity characterised by “many-to-many” connections.
Now, things are very different. “We're seeing large hyperscale campuses located maybe 40-60km outside the network core being used for data warehousing, and then smaller edge locations close to the end user. It's a fundamental evolution in the way that data centres are architected and scaled. People are now looking for a mixture of large hyperscale campuses, edge transit campuses, colocation edge locations, and even micro-edge facilities which people are looking to use to lower their latencies as much as possible,” says Davidson.
“It's requiring people to think very differently about the data centre market, as well as how facilities are going to be interconnected into the greater fabric of a given market.”
This bifurcation of the data centre industry into centralised hyperscale and a rapidly expanding edge has radically changed the ways in which data centres approach interconnection. Davidson - an 18 year veteran of CenturyLink - explains that around a decade ago, he started to witness the beginnings of this fundamental change. “Some of the most profitable routes that we had in Asia from a connectivity standpoint - where we were seeing the highest yields - were those express routes linking data centre to data centre,” he recalls. This was a far cry from the many-to-many interconnection which had been the norm for the preceding decades.
“Over the last five to seven years, there's been a dynamic shift where network connectivity - largely driven by hyperscale densities - has shifted towards the centralised data centre,” he says. Thanks to increasing deregulation, data centre operators found themselves increasingly able to capitalise on this trend. “What those data centre operators found was that they could build those express networks between core campuses themselves, offering them at discounted rates, and eating into one of the few remaining golden goose revenue streams left to the telcos on the networking side,” Davidson says. The reason for data centre operators’ dominance over telcos in the interconnection space, he continues, is because “they were able to do it a little bit better because they didn't have to view that connectivity as a revenue source, and instead could treat it as a value-add.”
This approach isn’t ubiquitous across the data centre sector, Davidson admits, but for Digital Realty, it’s become a cornerstone of how the company grows and attracts new customers into its user base. “When you look at how Digital Realty operates, that data-centre-to-data-centre connectivity really isn't a product: it's a feature, an add-on you see being used in order to attract people into the ecosystem,” he says. “It's not something you're looking to maximise your margin on; it's something that you're looking to sell as much of as possible in order to enable people to use your site effectively.” This ultra-open approach to the interconnection infrastructure surrounding and connecting Digital Realty’s facilities is, Davidson stresses several times throughout our interview, a key differentiator for the firm. This is a particularly exciting prospect, he continues, when you consider the scale of Digital Realty’s global platform, and their ongoing plans to grow its reach in APAC.
“We're taking the idea of interconnectivity as a value-added feature a step further,” he shares. “When you're a company that has more than 290 data centres globally, that can start to be a very interesting ecosystem play, especially given the fact that we're totally open and neutral.”
New Horizons, New Markets
2021 and 2022 are going to be bumper years for Digital Realty. In APAC alone, they’re planning to bring six new data centres online in the next nine months. “We're going to be in this rapid expansion phase as we open up data centres, and we're already working on the next set of new markets now,” Davidson explains.
When it comes to breaking into a new market, Digital Realty goes where the demand is strongest, not necessarily for data centres (there are often plenty of data centres in the countries they enter) but for Digital Realty itself. “We're being driven by the customers who want us to be in these new markets because they know that with Digital Realty they're going to get the same experience no matter whether they're in Jakarta or Amsterdam,” Davidson explains. “Right now, you can go into a lot of tier two and tier three markets and buy space in a data centre. The supply exists. However, if you do that, you're going to be managing different philosophies, operational styles, and customer experiences.” Rather than manage dozens of relationships with different data centre operators operating within dozens of different regulatory frameworks with different ways of doing business and different levels of technical sophistication, “the advantage of Digital Realty is that you can choose between 290 different sites around the world and be sure that you get the same experience in just about every single one of them,” Davidson says. “They're going to have the same portal, the same command structure, the same user experience that allows you to scale as fast as possible. It's that unified, ubiquitous experience that our 20-30 key customers value from us because, for them, a data centre is just a vehicle to help them achieve their business goals; they don't want to be managing data centres.”
This demand for ubiquitous data centre experiences from a core customer base is the thing that’s driving Digital Realty’s massive expansion throughout APAC. “We're pushing to create this unified environment in as many new markets as possible. That's what's driving our strategy, whether it's in Australia, Hong Kong, India, or Japan,” Davidson explains.
Of course, creating a totally uniform, ubiquitous solution that delivers the speed and convenience of a tier one market like Northern Virginia in a country with a very different regulatory, infrastructural, and cultural landscape, like India (where Digital Realty is currently expanding through its multi-billion dollar joint venture with Brookfield Infrastructure) is no mean feat.
Ubiquitous Experiences in Diverse Markets
“Each market is different,” explains Davidson. “Part of what I do is put together the regulatory and business framework to ensure that, no matter how different things may look when you part the kimono, so to speak, the market feels exactly the same as any other to our customers.”
The first part of entering a new market revolves around creating the right governmental and regulatory strategy to support Digital Realty’s plans for the country. APAC’s deregulation that we mention earlier may be progressing quickly, but the region’s markets are still broken up into three tiers.
There are four tier one markets - Singapore, Hong Kong, Japan, and Australia - which, Davidson explains, “are fairly open. You can build, operate, and own everything from facilities to networks and interconnection infrastructure; you're a facilities-based operator.” Then, in the tier two markets like South Korea, an operator has to approach things on more of a service basis. “You can do most things but you can't always own it all, which means you need to make some concessions or work with a partner,” Davidson says. “And then the third category is pretty much a closed market where you really can't do much of anything without a local partner, like Vietnam.”
“Digital Realty is already in all the type one markets. We're in Singapore, Hong Kong, etc. What we need to be able to do when we look at entering a type two or type three market is figure out how we can create an environment where, while we may not be in a type one market, we can make it look like a type one market to our customers,” and the approach to each new market is different. “What we did in Seoul is very different to what we're doing in India today, and is very different to what we're going to have to do when we start considering a move into say the Philippines,” Davidson explains.
“Digital Realty is building out metro ring facilities. We're building out our own interconnect infrastructure to make sure that we can get in and out of our buildings with fully diverse, tier grade access to the points of presence that our customers need to be connected to.
In the US, for example, you can get a 1+1 redundant circuit and that's going to give you five nines of availability. To get the same level of availability in a place like Jakarta or India, you're probably going to need five routes because of the level of structure in those markets.
Customers don't really want 1+1 redundancy; they want five nines of availability. So, whatever we need to do in any one market to produce that result the customer wants is what we do, rather than just building to a standard that was established for a completely different market context.”
Not only does Digital Realty build out its facilities to offer the same level of colocation experience in India that their customers would expect from London, Tokyo, or Ashburn, but they take great pains to deliver that same experience beyond the four walls of the data centre with regard to interconnection - an area which they take great pains to ensure is a value-add rather than another way to squeeze a few extra dollars from a customer. “Everyone claims to be carrier-neutral. Digital Realty is carrier and fibre neutral,” says Davidson. “We invite everyone in, we bar no one. It doesn't matter who's fibre you're using, you're welcome in our ecosystem. While our competitors might view that connectivity as a source of revenue, we see it as an enabler. We want to build and sell more data centres, and we're not looking to milk our customers once they're in our facilities.”
Ciena: Partnering for Success
Power, cooling, and intelligent, efficient design are all vital parts of a data centre. However, an industry-leading PUE and hyper-dense server racks mean nothing without rich interconnection with the surrounding network.
As it executes a sweeping rollout across APAC, Digital Realty is increasingly turning to interconnection specialist Ciena in order to deliver their ubiquitous, world-class customer experience, no matter the challenges posed by local interconnection infrastructure.
“We work very closely with Ciena to ensure that, while the approach might need to vary from market to market, at the end of the day our customers aren't stuck in our data centres. I've worked extensively with Ciena for the past 20 years. They were the main provider when I was at Qwest and CenturyLink, and I've always maintained that they're the best partner in the space from a total cost of ownership perspective,” says Davidson. “Ciena's products give you the uptime, they give you the availability; everything just works. That's very valuable, especially in a market like Asia where you can't always rely on the level of the skill of the technician you're going to get.”
Building the Fabric of Fabrics
Digital Realty’s scale allows it to take a wider view of the markets in which it operates. “We’re building out metro ring facilities,” Davidson continues. What this means is that the company is developing its own interconnect infrastructure to make sure that its customers can get in and out of its buildings with fully diverse, tier grade access to the points of presence that they need to be connected to. Once this year’s crop of data centres are operational, Davidson explains, “Those metro rings are going to interconnect our campuses so that it doesn't matter where you are in our ecosystem in SIngapore or Hong Kong.”
By early 2023, this growing layer of interconnection between different facilities, markets, even regions, is going to start having some seriously transformational effects. “Once we start interconnecting all of those local markets together, then this idea of the fabric of fabrics is really going to grow,” Davidson says. “Anyone who's plugged into our services in Singapore will be able to make use of our services in Hong Kong and beyond. And because of the fibre and carrier neutrality of that fabric, instead of being locked into one vendor, everyone can join in.”
Digital Realty plans to start rolling out the fabric of fabrics next year in the US. “You're going to start seeing bits and pieces appear in Asia, but I really think it will be fully integrated by early 2023, when enough people start to find value in it that it starts to hit this critical mass. And then it's really going to take off.”
Reflecting on what the future holds, Davidson concludes that there are undeniably exciting times ahead. “We have a number of data centres set to launch rapid-fire in Asia over the next nine months to meet the growing demand we're seeing in the region,” he says. “And then, as those facilities are rolling out, on top of that you're going to start seeing the evolution of our fabric of fabrics. You're going to see a mosaic of services being brought into those data centres that really allow them to interconnect and create the region's first 100% carrier neutral, fibre neutral open environment.”