Data Center Benchmarking Study

Data Center Benchmarking Strategy Study
Trends, Future Technologies, and Business Models
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September 2016
Contents
Section
Slide Number
Executive Summary
Market Definitions and Scope
Data Center Industry Trends
11
Industry Trends by Co-location, Managed Hosting, and Cloud Computing
18
Data Center Industry Competitive Landscape
24
Data Center Best Practices Framework
Data Center Strategy
29
Application Hosting Strategy
38
Recommendations
42
The Frost & Sullivan Story
49
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Executive Summary
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Key Findings
Companies should have their own data centers globally wherever they have significant
internal operations, as this would help in keeping control over their Information Technology
(IT) infrastructure.
Co-location and cloud hosting serves is an effective starting point in countries with
insufficient scale of operations or when a short time-to-market is required. For internal
operations, co-location is still preferred over cloud hosting.
A company should adopt a hybrid approach in its application deployment strategy

important workloads (research and development, manufacturing) in own or co-located
facilities and less sensitive applications (parts of sales, marketing and service) hosted on
cloud.
A measured approach to weigh the pros and cons of using cloud applications for less
sensitive applications is needed. Companies should also devote resources to ensure that
security levels remain optimal, especially when cloud applications are employed.
Source: Frost & Sullivan
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Market Definitions and Scope
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Market DefinitionData Center Services

Key Takeaway: Outsourcing of data centers to a third-party service provider can be either through
managed hosting or co-location.
Data Center Market: Price Versus Services , APAC, 2015
Business Process
Application
OS
MANAGED HOSTING
Server
Network
Rental of servers with basic services such as monitoring

and system reboot
CO-LOCATION
Pure rental of data center floor space, cage, or

empty racks with basic power, cooling, and
bandwidth
Infrastructure
Price Chargeable to Customers

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Market DefinitionTypes of Data Center
Data Center Market: Hosting Pattern

by Type, Global, 2015
10%
20%
25%
30%
Data Center Market: Forecast Hosting

Pattern by Type, Global, 2020
20%
30%
50%
60%
40%
45%
30%
35%
Owned DC
Co-location DC
Hosting DC (including cloud)
Owned DC
Co-location DC
Hosting DC (including cloud)
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Market DefinitionCloud Computing Services

Key Takeaway: A cloud is a pool of compute, memory, and input/output resources, applications, or
operating environments with seemingly infinite scalability, delivered as a service over a network, be it
private or public
Characteristics
On Demand, SelfService
Pay-as-you-use,
Metered
Consumption
Rapid Elasticity,
Scale up/down
Service Types
Deployment Models
Public
Software as a Service
Software delivered through
the public or private network
Private
Platform as a Service
Development platform as a
service
Community
Shared Pools,
Illusion of Infinite
Resources
Broad Network
Access Using
Standard Internet
Protocols
Infrastructure as a
Service
Hybrid
Compute, storage as a
service
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Scope of the Study

Objectives
To provide an overview about data center

demand, trends, and competitive landscape
Overview of the Asia-Pacific data center market
Detailed overview of data center best practices

framework with recommendations for enterprises

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Demand Drivers for Data Centers

Key Demand Drivers
Need to focus on core competency

Increasing complexities with technological evolution virtualization
and cloud services
Outsourced
Rising power requirements that cannot be met in-house
Greater adoption of managed and cloud services
Need to manage regulatory compliance requirements

Rise of Internet-based businesses: Google, Facebook, Microsoft,
Alibaba, Baidu
Captive data centers at scale are cost effective to build and
operate
Captive
Fear of loss of control over data, especially in a multi-tenanted

environment
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Data Center Industry Trends
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11
Major Trends Impacting Data Center Market
High Power Requirements
Data Center Infrastructure

Management (DCIM)
Energy Cautiousness
Cloud Computing
Containerized and Modular

Data Centers

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12
High Power Requirements

High power requirement has become a common interest in the data
center market. The need comes from enterprises either in the
process of setting up a virtualization platform or owning a Big Data
machine, which requires large-scale analytic power.
Currently, in developed data center markets, the ultimate KW
power per rack is not less than 3KW in a typical tier 3 data center
and can reach an average of 4.5KW per rack for the more
advanced data centers in the region. Due to the increasing
demand for high-performance computing, peak power per rack
has easily risen to more than 15KW at the higher end. However,
service providers are unable to support this in most cases.
This increase in demand is being driven by two factors:
o Greater advancements in technology
o Consolidation
Service providers are responding to these threats in two ways:
o Upgrading their facilities
o Effectively managing loads over a greater floor area
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13
Data Center Infrastructure Management

Data Center Infrastructure Management (DCIM),
which is closely linked to the cost and availability of
energy, is getting more executive-level attention at
enterprises aiming toward healthier bottom lines.
Increasing complexities in data centers have created
new demands on DCIM solutions.
Ability to manage virtual or cloud-ready
infrastructures: The level of management and
visibility goes significantly deeper than traditional
DCIM solutions, as it requires understanding of a
logical or virtual environment as opposed to the
physical environment.
IT complexities are driving the adoption of
multi vendor and multi delivery model
environments: An enterprise may choose to run
an ERP in-house in a captive data center or
contact center applications hosted by a third party
and DCIM solutions of today are expected to
manage these complex IT environments.
DCIM Service Catalogue

Energy
Management
Asset
Management
Environmental
Management
DCIM
Power
Management
Connectivity
Management
Capacity
Management
Change
Control
The DCIM industry also has evolved by

managing data centers in multiple locations and
providing visibility to the senior management.
Cloud platforms are using DCIM to provide
customers options to measure consumption for
billing and metering purposes.
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Cloud Computing
The management of hardware and software
traditionally conducted in-house will
increasingly be transferred to third-party
providers, with resources charged on an ondemand, metered basis. This transition is
already well underway in many public sector
organizations.
With cloud computing, business users are
finding it easier to subscribe to the services of
a third party cloud service provider than their
own IT teams. This is due to the greater agility
and flexibility that cloud-based services offer
business users. Furthermore, the self-service
nature of these services is also attracting users.
However, this complicates the role of the IT
team, as this service is beyond their realm of
control and gives rise to security and privacy
concerns.
These factors have driven enterprises to evaluate and adopt different cloud delivery models, especially the
hybrid cloud, which combines the cost effective nature of the public cloud with the security and privacy of
private clouds. This allows them to bring back the control of IT systems to the internal IT team and
overcome shadow IT issues, while meeting employee demands.
Image Source: https://commons.wikimedia.org/wiki/File:Cloud_computing.svg
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15
Energy Cautiousness
Energy costs account for 12%15% of the capital expenditure at the time of setting up of the data center
and refresh cycles. The operating expenditure is around 50%60% on average for a typical tier-III data
center.
Power and cooling giants are running innovative test-beds that aim to provide sustainable solutions for
data centers operating in Southeast Asia's tropical climate. For instance, Toshiba is partnering with
Nanyang Technological University to develop an advanced cooling technology that will enable data
centers to be more energy efficient and cutting energy bills by one-third. This is done by using a modular
structure, coupled with a smart cooling system.
Example: Equinix: It retrofitted its older SG1 facility with a hot and cold aisle approach, sensors for
temperature monitoring, replacement of old fans, as well as expansion of the number of fans. These
initiatives are expected to reduce the Power Usage Efficiency (PUE) of the data center to 1.83 from 2.15
and save around SGD 700,000 in power costs.

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Containerized and Modular Data Centers

Container or modular data centers
pack the entire data center
infrastructure in a box, ready to be
moved on an as needed basis.
The purpose of using a modular
data center is to achieve economies
of scale by adding a piece of the
data center as a plug and play
component complete with IT, power
and cooling elements.
Containerized data centers can

offer significant reductions in
deployment and management costs
especially for those looking for
rapid deployment, high density,
and/or mobility. While container
data centers have their niche
opportunity in catering to workloads
near oil rigs, mining sites etc., they
will continue to remain niche, often
being used to complement bricks
and mortar data centers
The motive of the containerized data center approach is to drive down the costs of data center expansion,
improve quality (quality in terms of consistency and efficient data center design), increase energy efficiency,
and accelerate the time to market.
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Industry Trends by Co-location, Managed Hosting,

and Cloud Computing
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Industry Trends by ServicesCo-location
Demand for pure

low-end co-location
services will decline
Data centers with

the latest cooling
technologies and
power specifications
will lead the market
A power-based
charging model can
protect the revenue
of data centers
Frost & Sullivan expects that the low end of the co-location market will shrink
over the next few years, as organizations turn instead to pay-as-you-go-pricing,
scalable managed hosting, and cloud services that require lower investment in
equipment and personnel
High-end co-location and interconnect providers will continue to enjoy growth,
as demand for secure, latency-sensitive applications increases.
The latest power and cooling technologies will reduce the overall demand for
data center space, as they enable better packing of efficient blade servers.
New data centers with the latest power and cooling technologies will attract
more demand because they are better able to provide facilities for hosting blade
servers, which offer efficient packing of computational power. Hence, an
accelerated demand for blade servers will drive the demand for the latest power
and cooling technologies.
The power requirements in a data center will increase significantly due to the
adoption of blade servers. Given that power continues to be one of the most
important operational costs in a data center, a hybrid charging model which takes
both space and power usage into account can help data center operators to match
revenues much more closely with costs incurred.
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Industry Trends by ServicesManaged Hosting
Service providers have traditionally been offering shared and dedicated hosting
services. Over the last five years, virtualization has been gaining increasing traction
Increasing share of and most services providers today have introduced virtualized hosting, or what is
virtual environments popularly addressed to as virtual private clouds. With advancements in virtual
to lower costs and
infrastructure management tools, service providers have been quick to expand the
enable consolidation share of their virtual environments to consolidate their infrastructure and create
additional space to meet the increasing demand.
Industry Trends by
ServicesManaged
Hosting
Enterprises have started developing an application-centric strategy to meet the

varying demands of different application categories. Hence, there is increasing
demand for application-specific hosting deployment models such as Enterprise
Resource Planning (ERP) hosting. This, in turn, is leading to the emergence of new
partnerships between ISVs and managed hosting service providers to meet this
new requirement from customers. Service providers are of the opinion that ISV
partnership and/or certification will help them create a competitive differentiation in
the market and attract enterprises.

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Industry Trends by ServicesManaged Hosting

(continued)
Migration of low-end
co-location to
managed hosting
Third-party audits
and round-the-clock
monitoring
becoming
mandatory
Setting up and running entire co-located facilities is becoming increasingly

challenging in the light of the increasing complexities in the workspace and the
data center. Enterprise IT departments need to procure and manage their own
infrastructure which requires capital expenditure as well as access to the right
talent in this evolving market.
Due to these factors, there is migration of demand from low-end co-location
services to managed hosting, which is proving to be more cost effective for
customers.
In the last couple of years, there has been a significant rise in enterprise concerns
around security capabilities of service providers. The customer today is demanding
higher levels of performance and uptime than ever before. As a response to these
demands, hosting providers are increasingly opting for third party audits to provide
an independent evaluation of their infrastructure and security protocols. Also, 24/7
infrastructure and network monitoring at the Network Operations Center (NOC) is
becoming a part of the basic package and is mandatory.

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Industry Trends by ServicesCloud Computing
Increasing cloudbased offerings by

most service
providers
Market participants have expanded their portfolio to include Infrastructure as a

Services (IaaS) and a marketplace model to offer Software as a Service (SaaS).
While the former is built entirely on their own infrastructure, SaaS is usually
sourced from an ISV or a SaaS vendor. Most managed service providers have
introduced cloud-based alternatives of their managed offerings. In order to reduce
the time to market for these new offerings, service providers have collaborated
closely with infrastructure vendors.
Service providers
creating value
through integration
and migration
support services
There is stiff competition among the various market participants in the cloud
computing services segment. Most of them have chosen to limit direct competition
with cloud pure plays and they have identified integration, migration, and support
services as a key value differentiators for their services. This has given rise to open
cloud standards, cloud broker models, cloud service aggregator/gateway, and
cloud security.
Automation driving
the transition to
software-defined
data centers
Cloud computing data centers are highly automated environments and these
environments are controlled by highly sophisticated pieces of software that define
the functioning of each component of the data center. Furthermore, provision,
orchestration, lifecycle management, and billing and metering are becoming
mandatory inclusions in cloud-ready data centers. Given the pivotal role of
software in cloud-ready data centers, these data centers are also being referred to
as software-defined data centers.
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Industry Trends by ServicesCloud Computing

(continued)
Shift from reactive

to proactive service
level management
Today, the Service Level Agreements (SLAs) in cloud computing are focused on
uptime and performance. Performance is primarily being measured in latency, jitter,
and packet loss. If a service provider does not meet these SLAs, there is a nominal
fee or credits that are offered to the end user. This is creating concerns in the enduser community due to the limited liability of service providers for taking control of
critical IT infrastructure that can impact productivity and top line for enterprises. As
SLAs evolve, service providers are expected to focus more on proactive
management compared to their reactive nature to downtimes today.
Open source cloud

platforms
Cloud-enablement solution, or a cloud operating system, is primarily based on an

open source concept. The advantage of it being open source is its free availability
and the ability to customize it to end-user requirements. However, it requires a
strong understanding of cloud operating environments and is more challenging and
time consuming to implement.
Cloud service
aggregator/gateway
Cloud aggregators are like resellers in the traditional IT model. They bring together
offerings from different service providers and offer them through a single platform.
Cloud broker model
Apart from being an aggregator, cloud brokers also assist enterprises in

implementing and managing a multi-cloud environment.
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Data Center Industry Competitive Landscape
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Mapping the Data Center Service Provider Ecosystem
Facilities
Pure
Play
System
Integrators
(SIs)
Carrier
Neutral
DCSP
Carriers/
Telcos
CDNs/
Web
Hosters
Key: CDN: Content Delivery Network

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Strengths and Differentiating Factors

Facility Pure Plays
Large Data Center Space in Prime Locations
Facilities pure plays have established a strong presence in Singapore by acquiring prime real estate in and around
the Central Business District (CBD) area. This ample amount of prime real estate has positioned the likes of Keppel
Digihub, Digital Realty, and others in a strong position, as there is lack of new data center space in these areas.
Strong Facilities Development and Management Skills

Facilities pure plays have established strong expertise in data center site selection, design, construction,
engineering, operations, and customer services and are the prime choice for wholesale data center space rental.
Recently, these participants started converting old workshops, publication houses, and factories into data center
space to meet the burgeoning demand for space. Furthermore, they play an important role in assisting other
segments in setting up and managing their data centers.
Carrier Neutral
Offer Unparalleled Flexibility
Carrier-neutral service providers offer customers the ability to work with carriers of choice and are not tied to a
particular service provider. Most of them offer more than one service out of more than one location and this offers
customers the flexibility to choose from a range of delivery models and locations. Furthermore, they are considered
more adept at providing higher redundancy due to their neutrality of vendors and services providers.
Lower Costs
Most carrier-neutral data centers today offer free connection between connectivity providers. This can lead to a
significant cost savings in connectivity costs for end users.
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Strengths and Differentiating Factors (continued)

CDN/Web Hosters
End-to-end Media Hosting and Managing Capabilities
These services have established end-to-end CDN services that encompass hosting, storage, and content
processing, media enablement, and distribution. Their capabilities beyond plain vanilla hosting is what differentiates
them. For example, they are able to offer content processing services such as trans-coding, peak conversions, and
regrouping of content from or to different formats.
Strong Regional Presence and Capabilities

These service providers have set up these capabilities regionally and offer a consistent user experience for users in
any part of the world.
Effective Network Management Capabilities

Network management capabilities is another important aspect of their offerings, whereby they are able to monitor
and manage the distribution and delivery of content across their network.
Carrier Neutral
Complete Control of Network Infrastructure
Telcos own the underlying network infrastructure and this allows them total control over the solution, from IT as well
as connectivity perspective. Hence, they are able to offer a holistic service offering to customers and provide
combined SLAs.
Easier Access to End Customers

Telcos have various other offerings such as a large sales team and relatively easier access to end customers,
especially large customers that are dependent on normal connectivity services.
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Strengths and Differentiating Factors (continued)

Ability to Bundle Services as Well as Create Tailor-made Solutions
Telcos can capitalize on their distinct strength in providing reliable private Internet Protocol (IP) services to enable a
cost effective and secure Virtual Private Cloud (VPC) solution. For example, SingTel has announced new VPC
offerings bundled with its basic connectivity services to Small and Medium Enterprises (SMEs) in Singapore. Its
professional services team, clubbed with multiple service offering capabilities, empowers it to create customized
solutions for end users.
System Integrators
Strong Partner Ecosystem and Integration Capabilities
System integrators have historically been strong in creating customized solutions for their customers by bringing
together capabilities, products, and services from their partners.
Flexibility in Data Center Choice

SIs offer customers the flexibility to choose where to host their infrastructure. They can assist customers in setting
up captive data centers, identify a third-party data center that meets their requirements, or host in one of their own
data centers. This adds to their capability to offer customized solutions.

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Data Center Best Practices FrameworkData Center

Strategy
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Data Center Strategy AnalysisTo Buy or to Build?

Key Takeaway: There are 9 major factors to consider in a build or buy (co-locate) decision making
process.
Buy
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Total Cost of Ownership (TCO) over the

evaluation period
Scale and predictability of demand
Time to market
Growth prospects for the region
Preferred mode of expenditure: capex or opex
Preferred level of control
Fiscal or tax benefits
Political stability
Manpower: availability of skill sets
Build

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Economics of Data Center ServicesCalculating the Total

Cost of Ownership
Key Takeaway: The calculation of TCO will allow the company to weigh the economic comparison
between build and co-location options in their decision making process.
General Parameters
Co-location
Power cost per kW
Bandwidth price per MB
Remote hands cost per cabinet
per month
Number of cabinets
Total kW of redundant power
Evaluation period (years)
Share of available power consumed
Cost per kWh
Internet connection (Mbps)
Build
Total construction cost
o Engineering and preparation
o Power
o Environmental controls
o Security and monitoring
o Network
Floor space
Electricity
Electrical, Heating, Ventilation,
and Air Conditioning (HVAC),
other systems maintenance
Staff
Redundant internet circuits
Buy
Build
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Data Center Strategy Analysis

Unpredictable and
limited demand
Scale and predictability of

demand
Predictable and
strong demand
There is a need to measure and forecast demand to understand the scale and predictability.
Organizations establish a tipping point beyond which building a data center is more cost effective and
efficient.
For instance, one of the enterprises would consider to build a data center only if its power usage or
demand is more than 1.5 MW in a specific country. Another enterprises tipping point in this aspect is 10
MW.
If there is unpredictable and weak demand, it may be more prudent to consider co-location, whereas a
predictable and consistent strong demand may point toward a build decision.
Short time to
market
Time to market
Extended time to
market
Time to market will depend on how immediate the data center needs are. One of the reasons behind a
co-location strategy for most of the interviewees was to serve their immediate need for a data center in a
specific market. Building a data center will require a period of about 12 to 18 months, which may result in
a time lag and weaken their competitiveness in the market.
For instance, one of large enterprises interviewed, co-locates, as it takes a shorter time to market as
compared to a build strategy.
As such, if there is an immediate demand to serve, a co-location strategy will be more suitable for the
company than a build strategy.
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Data Center Strategy Analysis (continued)

Limited growth
prospects
Growth prospects for the

region
Strong growth
prospects
It is important to determine the business growth prospects for the region, especially in developing
markets.
For instance, one large technology company is uncertain about its growth prospects in China and Russia
and hence, it decided on a co-location strategy to test the markets response instead of committing to
invest in data center build outs. It also depends on a large cloud service provider to meet peak demands,
especially to deliver the updates of its new software releases.
In contrast, a large technology company has decided to invest in three new data center facilities in Europe
due to the burgeoning demand for its products and services in the region.
Operating
expenditure model
preferred
Time to market
Capital expenditure
model preferred
This is dependent on the companys preference for expenditure. Building a data center will require a large
capital outlay, which may not be preferred by a company with tight cash flows.
Furthermore, a company may not want to take up the risks of capital lock-in and depreciate it over a
period of 1015 years.
A company may also prefer co-location, as the management will be able to forecast cash outlays more
accurately.
For example, two large cloud service providers use co-location to ensure there is limited capital outlay
when entering a new market and hence, continue to work with co-location providers to host their SaaS
offerings.
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Limited control
Preferred Level of Control

(Facility Management)
Complete control
One main differentiator between a build and co-location decision is the level of control over the underlying
data center facility. This comprises design architecture and mechanical and engineering components of
the facility, including space, power, cooling, and security.
Some business may not want to take up the ownership or may lack the skill sets to manage these
components. These businesses prefer outsourcing to a co-location provider.
While a few cloud service providers prefer to co-locate in another facility and focus on their core
competencies, some large enterprises believe data is their core competency, and choose to invest in
capabilities to build and manage their own data centers.
Limited fiscal benefits
or additional costs of
doing business
Fiscal BenefitsTax
Benefits
Fiscal benefits and

tax benefits
Fiscal benefits is an essential factor when businesses evaluate data center builds and the location of their
new data center. Fiscal benefits can take the form of investment credits, tax rebates, and abatements.
For example, one large Internet company was encouraged to build a data center in a state in the US due
to the many fiscal benefits received by the state.
On the other hand, if there are additional costs to be incurred for building data centers in a specific market
or site, with no significant Return on Investment (RoI), it may push them toward a co-location strategy
instead.
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Difficult and turbulent
to conduct business
Political Stability
Easy and stable to

conduct business
While the ease of doing business in a country is essential, political stability is also an essential factor that
businesses consider while deciding their hosting strategy. Businesses prefer to build data centers in
countries that offer a stable political environment, which ensures stable policy directions as well as
predictable economic growth.
Political instability can cause difficulty in predicting policy changes and changes in economic growth.
For example, a large technology company finds it difficult to navigate the Chinese market and, hence,
found a co-location strategy more preferable than a build strategy.
Lack of skilled
workforce
Manpower Availability of
Skillsets
Easily available and

abundant skilled
workforce
Building a data center also requires a set of employees with the right skill sets to build and operate data
centers.
For instance, before building a data center in a new market, the availability of skilled manpower in the
market is a key consideration for a large Internet company. Lack of relevant skills in the new market may
increase employee costs if it has to relocate current employees, and their families, to the new data center
site.
If there is a lack of skilled workforce, a co-location strategy may be more preferred in order to get access
to the existing workforce with a data center operator.
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Factors to Evaluate When Selecting a Co-location Provider
Traveling distance from main office to data centre

Safe from natural and man-made disasters
Availability and location of the disaster recovery
facility
Country-wide presence
Network provider diversity/redundancy
Quality of bandwidth
Interconnect charges
N+1 design
Commitment and adherence to
99.999% SLAs
Reference checks on SLA
adherence
Quality of
Facility
Location of
facility
Security
Service
management
Reputation
and third party
certifications
Monitoringpro-active availability monitoring, realtime dashboards

Beyond co-locationmanaged hosting and cloud
computing
State of physical security (e.g Biometric

authentication, security guards, surveillance
cameras, and so on)
Cages, access control separation
Customer
service
Connectivity
Reliability and
resiliency
Track record, reference customers,

and financial stability
Uptime institute tier
ISO27001 certification
SSAE 16 and ISAE 3402 Audits
Energy
efficiency
Value added
services
Costs
Scalability
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Age of facility
Architecture of facility
Leadership in Energy and Environmental Design (LEED) certificate
Power and cooling specification
Ability to support future computing and

network requirements
Future investment by the provider in
the latest facility design and
operational elements
Quality of customer support staff

Support optionsphone, email, chat,
social media, and so on
Granularity of SLAs and adherence

Information Technology
Infrastructure Library (ITIL)
adherence and services
Usage of renewable energy sources

Green efficiency practices
On-site power generation
Transparent pricing model

Investment protection and pricing guidelines for
the contract period

36
Ranking of Data Center Service Provider Selection Criteria

by Importance
Enterprise survey of 405 respondents in Singapore
Q. Please Select an Importance Scale for the Factors in Choosing a Data Center Service Provider
(1 being lowest and 5 being highest)
Data Centre Tier
5%
Flexibility to Adapt to Regulatory Compliance
6%
36%
Global Data Centre Footprint 4%
47%
11%
38%
46%
10%
40%
46%
9%
44%
10%
Carrier Neutrality
5%
40%
Managed Services Capabilities
5%
41%
45%
8%
SLAs
6%
41%
45%
8%
Logical Data Security 4%
43%
42%
10%
42%
43%
10%
42%
9%
Lower Price
6%
Physical Security
6%
43%
Data Handling Guidelines
5%
44%
43%
8%
Green Practices 4%
46%
41%
8%
46%
41%
8%
Certifications such as Uptime, ISO, and so on
5%
Brand Name
8%
0%
1-Least Important
45%
20%
2
39%
40%
60%
8%
80%
100%
5-Most Important
Source: Frost & Sullivan Enterprise Survey 2014 (This was done as part of another study and used here to justify the factors stated in previous slide)
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Data Center Best Practices Framework

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Internal
R&D
Manufacturing
Finance / Accounting
Logistics
Procurement
HR
Business-critical functions are more likely to

be hosted on own servers and managed by
the companies themselves.
Service, marketing, and sales functions are

most likely to be outsourced to third party
providers by companies.
Even if these functions are outsourced, only

non-core processes are outsourced.
Companies generally do not feel safe putting
confidential and sensitive data with third
party providers such as cloud providers.
Service
Marketing
External
Sales
Within Human Resources (HR) and finance

functions, non-critical processes such as
expense reports, timesheets, and health
benefits are more likely to be outsourced as
well.
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Application Hosting Strategy (continued)

Methodology:
Based on our research, Frost & Sullivan has compiled the results for each of business function specified to come up with
the corresponding ratios and analysis. In cases where some companies do not have a specific business function, Frost &
Sullivan will remove these companies from the computation for the corresponding ratios.
Statistics
Applications
Self-managed1
Third Party2
R&D
100.0%
0.0%
Manufacturing
100.0%
0.0%
MIS and Office

Supporting
Finance/
Accounting
98.3%
1.7%
Logistics
92.9%
7.1%
Procurement
90.9%
9.1%
Analysis
These 2 functions are regarded as business-critical functions within the
company, especially the R&D function. Most technology companies
regard R&D as a part of their intellectual property, and hence will want
this function to be highly secure and managed on their own servers.
Sensitive information such as companies financial data and audit data
are usually self-managed by the companies, whereas non-critical
finance applications such as expense reports are outsourced. A large
enterprise uses a cloud service provider for its business expense
workload. All third-party managed solutions are hosted in the cloud.
The 2 functions are important functions within the company and are
usually self managed. From Frost & Sullivans research, it is noted that
a large technology company has outsourced the procurement function
to a third party to manage, while it handles the logistics function along
with the third party.
Note:
1 Self managed is defined as hosting the applications on their own servers.
2 Third party is defined as outsourcing to a third-party provider and not hosting the applications on their own.
9AC2-72

40
Application Hosting Strategy (continued)

Statistics
Applications
MIS & Office

Supporting
HR
Service
Marketing
Sales
Self-managed1
90.8%
90.0%
78.6%
63.3%
Third Party2
Analysis
9.2%
Confidential data such as employees data are usually self managed by companies
themselves, while non-critical HR workloads such as timesheets, and staff
expenses are managed by third-party providers. It is noted that a large enterprise
has outsourced its entire HR function. Other technological companies use
SAP/Workday for non-critical HR functions. All third-party managed solutions are
hosted in the cloud.
10.0%
Most companies will still choose to host workload relating to customer servers on
their own, while non-critical service workload is increasingly being outsourced. One
technology company uses cloud-based Zendesk, while another one has outsourced
its non-critical customer service functions to a third-party customer service provider.
50% of third-party managed solutions are hosted on the cloud.
21.4%
The marketing workload is increasingly being outsourced by companies to thirdparty providers, as companies do not see these marketing data as confidential.
Many large as well as small technological companies are outsourcing the marketing
functions to different service providers. Salesforce and eTrique are some service
providers that are offering different innovative solutions in the marketing domain.
60% of third-party managed solutions are hosted on the cloud.
36.7%
Sales workload are most likely to be outsourced to third parties due to the need for
mobility and accessibility of information for sales employees. All third-party
managed solutions are hosted in the cloud, and Salesforce.com is a preferred
vendor.
Notes:
1 Self managed is defined as hosting the applications on their own servers.
2 Third party is defined as outsourcing to a third-party provider and not hosting the applications on their own.
9AC2-72

41
Recommendations
Return to contents
9AC2-72
42
Recommendations
Data Center StrategyGeneral Overview
Cloud Hosting
Co-locate
Build

9AC2-72
43
Recommendations (continued)
Data Center StrategyDecision Factors
Cloud Hosting
Enterprises can choose to deploy cloud services for specific use cases. Cloud services
are cost effective, agile, and scalable. Collaboration, sales, marketing, and services
functions, alongside some non-confidential HR and finance applications are frequently
outsourced to cloud providers by enterprises. Thus, cloud providers such as AWS,
Microsoft, Salesforce.com, NetSuite, SAP, Oracle, and Workday are emerging as
market leaders.
All other applications and workloads that are considered confidential and
private should be self-managed. However, the data center facility may
either be co-located with a data center operator or be self built. The
decision to co-locate or build an own facility will require enterprises to
conduct a study to determine a tipping point (i.e. average MW of power
consumption) where one option becomes more economical.
To Colocate
To
Build
0
E.g. 1.0 MW

9AC2-72
44
Data Center Strategy Decision Factors
Costs
Cloud-based solutions can help lower

the cost of hosting and managing
applications compared to in-house or
co-location.
The TCO over a 5 year period is higher in most

cases but provides greater control and ability to
self-manage applications.
Agility
Having access to scalable IT resources

significantly reduces the time to market
for market entry or new products.
Limited scalability to run predictable workloads in

markets where the company has a stable
customer base.
Innovation (RiskReward tradeoff)
Cloud drives innovation, as it allows

users to test out new products or
services due to low risk-reward
tradeoffs.
High risk-reward tradeoff inhibits internal risk

taking and can be disruptive to innovation.
Security
Only publicly available data, nonsensitive data should be moved onto

cloud.
All data, including sensitive data, can be hosted on

own servers.
Application
Architecture
Application architecture are based on

standard, commodity, or open source
technologies that can be easily
integrated on to cloud platforms.
Application architecture are based on other

systems/proprietary that are not available in the
cloud or cannot be located there.

9AC2-72
45
Internal
R&D
Manufacturing
Finance / Accounting
Logistics
Procurement
HR
R&D is a business function which should

be kept highly secure and confidential.
Enterprises should continue to host and
manage it on their own servers.
Within the other business functions, it

may be more cost efficient and easier to
manage if enterprise segregate the noncritical applications involving nonconfidential and non-sensitive
information, and outsource these
applications to third parties.
Service
Marketing
External
Cloud service providers may provide

highly-scalable and elastic options for
outsourcing non-critical applications.
Sales
9AC2-72
46
Marketing
Information
Internal Company Data

(Critical)
Market Intelligence
(Non-critical)
Market Research
(Critical/non-critical)
Different companies define critical marketing data differently, based on their own organizational policies.
Frost & Sullivan recommends defining critical data as that which captures either confidential information that
is not publicly available or any proprietary information.
Internal company data is proprietary information and should be defined as critical data. Similarly, any data
relating to intellectual property is critical data.
Market intelligence such as analytics or trends are examples of non-critical data, where these data have
been generalized and anonymized to an extent where client or potential client information will not be
revealed.
Market research may or may not be critical, depending on how valuable the data is to the company in
deriving profits. For instance, new product ideas are critical, whereas general research about competitors is
non-critical.
9AC2-72
47
Legal Disclaimer
Frost & Sullivan is not responsible for any incorrect any information supplied to us by
manufacturers or users. Quantitative market information is based primarily on interviews and
therefore is subject to fluctuation. Frost & Sullivan research services are limited publications
containing valuable market information provided to a select group of customers. Our
customers acknowledge, when ordering or downloading, that Frost & Sullivan research
services are for customers internal use and not for general publication or disclosure to third
parties. No part of this research service may be given, lent, resold or disclosed to
noncustomers without written permission. Furthermore, no part may be reproduced, stored in
a retrieval system, or transmitted in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, without the permission of the publisher.
For information regarding permission, write to:
Frost & Sullivan
331 E. Evelyn Ave. Suite 100
Mountain View, CA 94041
2016 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan.
No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
9AC2-72
48

The Journey to Visionary Innovation
Return to contents
9AC2-72
49

9AC2-72
50
Value Proposition: Future of Your Company & Career

Our 4 Services Drive Each Level of Relative Client Value
9AC2-72
51
Global Perspective
40+ Offices Monitoring for Opportunities and Challenges
9AC2-72
52
Industry Convergence
Comprehensive Industry Coverage Sparks Innovation Opportunities
Aerospace & Defense
Measurement &
Instrumentation
Consumer
Technologies
9AC2-72
Automotive
Transportation & Logistics
Energy & Power

Systems
Electronics &
Security
Information &
Communication Technologies
Chemicals, Materials
& Food
Healthcare
Environment & Building

Technologies
Industrial Automation
& Process Control
Minerals & Mining
Business Financial
Services
Public Sector
53
360 Research Perspective

Integration of 7 Research Methodologies Provides Visionary Perspective
9AC2-72
54
Implementation Excellence
Leveraging Career Best Practices to Maximize Impact
9AC2-72
55
Our Blue Ocean Strategy

Collaboration, Research and Vision Sparks Innovation
9AC2-72
56

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Data Center Benchmarking Strategy Study

Trends, Future Technologies, and Business Models

Market Definitions and Scope

Data Center Industry Trends

Industry Trends by Co-location, Managed Hosting, and Cloud Computing

Data Center Industry Competitive Landscape

Data Center Best Practices Framework

Data Center Strategy

Application Hosting Strategy

The Frost & Sullivan Story

A company should adopt a hybrid approach in its application deployment strategy

Market Definitions and Scope

Market DefinitionData Center Services

Rental of servers with basic services such as monitoring

Pure rental of data center floor space, cage, or

Price Chargeable to Customers

Market DefinitionTypes of Data Center

Data Center Market: Hosting Pattern

Data Center Market: Forecast Hosting

Market DefinitionCloud Computing Services

Scope of the Study

To provide an overview about data center

Overview of the Asia-Pacific data center market

Detailed overview of data center best practices

Source: Frost & Sullivan

Demand Drivers for Data Centers

Need to focus on core competency

Need to manage regulatory compliance requirements

Fear of loss of control over data, especially in a multi-tenanted

Data Center Industry Trends

Major Trends Impacting Data Center Market

High Power Requirements

Data Center Infrastructure

Containerized and Modular

Source: Frost & Sullivan

High Power Requirements

Data Center Infrastructure Management

DCIM Service Catalogue

The DCIM industry also has evolved by

Source: Frost & Sullivan

Source: Frost & Sullivan

Containerized and Modular Data Centers

Containerized data centers can

Industry Trends by Co-location, Managed Hosting,

Industry Trends by ServicesCo-location

Demand for pure

Data centers with

Industry Trends by ServicesManaged Hosting

Enterprises have started developing an application-centric strategy to meet the

Source: Frost & Sullivan

Industry Trends by ServicesManaged Hosting

Setting up and running entire co-located facilities is becoming increasingly

Source: Frost & Sullivan

Industry Trends by ServicesCloud Computing

Increasing cloudbased offerings by

Market participants have expanded their portfolio to include Infrastructure as a

Industry Trends by ServicesCloud Computing

Shift from reactive

Open source cloud

Cloud-enablement solution, or a cloud operating system, is primarily based on an

Cloud broker model

Apart from being an aggregator, cloud brokers also assist enterprises in

Data Center Industry Competitive Landscape