Off-premise is the way forward. The Uptime Institute is talking about a historic shift. Will corporate datacenters disappear? Max Smolaks, Research Analyst, answers.

“For the first time, the proportion of IT workloads hosted in on-premises datacenters now represents just under half of the total footprint. Off-premise is winning the day. This is an important and long-awaited moment for the industry,” says Max Smolaks, Research Analyst, Uptime Institute.

While the importance of datacenters remains, their importance as an integral part of a company’s digital infrastructure seems to be fading. Today, in fact, businesses have never had so many options for where to host their workloads. Colocation, edge sites, public cloud infrastructure and software as a service all offer a mature alternative to support many, if not all, enterprise workloads.

“This does not mean that data centre capacity, usage or spend is decreasing in absolute terms. On the other hand,” notes Max Smolaks, “it does indicate that for new workloads, organisations are tending to choose third-party centres and services.”

Capacity without capital expenditure

The trend is there. The share of workloads in enterprise installations is likely to continue to decline. Organisations are turning to third-party sites as the preferred deployment model for their applications – each with its own advantages and disadvantages, but all offering capacity without any capital outlay.

In Uptime’s 2020 annual data centre survey, respondents indicated that, on average, 58% of their organisation’s IT workloads were hosted in enterprise datacenters. By 2023, this had fallen to 48%. “In this latest survey, respondents predict that only 43% of workloads will be hosted in enterprise datacenters by 2025...”

For Max Smolaks, the economic context explains the trend. “More and more, economic difficulties are weighing on companies’ facilities. They are looking to offload the financial burden. And the organisational complexity involved in creating and managing data centre capacity.

In addition, specialist third-party datacenters are generally more efficient than their on-premise counterparts. Larger cloud and colocation facilities benefit from economies of scale when purchasing mechanical and electrical equipment. This helps them to reduce costs. For certain applications, smaller third-party installations are more attractive. They enable organisations to bring latency-sensitive or high-availability services closer to industrial or commercial sites.

Benefits at different levels

Max Smolaks outlines the main advantages of off-premise. The first, and most obvious, is capacity and change management. “Outsourcing frees business teams from the onerous task of finding the space and power they need to expand their IT estate. It’s also a way of addressing the critical shortage of staff. “When outsourcing, it becomes someone else’s problem.”

A new criterion: environmental reporting. Outsourcing simplifies the process of complying with current and future sustainable development regulations. Logically, it places a large part of the burden on the service provider. Max Smolaks puts the additional regulatory requirements that will come into force over the next two to three years – such as the recast of the EU Energy Efficiency Directive – on the same level.

Finally, outsourcing allows companies to experiment with cutting-edge IT hardware without having to make major initial investments – for example, dense clusters requiring liquid cooling.

The promise of the public cloud

In Max Smolaks’ analysis, the public cloud offers another set of advantages over in-house datacenters. In addition to flexible pay-per-use pricing models, customers can adjust their costs by opting for on-demand, reserved or one-off instances. “It’s no surprise that the public cloud now accounts for a growing share of IT workloads, with a 12% share, up from 8% in 2020!”

However, this does not mean that the public cloud is perfectly suited to every workload, particularly if the application is not reorganised to take advantage of the technical and economic benefits offered by a cloud platform. One of the problems highlighted by Uptime Institute Intelligence is the lack of visibility over cloud providers’ platforms. “This prevents customers from assessing their operational resilience or better understanding potential vulnerabilities.”

Yes, but… costs that are sometimes too “high

Public cloud deployments also tend to generate exorbitant costs. Finally, the intense competition between cloud providers and their proprietary software stacks makes multi-cloud strategies, which mitigate some of the risks inherent in cloud architectures, too costly and complex to implement.

In specific cases, cloud service providers have an oligopolistic advantage in accessing the latest technologies. For example, Microsoft, Baidu, Google and Tencent have recently spent billions acquiring huge numbers of GPUs to create specialist AI training clusters, exhausting the supply chain and causing GPU shortages.

In the short term,” warns Max Smolaks, “many companies that choose to develop their own AI models will simply not be able to buy the GPUs they need and will be forced to rent them from cloud providers…”