Mark Cunningham is president and founder of the Dun & Bradstreet Cloud Innovation Center cct in Vancouver.
The "race to zero" is alive and well, as Google Inc. made clear a few weeks ago when it announced that its new Photos app will be free, including unlimited storage. Cloud services have finally reached zero.
Over the past two years, the cloud industry's price war has been good for pretty much everyone. Lower upfront costs, tumbling storage prices and cheaper "compute" (non-storage) services are benefits that software vendors and end consumers alike can thank the race-to-zero gods for providing.
But as prices keep dropping across the board, we're starting to see a levelling of the playing field among major vendors. With cost no longer a big determining factor for companies choosing a cloud infrastructure provider, two other considerations are coming more into play: the sophistication of the compute services on offer, and the geography of those services.
While regular price undercutting has certainly driven the major cloud vendors to innovate to differentiate, it's the geography of cloud services that will soon become a primary deciding factor for many businesses, particularly for large enterprises.
Computerworld predicts that the greatest growth in cloud computing spending this year will come from enterprises with more than 1,000 employees. As companies with global footprints take a serious look at moving into the cloud, the ability to address data sovereignty and privacy issues will become a key deciding factor.
For cloud service providers, this means that ensuring global cloud coverage will be the only way to win those bigger businesses.
We're already seeing many more data centres popping up all over the world, driven in large part by the need to address local data-protection laws. According to International Data Corp. analysts, 65 per cent of the criteria for placing enterprise cloud workloads around the world will be shaped by organizations trying to comply with data privacy legislation in 2015. So while network speed and reliability are still important reasons for why a company might move their workloads around geographically dispersed data centres, it's a tightening of these laws that is really driving demand for global coverage.
Amazon Web Services' Frankfurt region, which opened just last year, is a case in point. As a major business hub with strict national data-protection laws, Germany is a perfect home for one of AWS's 11 global regions.
The exact location of the next round of data centres is tougher to predict. Many other factors will come into play beyond data laws. It's been interesting to see in recent years that cloud vendors have not been picking regions traditionally considered inexpensive. But then, the needs of the data centre are niche.
As well as the need to build near large, skilled work forces and good Internet connectivity, physical cooling costs are an important consideration. Keeping data centres cool is an expensive business, so if cloud vendors can benefit from the effects of a naturally colder climate, so much the better. Apple recently announced two new data centres in Ireland and Denmark, benefiting from moderate climates in both locations. And Google and Facebook have opened data centres in Finland and Sweden in the past five years.
Environmental considerations are also playing a significant role. Apple claims that its new data centres will be run on 100-per-cent renewable energy, while Facebook's Swedish operation is run on locally generated hydroelectric energy.
So where will we see the next data centres? The major cloud providers are keeping their cards close to the chest. My money's on Asia-Pacific as an important battleground in the next few years: Many countries have strict privacy laws, strong economic growth and a proliferation of smartphones and other Internet-connected devices bringing compute power to the masses. Major cloud players will also likely continue to invest in the United States, in an effort to reduce the risk of service disruption from inclement weather.
As a Canadian, I was pleased to read Microsoft's recent announcement of two new data centres here – Canada is often overlooked as a relatively small market compared with the United States.
The two centres will be built primarily to serve government departments dealing with sensitive data that need to stay within national boundaries. However, many Canadian enterprises will be delighted to finally see some cloud servers residing in the country.
It won't be quick, though. It typically takes a couple of years to build a data centre and with costs potentially running into the billions, it's a big investment. But as more enterprises look to move to the cloud, and data-protection laws continue to tighten, expect to see the race for global coverage slowly heating up.