Executive Summary: ISG Provider Lens™ Next-Gen Private Hybrid Cloud - Data Center Solutions & Services - Germany 2022
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High demand for IT or cloud services in Germany
The infrastructure outsourcing market continues to grow, but unit prices are falling significantly. Providers are trying to use service automation to compensate for this price reduction, along with higher employee turnover and rising employee costs. In addition, cyber threats and the complexity of cloud landscapes are increasing.
The IT and business services market in Europe is growing steadily. The strong performance of the managed services segment continued in the first quarter of 2022. During this period, the overall market, which includes aaS and managed services segments, grew by 24 percent year on year. ISG attributes this growth to an increase in IT and business process outsourcing. In addition, there were strong results in the U.K., France, Germany, Austria and Switzerland. In the IT outsourcing domain, the main contributors were ADM services or application development and maintenance, along with infrastructure services.
The rising demand for cloud services is driven by the growing use of digitalization, combined with the need for resilience and increased agility in modern enterprises. To improve agility, enterprises are using cloud technologies in data centers and hosting and colocation facilities to enable the rapid deployment of new services in the most suitable infrastructure. The demand for service support has increased, as the handling of such architectures and technologies is complex and, in most cases, cannot be managed by in-house staff. Enterprises are investing less in their own hardware and relying on the flexibility and scalability of cloud providers to reduce their capital expenditures. Most service providers offer both managed services and managed hosting. Hence, offerings overlap easily. Therefore, it is important for clients to choose the right provider that can offer comprehensive support in planning, implementation and operation.
Managed hosting providers that own and operate their own data centers are increasingly relying on colocation services. As a result, the need for additional colocation data centers is increasing. Clients include integrators, companies that are downsizing or closing their data centers and public cloud providers, some of which are no longer building their own data centers but use the space and services provided by colocation providers. More than 1,000 service providers or hosting providers in Germany, Austria and Switzerland look to win almost 100 million residents and more than five million midsize companies and corporations as their clients. Cloud-native applications are designed to use APIs and microservices to share data quickly. Legacy applications that reside outside the cloud infrastructure should not slow down these data transfers, for which they require low-latency networks. Hosting and colocation providers offer better networks than the ones configured on-premises by customers. Low-latency networks are essential for high-quality services over long distances.
The number of enterprises that require a maximum latency of 35 milliseconds or even less is growing and will continue to grow in the future due to ongoing digitalization projects.
Managed Services
Managing hybrid infrastructure requires tools for integrated infrastructure operations. In most cases, VMware and ServiceNow products serve as the foundation for service providers to run machine learning for automation development. Advanced service platforms automate incident analysis to suggest possible root causes, provide more contextual information to support teams and/or automate incident resolution, reducing the mean time to detection (MTTD) and mean time to repair (MTTR). Service providers will continue to automate operations to improve service levels and reduce costs. Midsize enterprises want to simplify infrastructure management and reduce their operational risk. On the other hand, large enterprises want to reduce service disruptions to improve their quality of service. Leading service providers offer robust automation to improve quality and simplify management.
Managed services have evolved to support multicloud and multiplatform landscapes, regardless of private, public or hybrid cloud. In some cases, mainframe services are also integrated. As a result, infrastructure management has become complex. Managed service providers can help clients address these management issues, as they have well-trained experts with appropriate service, product-specific and partnership certifications. Relevant providers maintain partnerships with several hyperscalers, such as AWS and Microsoft Azure. Providers have enhanced their machine learning models to offer customers usage analytics and insights and optimize infrastructure through consolidation and right sizing.
Large enterprises use the services of multiple public cloud providers, as they offer different functions. If one cloud goes down, the other can be used as a backup. Multicloud services are becoming more refined and are mainly distinguished by automation and intelligence to improve management quality, speed up production and improve security, while ensuring proactive management and self-healing in case of any failure.
Customers expect customized infrastructure services.
The challenge for service providers is to offer industry-specific technology stacks.
Leading providers for large enterprises in Germany are Accenture, Arvato Systems, Atos, Capgemini, Computacenter, DXC Technology, Fujitsu, IBM, Infosys and T-Systems.
Leading providers for SMEs in Germany are All for One Group, Axians, CANCOM, Claranet, DATAGROUP, Deutsche Telekom (TDG), Materna, PlusServer and q.beyond.
Managed Hosting
The study found more competitors in the managed hosting market in 2021. This market, once threatened by the emergence of public cloud hyperscalers, is now being reinvigorated with new technologies. Hosting providers offer automated, self-service platforms that mimic the public cloud services portfolio. Hosting platforms are integrated with cloud providers through hyper connectivity. High-end infrastructure technology makes hosting attractive for running stable applications that would not benefit from cloud services such as auto scaling. Many hosting providers offer bare metal servers on a pay-per-use basis to address customer requirements.
The asset-heavy nature of the business is leading to a widening gap between the large, established providers and new and smaller providers. It has been long since providers shifted their focus to cloud. The study focuses on private cloud hosting resources and their integration into hybrid operating models. Providers have developed their offerings and provide hybrid cloud services that can be combined as necessary and are operated on a single platform.
Many companies find it difficult to integrate legacy applications into public cloud infrastructure, and they prefer to run them on colocation data centers or migrate them to managed hosting services. Providers can manage colocation, hosting and cloud from a single AIOps platform and offer customers a cloud-like experience on any infrastructure.
Most providers have partnerships with at least one of the major public cloud providers, such as Microsoft. Depending on the size and configuration of the provider and customer requirements, there are additional public cloud partnerships with AWS, Google, IBM, Oracle or Alibaba. Providers’ service experts are certified accordingly and take a comprehensive approach to operations across all cloud environments. Customers are supported when migrating to the cloud, in some cases, all the way from transformation to commissioning. In addition to housing services, some colocation providers have expanded their range of managed cloud hosting services.
With the trend toward managed services, some hosting companies give up all or part of their own data centers for various reasons, such as a lack of space for computing resources or an aging technical infrastructure that is currently difficult to upgrade without further investment in areas such as IoT and edge. In addition, adherence to compliance policies often become challenging, and some hosting companies prefer to rent dedicated space or cages in the highly secure and certified buildings of colocation providers. This offers a huge advantage to providers because colocation operators are highly specialized in data center infrastructure. Their core business is to take care of technical components, network and server hardware, physical building security, general data center standardization, carrier and public cloud connectivity, energy consumption, and CO2 levels. The disadvantage of this development is that the remaining service portfolio is significantly reduced, and only efficient providers survive.
Cloud operations are mainly supported with products from VMware, Nutanix, Red Hat or Microsoft. Providers develop their offerings, increasing operational automation and acceleration with AI support and simplifying workloads with container management solutions such as Kubernetes. This makes management more secure and prevents business interruptions. The data is processed and stored on geo-redundant data centers for security reasons.
Leading providers for large enterprises in Germany are Atos, Arvato Systems, Fujitsu, IBM, Rackspace and T-Systems.
Leading providers for SMEs in Germany are Axians, CANCOM, Claranet, DATAGROUP, Deutsche Telekom (TDG), NTT DATA, PlusServer and q.beyond.
Colocation Services
Cloud computing accounts for one-third of the data center capacity in Germany. Several studies predict that cloud data centers will become the majority by 2025. This drives the expansion of digital networks and the rapid advancement of digitalization in Germany, which is clearly visible in the year-on-year comparison of the data throughput of the DE-CIX node in Frankfurt, one of the largest in the world. With around 1,100 connected customers, the throughput increased from 9.1 Tbit/s in 2020 to 10 Tbit/s in 2021, an increase of 1 Tbit/s for the second year in a row. Similar increases were also recorded in network nodes in Hamburg and Munich. DE-CIX handled a total of 38 exabytes worldwide. Topics such as integration and security have been successfully mastered and have reached a new standard. Last year’s developments were, therefore, aimed at increasing usability to enable the easier handling of booked services.
Increasing demand, combined with a persistent shortage of resources, has led to new economic awareness regarding the construction of data centers in recent years. In 2020, the average Power User Effectiveness (PUE) value was 1.63, but the average PUE value of each new data center is falling to 1.3 and below currently. In contrast, the number of installed workloads per kilowatt hour of electricity has increased fivefold since 2010. Data centers in Germany have a huge energy requirement and consume about three percent of country’s electricity requirement. To achieve energy efficiency, modern cooling and passive concepts were created; technical innovations are not limited to the temperature. Within the racks, the focus is on optimal hardware interoperability, which increases the power density in the available space. The risk of fire has been significantly reduced, and existing hardware is used optimally and for a longer time.
Investments in data centers below 40 KW are no longer profitable, and the era of large data centers with more than 5 MW has begun. There are currently about 90 of them in Germany, and they supply half of the capacity available in Germany. The urgent need for more capacity has given data center providers a financial advantage in terms of sustainability and should serve as an incentive to invest in the same. The German Federal Republic should not only supply reliable electricity but also make its sustainability policy lucrative. Advancing digitalization should be taken into account in the approval procedures because data center operators are still concerned about the complex procedures. Thus, the market in Germany is limiting innovations for more sustainability, although the issue was already addressed by the eco competence group in 2018.
Leading providers for large enterprises in Germany are CyrusOne, Datacenter One, Equinix, Interxion, ITENOS, maincubes, noris network, NTT GDC and Telehouse. Atlas Edge is the Rising Star.
Leading providers for SMEs in Germany are KAMP, myLoc, PFALZKOM, PlusServer, STACKIT and TelemaxX. akquinet is the Rising Star.
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