Increase in data collection drives growth in outsourced services

Remote data centres are expanding as more organisations outsource in-house computer systems to networked computer servers for the storing or distribution of large amounts of information.

Data centre services range from the actual physical space needed to house an organisation’s private computers and software, to hosting data and applications and cloud computing. Big names already operating in the sector include Amazon Web Services, which belongs to the US-based online retailer.

Market watchers say one driver of future growth is likely to be the increasing amounts of data needed to operate driverless cars, which require large quantities of real-time data that will be gathered from and interpreted by sensors inside and outside the vehicle.

Some estimates put the amount of information that will need to be gathered and analysed to operate a driverless car at 1 gigabyte a second, equal to about five hours of streamed television.

Growth will also be driven by the so-called internet of things. According to BroadGroup, a consultancy, the value of the data-service sector in western Europe alone will rise from €4.5bn in 2014 to more than €8bn in 2019.

The vast amounts of data being collected have already led to consolidation in the industry. For example, US-based Equinix acquired UK-based TelecityGroup for £2.6bn in January as part of a bid to increase its European operations.

Location is important for both clients and service providers because of the need to comply with different jurisdictions’ data protection regulations. Rules on what information can be stored and for how long can vary from place to place and also because of changes in legislation. For example, the EU scrapped its data-sharing agreement with the US last year following the revelations about data gathering by US security agencies in documents leaked by US intelligence contractor Edward Snowden.

A new agreement, the EU-US Privacy Shield, has been beset with wrangling and has yet to come into force. The UK vote to split from the EU is further likely to add to the confusion about where companies can store their data.

Amazon Web Services has announced plans to open a UK data centre, its third in the current EU member states, partly as an effort to address sovereignty concerns for European clients.

Despite the growth in outsourcing data centre services, executives seeking to hire external providers need to be aware of attendant risks.

Alex Rabbetts, chief executive of MigSolv, a UK-based data centre, says it can be hard for would-be customers to gauge how effective data service providers may be because certification standards are often meaningless and confusing to non-specialists. One standard is energy consumption, which is used to measure centres’ effectiveness.

“A data centre may claim a certain power effectiveness rating but this may not include the whole facility. So it is hopeless as a comparison tool and confusing,” Mr Rabbetts says.

Another problem is poor customer service. A 2015 survey of more than 30,000 data centre users by MigSolv found the industry produced low levels of customer satisfaction.

Stuart Barnett, chief technology officer of Wi-Q, an online restaurant ordering service, has tried several big providers and says that technical problems are often handled by email. This does not matter if you are just using a data centre for storage, Mr Barnett says. “But we’re running a service and our clients — bars and restaurants — need to know that their customers’ orders have been received. Being able to interrogate data fast is core to our business.”

Reliability is also important. The average cost of a data centre outage has risen from $506,000 in 2010 to $740,000 now, according to some estimates.

Costs can also be an issue. Some older data centres have been accused of imposing unreasonable fees for routine services and long contracts.

However, increased competition is also leading to more flexible purchasing and pay-monthly options that can reduce fees. Steve Wallage, managing director of BroadGroup Consulting, says: “A number of smaller providers is starting to appear with a ‘we try harder’ approach and a customer relationship and support mentality.”