Hybrid, Multi-Cloud Data Centers On The Rise In Secondary Markets

For many organizations, gone are the days of an on-premise server and a handful of applications powering day-to-day operations. 

The coronavirus pandemic, which sent office workers home overnight, fueled a rapid transition away from the old ways of managing IT, and it helped to usher in a new wave of demand for flexible, reliable data centers that support multiple cloud providers. 

Chicago is a notable case study illustrating the need for data centers with hybrid and multi-cloud support. Depending on their specific needs, organizations increasingly rely on a sprawling network of applications, multiple cloud services, and some on-premise data hosting in order to do business. And data center firms are expanding in order to meet that demand. 

“Some companies are thinking about what’s possible with hybrid cloud but haven’t yet implemented, others are activating a plan, and others are deeply integrated,” said Coresite Vice President Network, Channel & Enterprise Ben Green, speaking on a recent Bisnow webinar. Coresite is a data center REIT that operates facilities across the U.S. amounting to 4.6M SF. 

Generally speaking, hybrid cloud refers to some combination of cloud and on-premise data hosting and processing. Multi-cloud simply means that an organization relies on more than one cloud provider, such as Microsoft’s Azure, Amazon’s AWS or Google Cloud, to handle different workloads. 

Coresite, which recently opened up a second 18-megawatt data center campus in Chicago, touts its easy on-ramps to cloud providers, flexible offerings in terms of colocation space and low-latency environment. Latency is critical for environments where split seconds matter, added Edward Dryer, senior technology strategist at Steadfast, which offers managed IT infrastructure services.

“Typically, where you see the hybrid situation is in manufacturing or in systems that require low latency, [like] on a factory floor, where if you’re more than three milliseconds off everything goes to heck,” Dryer said. “Outside of those situations, everyone’s in a business transition situation.”  

The pandemic also sent a rush of small to midsized businesses to data center services. 

“COVID has changed everything,” Dryer added. “In the pre-COVID universe, organizations were going strategic long-term financial planning, compliance, operational efficiencies ... in 2020, it’s just been a mad scramble for everyone to figure out how to get access to the resources whatsoever.”

Even before the coronavirus, Chicago was on its way to becoming a top data center market. Boosted in part by a 10.25% tax credit for data center equipment, Chicago saw the fourth-highest level of data center construction in 2019, according to CBRE, alongside record leasing activity. At the center of the Midwest, Chicago is also an important market for edge computing, which is computing that needs to be done physically closer to the end user to achieve low latency.

Organizations are trying to strike the right balance between on-premise and cloud solutions, as well as what cloud providers work best for different computing needs.

Ray Parpart, director of data enter strategies and operations at the University of Chicago, pointed out that the university has migrated to cloud, software-as-a-service solutions for its administrative side. But large-scale, data-heavy research trials, for example, are largely run through the university’s large on-premise data centers. 

“We do a significant amount of on-premise still, significantly on our research side,” Parpart said. "But we’re definitely in a hybrid and leveraging Azure, AWS, Google."

For those large-scale research projects, Parpart noted, researchers may run a limited test in the cloud before conducting the final versions using the University of Chicago’s own facilities.  

Likewise, leading hospital systems are using both on-premise and cloud solutions with an eye toward delivering the best possible clinical experience. 

“There are clinical applications that sit better in the cloud,” said Andy Balazs, manager of data centers and disaster recovery at University Hospitals, a nonprofit medical complex with 150 locations throughout the Cleveland metro area. “Our administrative systems today are mostly on-premise, but as we look at it now, it’s strategic: is it the right way to deliver information to our clinicians and our patients?” 

For data center firms, the demand for flexible services that respond to evolving business needs, and facilitate hybrid and multi-cloud environments, has never been greater.

“We see gaming companies, we see electric vehicle companies, we’ve seen healthcare, education, banking, finance ... I would argue that there’s no company that cannot benefit from the cloud,” Green said.