Telcos living in the clouds

While telco COs are being affected by IT trends, the real revolution is happening in the data and hosting centers at large global telcos.

While Web players such as Google and Microsoft — as well as IT vendors such as HP-EDS and Sun — get all the attention in the areas of so-called “cloud” or “on-demand” computing, large service providers such as AT&T, BT and Verizon operate data centers that are as large, and in key ways much more sophisticated, than anything happening on the Web or IT fronts.

Such data centers typically serve large enterprise users with Web and application hosting, on-site equipment co-location, managed services delivery, and emerging on-demand application and infrastructure services. Telco data centers also offer something that most Web and IT players cannot: well-integrated networking services delivered via world-class networks leveraging well-defined service level agreements and IT industry best practices.

Web players such as Google “tend to be targeting more of a mass market, consumer or small business type of play” from their data centers, said Steve Caniano, vice president of hosting and application services for AT&T, which runs 38 data centers spanning 2 million square feet of facilities' space. “Not to be disparaging, but I don't know anybody in that space known for delivering enterprise, mission-critical-type services,” he said.

More than any company, Google has garnered attention for building mega data centers to run its search and ad businesses; new on-demand applications, including Gmail, Google Calendar and Google Docs; and its new cloud infrastructure offering, AppEngine, which offers companies an “application development platform in the sky.”

Google's data centers tend to be very large and located in remote areas where land and power are cheap, often along rivers to take advantage of hydropower. That approach reflects its model of serving consumers with on-demand services that don't require user access — no Google user is going to want to stop by the data center to check out their cage. By comparison, many telco data centers serve enterprise users and business centers, so facilities are often smaller and located in or near key cities such as London, New York and Tokyo.

That said, service providers are building on-demand or cloud computing capabilities as well. Verizon, which also runs more traditional telco data centers, is building an on-demand computing platform that it plans to launch by the end of the year, said Chris Gesell, director of marketing, IT solutions and hosting, for Verizon Business.

The offering will let users buy computing and network services “in quantity,” Gesell said. “It's just a different way of delivery.”

The evolution of telco data centers is driven by the same trends affecting Web and IT computing platforms. Power issues are paramount, including lowering electricity costs and being environmentally conscious. Another key trend is virtualization, which lets data-center owners run computing capabilities and applications across multiple servers in a virtual environment. That delivers better platform usage, requiring fewer servers and decreasing power costs.

The next step, which all the carriers interviewed are heading toward, is offering virtualization to customers, passing along the savings and efficiency.