Carrier hotel or retail data center?

When planning for an expansion in network capacity, CSPs now have a clear choice to make: they can invest in traditional carrier hotels and continue to focus on wholesale network services, or they can invest in retail data centers, also known as colocation centers, where equipment space and bandwidth are available for rental to retail customers. These facilities not only offer all the direct network connectivity of a carrier hotel but also host high concentrations of customers in network-centric industries, including those working in cloud, content and mobile services.

Retail data centers are a fairly new market development, having first appeared on the network landscape only a few years ago, and their growth is being driven by the ongoing push for corporate cost savings and enhanced IT services. Today’s average corporate data center costs about $9 million to build, a hefty investment even in the best of economic times, so companies that need more computing capacity are increasingly choosing to lease data-center space rather than build or buy it. In essence, they’re choosing to convert a costly capital expense into a recurring operational expense.

As more and more companies shift computing capacity to retail data centers, they’re literally altering the landscape for network services. These kinds of companies tend to be in network-centric industries and require high levels of data-networking efficiency, reliability and scalability to ensure good quality of service (QoS) for their end users regardless of where they are in the world. They’re hungry for higher performance, higher bandwidth and higher-margin services.

For CSPs, deploying capacity and infrastructure in a smart, strategic way can make a huge difference in service delivery and performance as well as in the performance of customers’ services for end users. And within these broader tactical and architectural considerations, CSPs have considerable leeway in choosing where they invest in infrastructure and where they expand capacity. Retail data centers, not carrier hotels, are becoming the preferred point of interconnection for CSPs that want to capitalize on the many corporate tenants also deploying infrastructure in these facilities. They also recognize to an increasing extent that when they build network capacity in a retail data center they’re also building opportunities to develop and sell their services, turning the retail data center into a CSP revenue center.