Who needs a data center?

What does it take to start a company in this era of the New Enterprise? Nothing more than an idea. You might stop me right here and say “wait a minute, you need to have a website built and probably some knowledge of coding and it would depend on the idea”. I would argue that while a knowledge of coding would make your life a little easier and yes you do need to build a website, those things can be done in the cloud.

In the days of the Old Enterprise starting a company was a risky and expensive endeavor. Yes, they all started with an idea but there was so much more involved in the Old Enterprise. You had to buy materials, if your garage was packed, you needed space. In the 1990's you needed to have a website but you couldn't build it yourself very easily as you had to have a lot of coding knowledge. The start up costs alone could run in the millions of dollars. Then you had to go and actually talk to people about your product and convince them to buy it. And if the business failed (which statistics tells us is the most likely outcome)? You lost everything! But what if the business succeeded? What then? How would you keep it going?

Once the business was up and running you would need infrastructure and in the Old Enterprise that was very expensive. If we go back to the 1990's, infrastructure meant a data center. A place for your servers to run to serve up your website (if you had one) and other servers to serve your employees and store your data. As your business would grow, so would the size of your data center. In fact, since just about every company in the world needed a data center, old buildings were converted to data center space and new buildings were built specifically to be data centers. This was the future, this is where the money was (if you were in the business of selling servers, networking gear, racks, space etc.) and that was true for a while. Then enter the cloud, and everything is changing.

In the New Enterprise, just about everything can be done in the cloud. The costs to start a company in this era are so small that, so long as you have Internet access, you can start a business for easily less than $10k depending on the business. If that business fails (which is still extremely likley) then you are not out much, relative to the Old Enterprise. And if it succeeds then the costs still are low thanks to the cloud. Specifically infrucutre as a service (IaaS). IaaS means that just about any business can use servers provided by the cloud and store there data, securely, in the cloud. They don’t need their own data centers any more. Even established companies are looking at strategies that close down almost all but the most important data centers. For established companies, if the data is not secret or top secret, then way not just store that data in the cloud. They will free up space and capital to focus on their core business.

So, who needs a data center? In my opinion, only companies whose core business is selling IaaS are going to need a data center. Everyone else will need either very small or no data center at all. The world is going to continue to need servers, switches, routers, racks and data center space but it won’t be the big customers for this won’t be the next big start up, it will be Microsoft, Amazon, Google, Rackspace and hopefully many more.

I think the challenge we are going to face here is competition. In order to keep IaaS costs low, there must be more competition than there is today. If that happens, I think that we will continue to see more and more start — ups. Most will fail but a lot more will be successful thanks to IaaS!