Extending data-center benefits across the metro

Jan. 1, 2001

The advantages of collocation without having to install routers, rent rack space, or lease dedicated telephone connections.

Dr. Robert Klessig
and Dr. Michael Hulfactor, Telseon

Virtual collocation is a new optical Ethernet connectivity option of Internet Protocol (IP) services for service providers that have located their network servers in Internet data centers-also known as collocation facilities and carrier hotels. These businesses can now use virtual collocation to extend their services to partners and customers located in data centers across the metro.

Virtual collocation builds on the foundation of the e-business ecosystem of service providers, their partners, and customers collocating within a data center to achieve fast and cost-effective connections. It enables service providers located in one data center to establish a presence in other data centers without having to install routers, rent rack space, or lease dedicated telephone connections, such as DS-1 (1.544-Mbit/sec) or DS-3 (44.736-Mbit/sec) connections. With virtual collocation, the benefits of the collocation model can be extended across the metro, increasing the number of partners and customers that service providers can reach. By expanding the e-business ecosystem, virtual collocation enables service providers to expand their addressable customer base quickly and cost-effectively, reducing the time-to-revenue.

Increasingly, Web-based businesses-content service providers, application service providers (ASPs), dot-coms, portals, and others-are placing their service infrastructure in third-party data centers. Many of these data centers are located near fiber-optic cable access points and other network aggregation points, making peering arrangements possible with interstate long-haul carriers and Internet service providers (ISPs).

While data centers differ in the value-added services they offer tenant companies, all data centers deliver high levels of security, 7/24/365 availability, and substantially lower costs than most in-house solutions.

One of the key benefits of collocation for service providers and Web-based businesses is close proximity to partners and customers. This proximity is creating the foundation of a new e-business ecosystem where key customers and partners are near one another within a secure data center environment. Data centers provide tenants cost-effective access to such services as basic storage, backup, content distribution, and outsourced applications integration. It is not unusual, for example, for an ASP to collocate with its network-management supplier and backup service provider. In a data center, short crossconnect links between the partners minimize the cost of reaching those services.

Yet, as the trend toward collocation accelerates, companies are already encountering difficulties:

  • No vacancy. Data centers that are located near metropolitan backbone aggregation points and national fiber backbone termination points are largely sold out, often before construction is complete.
  • Rising prices. Space in the most desirable, high-occupancy data centers is getting expensive.
  • Limited choices. Many new data centers are located on one or more metropolitan fiber rings, but are not close to network aggregation points that provide peering to large numbers of long-haul carriers and ISPs. This limits companies located in these facilities in their service-provider choices.

Right now, e-business ecosystems within data centers are constrained in growth and richness because of the limitations imposed by a data center's capacity and tenant mix. The individual data center becomes a closed community, limiting the selection of services and partners that can be reached easily and cost-effectively, even though businesses grow and their needs change.

In order to sustain growth and competitiveness in today's fast-changing Internet economy, service providers must be able to connect to partners and customers outside of the walls of the data center for numerous reasons:

  • ASPs need to provide very high bandwidth outsourcing across the metropolitan area.
  • Storage service providers (SSPs) want to extend storage over IP to remote customers.
  • ISPs need to serve customers in multiple facilities from a single point-of-presence (PoP).
  • IP backbone providers need to extend high-speed access to customers outside their metro gateway or PoP.

The ability for service providers to connect to partners and customers outside of individual data centers is hampered by traditional metropolitan time-division multiplexing (TDM) telecom systems. SONET is the most widely used TDM system for connecting data center to data center. However, SONET was designed for voice in the mid-1980s, not for IP-based data. Running IP traffic over SONET is complex and costly to implement.

Virtual collocation is a new way to link data centers across a metro into a single, flexible, scalable IP data infrastructure. In creating this application, metro-infrastructure companies give service providers a quick-to-provision, scalable, and cost-effective way to reach partners and customers located in remote data centers. In other words, service providers can expand their e-business ecosystem beyond the walls of the particular data center where their equipment is located.

Virtual collocation is completely transparent to the businesses using the service. A customer cannot tell, for example, that a service provider is located in a data center across the metro and not in an adjacent rack. The only requirement is that the enabling metro-optical Ethernet connectivity services be established in data centers where partners or customers are tenants.

Companies that use the new optical Ethernet infrastructure to extend their presence throughout the metro can develop productive partner and customer relationships. Once a service provider establishes virtual collocation with another data center, it is quick and easy to increase the connection's bandwidth and serve additional partners in the remote data center.

Key to the virtual collocation application is how the metro infrastructure provider creates a "logical wire" that allows businesses to partner in new, more productive ways. Although a logical wire appears like a dedicated, hard-wired connection to the service provider, it is actually a virtual path through the metro infrastructure provider's network. To provide high availability between data centers, that network path should be fully redundant, with no single point of failure.

Up to now, an e-business ecosystem spanning multiple data centers has been slow to develop. A comparison of virtual collocation and TDM/SONET helps clarify the reasons why traditional telecommunications infrastructure has hindered progress, while virtual collocation can offer service providers new business opportunities. Important areas of comparison are cost of ownership and adaptability to changing business conditions.

A service provider linking to remote data centers using virtual collocation is likely to save $100,000 or more in capital equipment costs for each remote site. The primary savings come with the avoidance of incurring expense for deploying an additional router at each remote data center and the use of cost-effective Ethernet technology at the primary data center. The cost of SONET equipment is higher than Ethernet devices because it requires built-in control architecture to handle voice traffic. Ethernet equipment, on the other hand, is substantially less expensive since it is designed to handle data traffic and is manufactured in massively higher volume.

The following estimates of equipment costs compare two different SONET deployments with a virtual collocation solution, which can meet the bandwidth needs of either example.

  • Basic presence with SONET. To establish a new PoP using SONET technology, the ISP installs a mid-range router with fast Ethernet ports and a DS-3 or OC-3 (155-Mbit/sec) port in the remote data center to connect to the primary site. This is a typical scenario for an ISP or other service provider needing bandwidth to reach fewer than 10 customers in a remote data center. The estimated equipment cost is $100,000.
  • Content intensive with SONET. In the remote data center, the content provider requires a high-end router with 16 Fast Ethernet ports and an OC-12 (622-Mbit/sec) WAN port to connect to the primary data center. The estimated equipment cost is $160,000, not including caching hardware.
  • Virtual collocation. This solution is suitable for business situations ranging from establishing a basic ISP presence to more content-intensive applications, such as those offered by ASPs and backup providers. The service provider requires no equipment in the remote data center, therefore the estimated equipment cost is $0.

Acquisition of rack space is a major headache for service providers, particularly in desirable collocation facilities. With a SONET solution, a service provider will have to find and rent rack space to establish a presence in the remote data center. The estimated cost varies from data center to data center. With virtual collocation, rack space is not required.

Service providers can also reduce their administrative and personnel overhead through virtual collocation, since equipment and personnel requirements are eliminated. A SONET solution requires the installation and maintenance of equipment outside the primary data center. A SONET connection is new territory to most companies' IP-fluent technical staff. It requires securing scarce and expensive SONET technicians. The service provider thus incurs charges for staff time, as well as the need for separate parts depots at the remote data centers.

With virtual collocation, service providers can realize substantial short- and long-term savings in monthly bandwidth costs compared to a SONET-based solution. SONET equipment with its capability to keep track of huge numbers of telephone circuits is very expensive to buy and operate. Market researcher the Aberdeen Group (Boston) estimates OC-3 services, for example, cost upwards of $12,000 per month. Additionally, service providers are locked into purchasing in high-bandwidth increments even if they do not use all of the bandwidth. For example, a SONET customer that requires 100 Mbits/sec will need to buy an OC-3 (155-Mbit/sec) connection, thereby incur ring the costs of the additional unused bandwidth.

In virtual collocation, data traffic sent over Ethernet is seamless and requires no conversion. The service provider can realize savings related to administrative efficiencies and lower equipment costs.

In today's economy, service providers operate in highly competitive markets where business opportunities change rapidly. Service providers need to add-or drop-partners and customers quickly and easily.

With a SONET solution, point-to-point links between data centers cannot be redirected when a company changes business partners. SONET connections can take months to provision. To accommodate the delays in obtaining or adding SONET links, a service provider would depend on uncanny business forecasting skills, extraordinary patience, or deep pockets.

Virtual collocation on the other hand, allows service providers to change connectivity as business grows. Additional customers in a data center can be served by installing crossconnects, a procedure that typically takes a day or less. In Internet time, this fast provisioning can easily be the difference between winning and losing business.

Given the exponential growth of data traffic, service providers also need highly scalable bandwidth. Once deployed, a SONET connection is static. If additional bandwidth is required to meet a business opportunity, the service provider starts the months-long provisioning cycle all over again. The situation is so dire that for many service providers the choice is to over-provision, paying in advance for unused bandwidth, routers, and ports. And then hoping they guessed right about the future.

In virtual collocation, a Web interface enables the service provider to control bandwidth directly. For the first time, a service provider can adjust bandwidth to meet a growing business's needs. Bandwidth can be scaled from 1-1,000 Mbits/sec in minutes, freeing service providers and their partners from the need to overprovision to accommodate growth. There is no reason to inventory bandwidth when a service provider can increase it as needed.

Additional parallel 100-Mbit/sec logical wires can be established to reach new business partners or to add redundancy for mission-critical applications. Such a configuration offers scalable aggregate bandwidth up to several Gbits/sec between sites.

The Table summarizes how virtual collocation compares with a traditional TDM/SONET solution in several key business dimensions for service providers.

Virtual collocation strikes right to the heart of the e-business ecosystem because it matches the way businesses move in today's markets. A service provider does not have to commit substantial capital resources to reach a customer in another data center. With virtual collocation, equipment costs are negligible and monthly costs for bandwidth are lower than comparable SONET fees.

The rapid provisioning and scalability of virtual collocation enables service providers and their partners to realize revenue faster than with SONET. Connections with partners and customers located in remote data centers can be established in minutes or days instead of months. Connecting to additional data centers in a metro area enlarges the pool of partners and customers that a business can reach and still enjoy the benefits of collocation-basically speed of connection and cost savings.

Dr. Robert Klessig is vice president of product development and Dr. Michael Hulfactor is director of strategy and market analysis at Telseon (Palo Alto, CA).