Red Ocean/Blue Ocean: How to Exploit the Hottest Data Center Trends

There are a slew of trends shaping the data center market today for integrators, vendors and channel partners, including software-defined everything, automation, containers and more. But the key to making the most of the opportunity is the ability to answer this: Are you swimming in a red ocean, or a blue ocean?

That’s the question from Marc Staimer, “chief dragon slayer” at Dragon Slayer Consulting, who noted that understanding red vs. blue ocean markets means having a grasp of market mechanics and where challenges and opportunities lie.

Red ocean markets mean that one is swimming with sharks: these are well-defined markets, with plenty of known competitors, plenty of price pressure and rules that are well-known. Strategies that work here include exploiting existing demand, making value-cost tradeoffs and decisions to align one’s business with a strategic choice: either go for differentiation or low-cost margins—rarely can one have both.

Blue ocean markets on the other hand are oriented around innovative new technologies and business models. These markets are generally uncontested, with a handful of first-movers breaking new ground and creating new value in a favorable margin environment. Strategies that work here are differentiation and end-user awareness activities; a focus on strong distribution strategies; and a willingness to lead on best practices. And it’s possible here to have both differentiation and high margins.

Each have their specific challenges.

“You’re always going to have downward price pressure in a red-ocean market,” explained Staimer. “That’s not the case in a blue ocean market, but there, you have to convince people of the technology, because it will be largely unknown and untested.”

In the data center market, opportunities come in red, blue and purple.

Software-Designed Data Center Delivered as Hyper-Convergence (News - Alert)

Perhaps the most-buzzed-about trend in the data center field is the fact that the space is becoming more server-centric and virtualized. Data center operators are moving from vertically integrated hardware stacks to an architecture that separates the infrastructure layer from the service and service management layer. That infrastructure can be delivered in an infrastructure-as-a-service (IaaS) model with its own management and control systems.

The result is one common hardware platform that can be used for different offerings—composed of common elements that they know how to tune and tweak for predictable performance and scale. This reduces cost and boosts service agility, among other perks.

This is a hot topic and rapidly becoming a solid red ocean. But the opportunity here for those targeting data centers as clients is the fact that most data centers are not set up to be their own systems integrators. They still need help with quality assurance, testing, script-writing and configuration, among other things.

“Increasingly, they are interested in getting the software elements shrink-wrapped in hardware—so everything is delivered on servers with a scale-out architecture,” Staimer explained. “Think of it like Legos, with each hardware block consisting of a node + compute/memory/storage. They’re buying silos that have been put together for them, mostly hypervisor-focused, mostly VM.”

So, operators can buy a server, network and storage capacity together, all pretested and pre-integrated. The commoditization of the hardware means no vendor lock-in, less training and expertise requirements and less cost. Distributors can wrap in storage-area networking, data migration services and management into the mix.

This is a market that has become relatively well-defined, Staimer said, and so it’s under some pricing pressure. But the growth is there for partners and vendors that can provide pay-as-you-go, as-a-service-style IT around the virtualization components.

Automation

Another big trend in data centers is automation. And no wonder: Automation offers a number of benefits in the form of less system integration, less manual labor, streamlined data protection (DP) integration, streamlined virtual machine (VM) provisioning and policy-based processes.

“They want to focus on the business, not the IT that runs the business,” Staimer said. “The less they have to put their hands on, the better, because that means less cost, less time, less people—all good stuff.”

Automation shows up frequently in appliances. These can include security, back-up software, purpose-built backup appliance PBBAs for the SME and SMB markets and so on. But typically, these are designed for end users, not for cloud or service providers.  And the market entrants here tend to provide varying degrees of convergence and functionality.

“This is most certainly a blue ocean—everyone’s all over the map,” Staimer said. “It’s hard to compare EMC’s (News - Alert) to HP’s appliance or anyone else’s, because they’re all offering different functionality and all solving different problems.”

But, savvy distributors will remember that it’s not the hardware it’s the problem, and will craft a personalized solution for the data center that meets their specific needs.

“You’re not selling products, you’re selling processes,” Staimer noted. “If you can remember that, you’ll do very well.”

Data Protection Complexity Reduction

If you talk to a data center operator, it’s more likely than not that they will say they have too many DP products. This causes overlapping functionality and leads to additional complexity, higher management costs, and while it’s problematic for backup, this state of affairs can be potentially disastrous for recovery.

“Data centers want simplicity; less required expertise, less training, less troubleshooting, fewer throats to choke,” Staimer said. “They want to reduce OpEx, training, recovery, infrastructure and management.”

To exploit this, partners and vendors will need to contrast this DP complexity with the service simplicity that they can bring to the table. It’s an increasingly attractive proposition as the data center environment continues to evolve.

In many ways, this is a purple ocean—it’s an understood dynamic that most operators want more simplicity. But how to implement that given the changes in architecture to include software-defined networking, automation and other things? It’s become a market where thought leadership can be an important differentiator.

“Data centers have been trying to do this for a while—it’s not new,” Staimer said. “But there’s more and more complexity to address, and in that way this is once again a new frontier.”

Containers

Data centers are increasingly embracing containers as an alternative to hypervisors for application virtualization. And there’s a simple reason for that: A hypervisor adds about 40 percent overhead to every VM. Containers add just 1 to 2 percent.

But containers have their own set of pros and cons.

“Running multiple instances in a single OS in a container is very easy—and they don’t cost more to run on multiple instances,” Staimer noted. “But containers are more difficult to back up—it requires backing up the server and all of the apps on that server—so it’s like backing up a physical server. You have to have agents to do it properly.”

Both of these allow partners and vendors to exploit this purple ocean market. Offering containers to data center operators means that you’re offering them a path to much less cost—there are no hypervisor licenses to worry about, there are fewer instances licenses, and containers tend to be open source, requiring less hardware and management. There’s no hypervisor overhead and no multi-OS overhead at play either, and it blends nicely with an IT as-a-service strategy.

Savvy distributors can also exploit containerization’s downsides by comparing the data center’s process for containers without one’s services, and with. “You can create and manage a container deployment for a data center that makes the process agentless,” Staimer explained. “You can bring your expertise to bear to make it as seamless as it would be with a hypervisor deployment.”

Cloud Backup

Cloud backup is an increasingly popular service because again, it allows data centers to focus more on their business than being an IT provider. Adopting it means that there’s less to manage, a reduction in complexity, and fewer IT vendors, licenses and people to manage.

But while this isn’t a new arena, and there are multiple exploitation paths here to offer backup and recovery to data center clients, there is almost certainly a blue-ocean dynamic at work.

When people think “cloud backup,” they can conflate this with disaster recovery (DR). Staimer warns that providers need to be very clear about what, exactly, they’re offering. Is it just data recovery? Or is it true DR? And to what level of disaster: Server disaster? Site disaster? Regional disaster?

“Disaster recovery as-a-service, or DRaaS, involves multiple layers of service,” he explained. “And how many layers of disaster recovery are you really offering? Make sure that data-center clients know exactly what you’re offering and what you’re capable of providing.”

This includes being able to define the number of their customers you can support at the same time in disaster mode. Also, providers need to adequately communicate what resources can be brought to bear (i.e., AWS, Azure, etc.) and what in-house expertise is on offer. Other questions may be, how long can a cliennt stay in the backup data center? What about DNS updating and rerouting, and topology VDI to get users to their apps. How is the service priced? And in the case of a physical disaster like Hurricane Sandy, how can you get people that need physical access to the data center where they need to be?

“This is a very complicated space, and little understood,” Staimer said. “If you understand this market and all of the details, and can communicate that, you’ll be far out ahead.”

In general, a theme unifies all of these opportunities: less hardware, more software, simplicity in management and a reduction in OpEx and IT.

“Whether you’re going after a red ocean or a blue ocean opportunity, the key is understanding the specific market and the dynamics,” Staimer said. “For data centers, things are moving quickly and they’re looking to drive out complexity. That should be your guiding principle across all of these trends.”