Data Centres

[Dona Ferentes]

I'm raising this as a thread for a couple of reasons:
- The digitisation of human activities continues apace.
- The 'cloud' has allowed for the introduction of a completely new set of industries - software based "as a Service".
- Essentially, the cloud is just a metaphor for the internet. A dictionary definition of cloud computing is the practice of "using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer."

But the main one is that there has been money to be made (or has been, especially in the last 5 years).

I came across some background on why this sector has grown:
"In mid-2017, computer scientists at Google’s security-research unit Project Zero helped discover two 20-year-old flaws in computer chips that were so widely used it meant just about every computer and network in the world was vulnerable to hacking.

Among those vulnerable to the microprocessor flaws were the providers of cloud computing, those that offer IT resources from data centres over the internet. By the time the flaws were made public in January 2018, however, the major cloud-service providers such as Amazon (AWS), Google and Microsoft had secured their systems and enhanced their reputations for competence and security."

And the big 3 from the USA have used their deep pockets to dominate this growing sector. Amazon came to attention recently with news it would host the Covid-19 App. Some thought this would mean sensitive data going to USA (a privacy no-no), but there are two AWS data centres: SYD51 in Eastern Creek and SYD52 in Smeaton Grange towards Campbelltown. AWS also uses two colocated facilities run by Fujitsu, as well data centres operated by NEXTDC, Iseek-KDC, Global Switch, and Equinix.

So, where are we going with this? As well as the international players, we have listed local companies involved in different parts of the sector and they seem to be doing well. It is a large and fast growing industry.



Next DC (NXT) - (purple on the graph) - is involved in the development and operation of independent data centres in Australia. It focuses on providing scalable, on- demand services to support outsourced data centre infrastructure and cloud connectivity for enterprises of all sizes.

MegaPort MP1 - (blue) - is a provider of elastic interconnection services across data centres globally. This service allows its customers to increase and decrease their available bandwidth in response to their own demand requirements instead of being tied to fixed service levels on long-term and expensive contracts.

Data #3 (DTL) - (red) - is engaged in providing information technology solutions. The Company operates through two segments: Product and Services. It is Headquartered in Brisbane, the company has offices, data centres, and configuration and warehousing facilities in operation across Australia.

Macquarie Telecom (MAQ) - (green) - is engaged in the provision of telecommunication and hosting services to corporate and government customers within Australia. MAQ currently operates in two primary business divisions; Hosting (business and government) and Telco mobiles. Recently it announced data centre expansion that will "quadruple capacity and provide many years of growth".

So there we have 4 companies, not all the same and with degrees of focus on data and specialisation in service provision. I'm sure there are other players.

Some of the issues facing the industry:
- Data centres can have technical problems that put them temporarily out of service.
- Their large energy demands could attract criticism, although cloud computing is a more efficient use of resources at a society level and cloud providers are adept at maximising energy efficiency.
-Issues about ‘data sovereignty’ have prompted some governments to force cloud service providers to contain data within country borders. No part of the internet, including cloud data centres, will ever be fully secure. The European banking regulator worries that the outsourcing of core banking systems to the cloud is a systemic risk.
- With data growing, the networks or pipelines have choke points; one often mentioned is capacity constraint on undersea fibre optic cables.
- Increasing market dominance by the likes of Amazon and Microsoft could attract the attention of anti-trust regulators.

 

[waterbottle]

Interesting topic Dona.

I would think these smaller business that you've listed only exist to serve the overseas giants i.e. Microsoft and Amazon.
Unfortunately, I don't see how Australia could be a location for a company as large as the aforementioned - we're isolated and the distance would be a hindrance on transfer speeds.

I'd be happy for someone to prove me wrong though!

 

[InsvestoBoy]

Interesting topic Dona.

I would think these smaller business that you've listed only exist to serve the overseas giants i.e. Microsoft and Amazon.

It depends on the business you are talking about.

Datacenters:
NEXTDC for example hosts AWS workloads, but also many other workloads. Many companies are migrating to Azure, AWS, GCP, etc. But some companies can't, won't use Public clouds or utilise both Public and Private clouds.

For example, I currently contract to a large ASX listed financial org. They have workloads on AWS and GCP but also quite a large footprint in datacenters running Private cloud workloads through a 3rd party Managed Services Provider. This setup is pretty common for most large Aussie orgs. Most businesses will want geographical redundancy and potentially provider redundancy as well.

I do note that @Dona Ferentes didn't mention Vocus (VOC), Telstra (TLS), 360 Capital (TDI) as other DC owners, maybe because their charts don't look so pretty?

Connectivity:
If you are adopting a hybrid cloud approach or anything with geographic redundancy you need the services of someone like MegaPort.

Services:
Companies like DTL derive a lot of money for acting as MSP to get big businesses onto Public Cloud, etc. Lots of work there.

Companies like MAQ kind of fall under all 3 categories.

Unfortunately, I don't see how Australia could be a location for a company as large as the aforementioned - we're isolated and the distance would be a hindrance on transfer speeds.

I'd be happy for someone to prove me wrong though!

The customer base for all this cloud stuff is pretty much all businesses. If you are a tiny 1 person business using Office365 or GSuite for your email/docs/etc then your data is hosted in an Australian datacenter on Microsoft Azure or GCP. If you're a medium/large business you (or your MSP) are either all in on Public cloud in an Australian datacenter, on your way there or pursuing a hybrid approach.

 

[qldfrog]

If you follow nextdc, please look at my posts on the nextdc thread before making a decision

 

[InsvestoBoy]

If you follow nextdc, please look at my posts on the nextdc thread before making a decision

I went and had a look, and saw this post from Ves https://www.aussiestockforums.com/threads/nxt-nextdc-limited.21223/page-2#post-791903

AJD also got acquired didn't it?

So NextDC don't actually own their own DCs anymore either?

 

[Country Lad]

AJD also got acquired didn't it?

 

[Dona Ferentes]

"Perhaps most importantly, the unique characteristics of this particular crisis have increased the resolve we see from customers relative to their focus on digital transformation as a long-term priority”

“This crisis has also created a level of distraction and friction in the overall economy that reinforces the importance of the real-time on-demand scalability”

Charles Meyers, CEO, Equinix Inc [global data centre provider]

“There is no question that moving to the public cloud, even at a time like this, is just capital efficient. Even for businesses that are having tough economic cycles, one of the smartest things that anyone can do…is to transition to the efficient frontier as quickly as possible so that they can have more agility, more elasticity and better unit economics coming out of this, or even while you're in this crisis. So I think the migration to the cloud is absolutely a secular shift”

Satya Nadella, CEO, Microsoft Corp

 

[Klogg]

I'm raising this as a thread for a couple of reasons:
- The digitisation of human activities continues apace.
- The 'cloud' has allowed for the introduction of a completely new set of industries - software based "as a Service".
- Essentially, the cloud is just a metaphor for the internet. A dictionary definition of cloud computing is the practice of "using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer."

But the main one is that there has been money to be made (or has been, especially in the last 5 years).

I came across some background on why this sector has grown:
"In mid-2017, computer scientists at Google’s security-research unit Project Zero helped discover two 20-year-old flaws in computer chips that were so widely used it meant just about every computer and network in the world was vulnerable to hacking.

Among those vulnerable to the microprocessor flaws were the providers of cloud computing, those that offer IT resources from data centres over the internet. By the time the flaws were made public in January 2018, however, the major cloud-service providers such as Amazon (AWS), Google and Microsoft had secured their systems and enhanced their reputations for competence and security."

And the big 3 from the USA have used their deep pockets to dominate this growing sector. Amazon came to attention recently with news it would host the Covid-19 App. Some thought this would mean sensitive data going to USA (a privacy no-no), but there are two AWS data centres: SYD51 in Eastern Creek and SYD52 in Smeaton Grange towards Campbelltown. AWS also uses two colocated facilities run by Fujitsu, as well data centres operated by NEXTDC, Iseek-KDC, Global Switch, and Equinix.

So, where are we going with this? As well as the international players, we have listed local companies involved in different parts of the sector and they seem to be doing well. It is a large and fast growing industry.

View attachment 103240

Next DC (NXT) - (purple on the graph) - is involved in the development and operation of independent data centres in Australia. It focuses on providing scalable, on- demand services to support outsourced data centre infrastructure and cloud connectivity for enterprises of all sizes.

MegaPort MP1 - (blue) - is a provider of elastic interconnection services across data centres globally. This service allows its customers to increase and decrease their available bandwidth in response to their own demand requirements instead of being tied to fixed service levels on long-term and expensive contracts.

Data #3 (DTL) - (red) - is engaged in providing information technology solutions. The Company operates through two segments: Product and Services. It is Headquartered in Brisbane, the company has offices, data centres, and configuration and warehousing facilities in operation across Australia.

Macquarie Telecom (MAQ) - (green) - is engaged in the provision of telecommunication and hosting services to corporate and government customers within Australia. MAQ currently operates in two primary business divisions; Hosting (business and government) and Telco mobiles. Recently it announced data centre expansion that will "quadruple capacity and provide many years of growth".

So there we have 4 companies, not all the same and with degrees of focus on data and specialisation in service provision. I'm sure there are other players.

Some of the issues facing the industry:
- Data centres can have technical problems that put them temporarily out of service.
- Their large energy demands could attract criticism, although cloud computing is a more efficient use of resources at a society level and cloud providers are adept at maximising energy efficiency.
-Issues about ‘data sovereignty’ have prompted some governments to force cloud service providers to contain data within country borders. No part of the internet, including cloud data centres, will ever be fully secure. The European banking regulator worries that the outsourcing of core banking systems to the cloud is a systemic risk.
- With data growing, the networks or pipelines have choke points; one often mentioned is capacity constraint on undersea fibre optic cables.
- Increasing market dominance by the likes of Amazon and Microsoft could attract the attention of anti-trust regulators.

FWIW - DTL no longer operate a data center. They stopped selling their own VMs, and moved clients to public cloud. The investment case didn't stack up.

Nevertheless, I know some private companies who don't use the public cloud (Azure/AWS) for the majority of hosting/servers because it's more expensive. But they still use it in some form (office 365, S3 storage for backups, some CDN capabilities).

As Azure, AWS and GCP become more efficient, price per hour will drop further and it'll just make sense to have everyone on it.

 

[qldfrog]

It makes economic sense but isn't it funny when everyone is crying about how relying on China made our manufacturing/consuming hostages, that we all push the bandwagon of let's go to the cloud.
hostage to your own data stored..well you have no clues do you..accessed by..no clues either, probably a Pakistani guy underpaid and so not corruptible...., nor subject to your rule of laws..and i have nothing against Pakistan could be India Nigeria Morocco or US big brother....
Lessons never learnt

 

[Country Lad]

A dictionary definition of cloud computing is the practice of "using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer."

.........hostage to your own data stored..well you have no clues do you..accessed by..no clues either, probably a Pakistani guy underpaid and so not corruptible....

I prefer my definition of the cloud:
A server stored in the Shifty Brothers' garage.

 

[InsvestoBoy]

It makes economic sense but isn't it funny when everyone is crying about how relying on China made our manufacturing/consuming hostages, that we all push the bandwagon of let's go to the cloud.
hostage to your own data stored..well you have no clues do you..accessed by..no clues either, probably a Pakistani guy underpaid and so not corruptible...., nor subject to your rule of laws..and i have nothing against Pakistan could be India Nigeria Morocco or US big brother....
Lessons never learnt

What are you saying here @qldfrog ?

How do you suggest people host their data, if not in the cloud?

 

[qldfrog]

What are you saying here @qldfrog ?

How do you suggest people host their data, if not in the cloud?

On own server if you have anything remotely confidential or critical. I do not say it is easy to do it properly

 

[InsvestoBoy]

On own server if you have anything remotely confidential or critical. I do not say it is easy to do it properly

Where do you host this server?

 

[qldfrog]

Where do you host this server?

I am not going to bore everyone with details, i too work/worked in IT and including for a major data center.
I spent weeks drawing fail over plan, redundancy approaches, etc

So ideally you use your own premises with back up premises distributed geographically etc etc etc multiple cable accesses ideally different providers so that you do not fail when an excavator digs a trench
Company who needs that are not your SME but ASX 100 should .
and i would not cry if they do not and fail or get hacked..
Rio during GFC and takeover calls if you remember?
But i have no doubt you will disagree, and feel free to parrot the resellers speech.
I even used my own AWS instances when it makes sense but
In a world where IT gets critical, it is more important to have our data and processes held AND managed within our jurisdiction, and for companies within their control.
Covid-19 is showing us what globalisation can bring with material goods, do we need to wait for a cyber attack and the need to close our network external access to realise how vulnerable we are with 'the cloud"?
The cloud is just a set of servers somewhere.it is called the clouds when you basically close your eyes and assume all will go well..cause you sign a contract.

 

[qldfrog]

https://www.abc.net.au/news/2020-05...sinesses-increasing-not-state-actors/12253842
Just today as an example of below par systems

 

[Dona Ferentes]

Despite its remoteness from major global markets, Sydney ranks alongside Singapore, Tokyo and Hong Kong as a first-tier data centre market, where major occupiers and reliable power infrastructure enable significant investment. Total capacity in Sydney surged 76 per cent in 2019 to 414.9 megawatts, according to research by CBRE. Singapore has the second largest capacity after it increased by 14 per cent to 411.9 megawatts.

"The surge in Sydney is primarily attributed to it being an attractive location for acquisition and a significantly shorter development time (six to eight months less) as compared to other tier-1 markets," the CBRE report said.

Underpinning growth in the region is the increasing turn to big data, the internet of things, 5G and cloud computing. Ericsson data showed that global mobile data traffic grew by 49 per cent during 2019. It is projected to expand by 31 per cent annually until 2025.

The majority of existing and prospective cables into Australia use Sydney as a landing point, giving the city strong telecommunications connectivity. Perth is emerging as a potential powerhouse, due to new sub-sea cables which link it to a number of southeast Asian countries.

Data centre operators have benefited from hyper-scale providers such as Microsoft, Google and AWS. Those companies typically opt for collocation rather than self-built facilities, according to CBRE.

 

[Dona Ferentes]

It depends on the business you are talking about. ...I do note that @Dona Ferentes didn't mention Vocus (VOC), Telstra (TLS), 360 Capital (TDI) as other DC owners, maybe because their charts don't look so pretty?

let that one go to the keeper, as the core biz of the telcos is telecoms.

anyway, Telstra is slowly getting its house in order. Recently leased a data centre....

..to Centuria Industrial REIT for $416.7 million. The sale includes a triple-net lease-back arrangement which means Telstra will retain ownership of all IT and telecomms equipment, as well as ongoing operations and responsibility for building upgrades & repairs, future capex requirements and security... The lease is for an initial period of 30 years with two 10-year options. Telstra CEO Andrew Penn said .."we have an ambition to monetise up to $2 billion worth of assets to strengthen our balance sheet... “Data centres are an incredibly important part of the digital ecosystem and we continue to own and operate world-leading facilities in Australia and overseas."

The 3.2 hectare complex is just 25km from the Melbourne CBD, and incorporates 10 buildings, including Telstra's newest 6.1MW data centre and its adjacent 6.6MW data centre and associated energy centre.

 

[Dona Ferentes]

Just dropping this quote off here, mainly as a reminder to myself and because it intrigued me.

"We believe that the future computer company is a data center-scale company. The computing unit is no longer a microprocessor or even a server or even a cluster. The computing unit is an entire data center now.”

Jensen Huang, CEO, NVIDIA Corporation [global manufacturer of computer graphics cards]

 

[frugal.rock]

Enjoyed reading through your research and thoughts Dona and wondered if the speccie priced Dixon (ASX DXN) has been considered or known of in your data centre circle?
Cheers.

 

[Dona Ferentes]

Issues around data sovereignty were thrust into the spotlight earlier this year, when the government opted to use Amazon Web Services to host its COVIDSafe app. During COVID-19 it also became clear that some government staff working from home needed to access sensitive data in a clear and safe manner.

Following these concerns, the government is now considering restricting foreign cloud companies from handling certain government data sets - which could prove to be a major win for small local players like soon-to-be-floated AUCloud. AUCloud is positioning itself as Australia's sovereign cloud Infrastructure-as-a-Service (IaaS) provider, and is exclusively focused on government and critical national infrastructure industry communities.

AUCloud initially raised $10 million in 2017 from seed investors including Icon Group founders Cathie Reid and Stuart Giles, a personal investment from Paradice Investment Management fund manager, James McBeath and Bevan Slattery. A year later it raised another $10 million. WAM Microcap Fund tipped in $2.5 million via a cornerstone placement. AUCloud this year has raised nearly $7.5 million via a rights issue, in which serial entrepreneur and founding investor Bevan Slattery took up his full rights.

Ms Reid, who is chairman, Mr Giles and Mr McBeath's family together control nearly 40 per cent of AUCloud, which is slated for an ASX listing in either November or December.

"With all the negative press around the COVIDSAFE app - we think the issue around sovereignty is going to increase," WAM's Oscar Oberg told The Australian Financial Review. "It will be a bullish time for software providers. As a pure play company in this space - the demand for cloud providers that are Australian owned as opposed to the global behemoths like Azure or AWS, will increase. Particularity with their exposure to government departments such as defence and key industries like financial services."