Transparency through Smart Contracts. As businesses and platforms scale applications and capabilities through global partnerships, there is a need for trusted, transparent transactions. Symbiont‘s partnership with Swift and BNB Chain‘s tie-up with Google Cloud are some recent examples.
Evolution of Digital Payments. Digital payments have come a long way from the early days of online banking services and is now set to move beyond digital wallets such as the Open Finance Association and EU initiatives to interlink domestic CBDCs.
Banks Continue to Innovate. They are responding to market demands and focus on providing their customers with easy, secure, and enhanced experiences. NAB is working on digital identity to reduce fraud, while Standard Chartered Bank is collaborating with Bukalapak to introduce new digital services.
The Emergence of Embedded Finance. In the future, we will see more instances of embedded financial services within consumer products and services that allows seamless financial transactions throughout customer journeys. LG Electronics‘ new NFT offering is a clear instance.
This new partnership was essential for Kyndryl to provide legitimacy to their independent reputation and their global presence. And in many respects, it is a partnership that AWS needs as much as Kyndryl does. As one of the largest global managed services providers, Kyndryl manages a huge amount of infrastructure and thousands of applications. Today, most of these applications sit outside public cloud environments, but at some stage in the future, many of these applications will move to the public cloud. AWS has positioned itself to benefit from this transition – as Kyndryl will be advising clients on which cloud environment best suits their needs, and in many cases Kyndryl will also be running the application migration and managing the application when it resides in the cloud. To that end, the further investment in developing an accelerator for VMware Cloud on AWS will also help to differentiate Kyndryl on AWS. With a high proportion of Kyndryl customers running VMware, this capability will help VMware users to migrate these workloads to the cloud and run core businesses services on AWS.
Beyond the typical partnership activities, Kyndryl will build out its own internal infrastructure in the cloud, leveraging AWS as its preferred cloud provider. This experience will mean that Kyndryl “drinks its own champagne” – many other managed services providers have not yet taken the majority of their infrastructure to the cloud, so this experience will help to set Kyndryl apart from their competitors, along with providing deep learning and best practices.
By the end of 2022, Kyndryl expects to have trained more than 10,000 professionals on AWS. Assuming the company hits these targets, they will be one of AWS’s largest partners. However, experience trumps training, and their relatively recent entry into the broader cloud ecosystem space (after coming out from under IBM’s wing at the end of 2021) means they have some way to go to have the depth and breadth of experience that other Premier Alliance Partners have today.
In my recent interactions with Kyndryl, what sets them apart is the fact that they are completely customer-focused. They start with a client problem and find the best solution for that problem. Yes – some of the “best solutions” will be partner specific (such as SAP on Azure, VMware on AWS), but they aren’t pushing every customer down a specific path. They are not just an AWS partner – where every solution to every problem starts and ends with AWS. The importance of this new partnership is it expands the capabilities of Kyndryl and hence expands the possibilities and opportunities for Kyndryl clients to benefit from the best solutions in the market – regardless of whether they are on-premises or in one of the big three hyperscalers.
Kyndryl has a competitive networking services unit, particularly in partnership with Cisco. Its focus has been on SD-WAN, campus networks, and network management as part of broader cloud services deals. This 5G partnership with Nokia is its first serious effort to work with one of the major carrier-grade vendors using cellular technology. It creates an opportunity for Kyndryl to position itself as a provider of services that underpin IoT and edge applications, rather than only cloud, which has until now been its main strength.
Prior to the Kyndryl announcement, Nokia was already developing private 5G solutions under the moniker Digital Automation Cloud (DAC). A key customer is Volkswagen, using the network to connect robots and wireless assembly tools. Over-the-air vehicle updates are also tested over the private network. Volkswagen operates in a dedicated 3.7-3.8 GHz band, which was allocated by the Federal Network Agency in Germany. This illustrates a third option for accessing spectrum, which will become an important consideration in private 5G rollouts.
Private 5G Use Cases
Private 5G has several benefits such as low latency, long-range, support for many users per access point, and provision for devices that are mobile due to handover. It is unlikely that it will completely replace other technologies, like wireless LAN, but it is very compelling for certain use cases.
Private 5G is useful on large sites, like mines, ports, farms, and warehouses where connected machines are moving about or some devices – like perimeter security cameras – are just out of reach. Utilities, like power, gas, and water, with infrastructure that needs to be monitored over long distances, will also start looking at it as a part of their predictive maintenance and resiliency systems. Low latency will become increasingly important as we see more and more customer-facing digital services delivered on-site and autonomous robots in the production environment.
Another major benefit of private 5G compared to operating on public service is that data can remain within the organisation’s own network for as long as possible, providing more security and control.
Private 5G Gaining Popularity
There has been a lot of activity over the last year in this space, with the hyperscalers, telecom providers and network equipment vendors developing private 5G offerings.
Last year, the AWS Private 5G was announced, a managed service that includes core network hardware, small-cell radio units, SIM cards, servers, and software. The service operates over a shared spectrum, like the Citizens Broadband Radio Service (CBRS) in the US, where the initial preview will be available. CBRS is considered a lightly licenced band. This builds on AWS’s private multi-access edge compute (MEC) solution, released in conjunction with Verizon to integrate AWS Outposts with private 5G operating in licenced spectrum. A customer reference highlighted was low latency, high throughput analysis of video feeds from manufacturing robots at Corning.
Similarly, Microsoft launched a private MEC offering last year, a cloud and software stack designed for operators, systems integrators, and ISVs to deploy private 5G solutions. The system is built up of components from Azure and its acquisition of Metaswitch. AT&T is an early partner bringing a solution to the market built on Microsoft’s technology and the operator’s licenced spectrum. Microsoft highlighted use cases such as asset tracking in logistics, factory operations in manufacturing, and experiments with AI-infused video analytics to improve worker safety.
Organisations are likely to begin testing private 5G this year for Industry 4.0 applications, either at single sites in the case of factories or in select geographic areas for Utilities. Early applications will mostly focus on simple connectivity for mobile machines or remote equipment. In the longer term, however, the benefits of private 5G will become more apparent as AI applications, such as video analysis and autonomous machines become more prevalent. This will require the full ecosystem of players, including telecom providers, network vendors, cloud hyperscalers, systems integrators, and IoT providers.
Last week AWS announced their plans to invest USD 5.3 billion to launch new data centres in New Zealand’s Auckland region by 2024. Apart from New Zealand, AWS has recently added new regions in Beijing, Hong Kong, Mumbai, Ningxia, Seoul, Singapore, Sydney and Tokyo; and are set to expand into Indonesia, Israel, UAE and Spain.
In a bid to deliver secure and low latency data centre capabilities, the infrastructure hub will comprise three Availability Zones (AZ) and will be owned and operated by the local AWS entity in New Zealand. The new region will enable local businesses and government entities to run workloads and store data using their local data residency preferences.
It is estimated that the new cloud region will create nearly 1,000 jobs over the next 15 years. They will continue to train and upskill the local developers, students and next-gen leaders through the AWS re/Start, AWS Academy, and AWS Educate programs. To support the launch and build new businesses, the AWS Activate program will provide web-based trainings, cloud computing credits, and business mentorship.
New Zealand is becoming attractive to cloud and data centre providers. Last year, Microsoft had also announced their Azure data centre investments and skill development programs in New Zealand. To support the future of cloud services and to fulfil the progressive data centre demands, Datagrid and Meridian Energy partnered to build the country’s first hyperscale data centre, last year. Similarly, CDC Data Centres have plans to develop two new hyperscale data centres in Auckland.
An Opportunity for New Zealand to Punch Above its Weight as the New Data Economy Hub
“The flurry of data centre related activity in New Zealand is not just a reflection of the local opportunity given that the overall IT Market size of a sub-5 million population will always be modest, even if disproportionate. Trust, governance, transparency are hallmarks of the data centre business. Consider this – New Zealand ranks #1 on Ease of Doing Business rankings globally and #1 on the Corruptions Perception Index – not as a one-off but consistently over the years.
Layered on this is a highly innovative business environment, a cluster of high-quality data science skills and an immense appetite to overcome the tyranny of distance through a strong digital economy. New Zealand has the opportunity to become a Data Economy hub as geographic proximity will become less relevant in the new digital economy paradigm.
New Zealand is strategically located between Latin America and Asia, so could act as a data hub for both regions, leveraging undersea cables. The recently initiated and signed Digital Economy Partnership Agreement between Singapore and New Zealand – with Chile as the 3rd country – is a testimony to New Zealand’s ambitions to be at the core of a digital and data economy. The DEPA is a template other countries are likely to sign up to and should enhance New Zealand’s ability to be a trusted custodian of data.
Given the country’s excellent data governance practices, access to clean energy, conducive climate for data centres, plenty of land and an exceptional innovation mindset, this is an opportunity for global businesses to leverage New Zealand as a Data Economy hub.“
New Zealand’s Data Centre Market is Becoming Attractive
“The hyperscale cloud organisations investing in New Zealand-based data centres is both a great opportunity and a significant challenge for both local data centre providers and the local digital industry. With AWS and Microsoft making significant investments in the Auckland region the new facilities, will improve access to the extensive facilities provided by Azure and AWS with reduced latency.
To date, there have not been significant barriers for most non-government organisations to access any of the hyperscalers, with latency of trans-Tasman already reasonably low. However, large organisations, particularly government departments, concerned about data sovereignty are going to welcome this announcement.
With fibre to the premise available in significant parts of New Zealand, with cost-effective 1GB+ symmetrical services available, and hyperscalers on-shore, the pressure to grow New Zealand’s constrained skilled workforce can only increase. Skills development has to be a top priority for the country to take advantage of this infrastructure. While immigration can address part of the challenge, increasing the number of skilled citizens is really needed. It is good to see the commitment that AWS is making with the availability of training options. Now we need to encourage people to take advantage of these options!“
Top Cloud Providers Continue to Drive Data Centre Investment
“Capital investments in data centres have soared in recent quarters. For the webscale sector, spending on data centres and related network technology account for over 40% of total CapEx. The webscale sector’s big cloud providers have accounted for much of the recent CapEx surge. AWS, Google, and Microsoft have been building larger facilities, expanding existing campuses and clusters, and broadening their cloud region footprint into smaller markets. These three account for just under 60% of global webscale tech CapEx over the last four quarters. The facilities these webscale players are building can be immense.
The largest webscalers – Google, AWS, Facebook and Microsoft – clearly prefer to design and operate their own facilities. Each of them spends heavily on both external procurement and internal design for the technology that goes into their data centres. Custom silicon and the highest speed, most advanced optical interconnect solutions are key. As utility costs are a huge element of running a data centre, webscalers also seek out the lowest cost (and, increasingly, greenest) power solutions, often investing in new power sources directly. Webscalers aim to deploy facilities which are on the bleeding edge of technology.
An important part of the growth in cloud adoption is the construction of infrastructure closer to the end-user. AWS’s investment in New Zealand will benefit their positioning and should help deliver more responsive and resilient services to New Zealand’s enterprise market.“
Here are the 3 key emerging trends in the data centre market:
#1 Top cloud providers drive webscale investment but are not alone
The webscale sector’s big cloud providers have accounted for much of the recent CapEx surge. AWS, Google, and Microsoft have been building larger facilities, expanding existing campuses and clusters, and broadening their cloud region footprint into smaller markets. These three account for just under 60% of global webscale tech CapEx over the last four quarters. Alibaba and Tencent have been reinforcing their footprints in China and expanding overseas, usually with partners. Numerous smaller cloud providers – notably Oracle and IBM – are also expanding their cloud services offerings and coverage.
Facebook and Apple, while they don’t provide cloud services, also continue to invest aggressively in networks to support large volumes of customer traffic. If we look at Facebook, the reason becomes clear: as of early 2021, they needed to support 65 billion WhatsApp messages per day, over 2 billion minutes of voice and video calls per day, and on a monthly basis their Messenger platform carries 81 billion messages.
The facilities these webscale players are building can be immense. For instance, Microsoft was scheduled to start construction this month on two new data centres in Des Moines Iowa, each of which costs over USD 1 billion and measures over 167 thousand square metres. And Microsoft is not alone in building these large facilities.
#2 Building it all alone is not an option for even the biggest players
The largest webscalers – Google, AWS, Facebook and Microsoft – clearly prefer to design and operate their own facilities. Each of them spends heavily on both external procurement and internal design for the technology that goes into their data centres. Custom silicon and the highest speed, most advanced optical interconnect solutions are key. As utility costs are a huge element of running a data centre, webscalers also seek out the lowest cost (and, increasingly, greenest) power solutions, often investing in new power sources directly. Webscalers aim to deploy facilities that are on the bleeding edge of technology. Nonetheless, in order to reach the far corners of the earth, they have to also rely on other providers’ network infrastructure. Most importantly, this means renting out space in data centres owned by carrier-neutral network operators (CNNOs) in which to install their gear.
The Big 4 webscalers do this as little as possible. For many smaller webscalers though, piggybacking on other networks is the norm. Of course, they want some of their own data centres – usually the largest ones closest to their main concentrations of customers and traffic generators. But leasing space – and functionalities like cloud on-ramps – in third-party facilities helps enormously with time to market.
Oracle is a case in point. They have expanded their cloud services business dramatically in the last few years and attracted some marquee names to their client list, including Zoom, FedEx and Cisco. To ramp up, Oracle reported a rise in CapEx, growing to USD 2.1 billion in the 12 months ended June 2021, which represents a 31% increase from the previous year. However, when compared to Microsoft’s spending this appears modest. Microsoft reported having spent USD 20.6 billion in the 12 months ended June 2021 – a 33% increase over the previous year – to help drive the growth of their Azure cloud service.
One reason behind Oracle’s more modest spending is how heavily the company has relied on colocation partners for their cloud buildouts. Oracle partners with Equinix, Digital Realty, and other providers of neutral data centre space to speed their cloud time to market. Oracle rents space in 29 Digital Realty locations, for instance, and while Equinix doesn’t quantify its partnership with Oracle, Oracle’s cloud regions across the globe access the Oracle Cloud Infrastructure (OCI) via the Equinix Cloud Exchange Fabric. Oracle also works with telecom providers; their Dubai cloud region, launched in October 2020, is hosted out of an Etisalat owned data centre.
#3 Carrier-neutral data centre investment is surging in concert with webscale/cloud growth
As the webscale sector has raced to expand over the last 2 years, companies that specialise in carrier-neutral data centres have benefited. Industry sources estimate that as much as 50% or more of the cloud sector’s total data centre footprint is actually in these third-party data centres. That is unlikely to change, especially as some CNNOs are explicitly aiming to build out their networks in areas where webscalers have less incentive to devote resources. It’s not just about the webscalers’ need for space; the need for highly responsive, low latency networks is also key, and interconnection closer to the end-user is a driver.
Looking at the biggest publicly traded carrier-neutral providers in the data centre sector shows that their capacity has expanded significantly in the last few years (Figure 1)
Some of this new investment target core facilities in the usual high-traffic clusters, but some also target smaller country markets (e.g. STT’s new Bangkok-based data centre), and the network edge (e.g. EdgeConneX, a portfolio company of private equity fund EQT Infrastructure).
EdgeConneX is a good example of the flexibility required by the market. They build smaller size facilities and deploy infrastructure closer to the edge of the network, including a PoP in Boston’s Prudential Tower. The company offers data centre solutions “ranging from 40kW to 40MW or more.” They have built over 40 data centres in recent years, including both edge data centres and a number of regional and hyperscale facilities across North America, Europe, and South America. Notably, EdgeConneX recently created a joint venture with India’s property group Adani – AdaniConneX – which looks to leverage India’s status of being the current hotspot for carrier-neutral data centre investment.
As enterprises across many vertical markets continue to adopt cloud services, and their requirements grow more stringent, the investment climate for new data centre capacity is likely to remain strong. Webscale providers will provide much of this capacity, but carrier-neutral specialists have an important role to play.