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Why multi-tenant data centers have become essential for today’s enterprises

Andy Bastick, Senior Director, Product and Partner Marketing, Digital Realty
February 10, 2023

In the same way that many business meetings have moved from boardrooms and conferences to Zoom and other video meeting platforms, the data and apps that enterprises rely on can be accessed in the most efficient place: the multi-tenant data center (MTDC).

What is multi-tenant data center

Multi-tenant data centers (MTDCs), also known as colocation data centers, are large data center facilities that are shared by numerous organizations and highly interconnected with telecommunications, cloud computing providers and other service providers. They have become the new centers for data exchange in the rapidly evolving global digital economy. In turn, traditional in-house data centers are becoming less relevant and effective in supporting enterprises’ needs and competitiveness.

But what’s driving this change and why should those organizations that still have most of their applications and data hosted within their own data centers consider making a change? To answer these questions, we need to examine how data is changing, how technology infrastructure and networks are changing, and the way doing business has evolved.

Drivers of change

Firstly, the volume of data that organizations are seeking to manage is exploding with the evolution of traditional enterprise systems and the introduction of mobile phone apps, Internet of Things sensors and other innovations. This growth is only going to accelerate as further advances become mainstream, including artificial intelligence, machine learning, augmented reality, autonomous vehicles, 3D printing, and new social media platforms.

This raw growth in data has created significant opportunities for enterprises to analyze this information to improve customer experiences, develop new digital products and services, and grow sales. However, the sheer volume of data can lead to the problem of Data Gravity, where there is so much, or it’s so stuck in silos, that it becomes difficult to manage.

At the same time, regulators in Europe, the United States, and elsewhere have introduced rules to control how and where organizations can use and store the data they now hold. All these forces are leading many organizations to seek ways to decentralize the storage and analysis of data, to make it easier to handle and to avoid breaking regulations.

The second shift has been the rise of cloud computing and software-as-a-service solutions, providing services like storage, analytics, CRM, and everything in between. This has seen enterprises look beyond their own in-house data centers with cloud, multi-cloud, and hybrid IT strategies aimed at expanding the power and scalability of their IT infrastructures. For these strategies to work, it is critical that organizations can connect to these third parties in fast, secure and flexible ways.

The third key driver is the digitalization of business itself. Just as meetings are becoming virtual, many commercial transactions continue to move from the physical realm of shops, offices, and factories to websites and other online platforms. In turn, organizations need to ensure that all parties enjoy a high-quality experience while interacting in the virtual realm.

The new role for multi-tenant data centers

MTDCs solve a range of challenges for organizations grappling with these trends and seeking to leverage them for their advantage. They do this by acting as neutral, technology-agnostic meeting places that allow organizations to change how they handle data while establishing faster and more secure connections with suppliers and partners.

MTDCs also support the foundational elements of a company’s critical IT infrastructure, by providing innovative power and cooling solutions, in house expertise and support, and a highly secure environment, allowing the customer to focus on their core business.

Let’s look at a few specific examples.

Digital Realty’s recent Global Data Insights Survey of more than 7,000 C-level executives in 23 countries found 44% of companies with revenues of over $1 billion were keeping their data in decentralized locations for faster processing and proximity to devices and users, and lower processing costs. Gartner has also predicted that by 2024, 70% of organizations will have multiple data hubs to support data analytics, sharing, and governance.

MTDCs allow organizations to achieve these goals by enabling them to access data center resources where they need them on a cost-effective basis. The alternative would be for those organizations to build their own dedicated facilities and have operational staff in every desired location.

Another attraction is that many of the digital service providers that enterprises need to work with, from telcos to cloud and SaaS providers, are co-located in MTDCs. This is critical at a time when it has been estimated that a typical enterprise workflow now uses more than 400 data sources exchanged across 27 cloud products (Global Data Insights Survey, see page 9).

So, when an organization moves its data and apps to a shared data center, it will typically be able to connect to those other critical suppliers quickly and securely within the facility. Digital Realty has extended this concept by supporting fast, secure virtual private network connections across its data centers and beyond with solutions including ServiceFabric™.

The following diagram captures this new architectural vision.

Enterprises can also find other organizations they wish to work with located within MTDCs. For example, a business could find it’s more easily able to connect with a key cybersecurity supplier, a product distributor, and a major social media platform with direct access to end customers, simply by sharing space in the same data center.

Finally, these opportunities to connect don’t happen by chance - Digital Realty brings companies, technologies and data together across its multi-tenant data centers on PlatformDIGITAL©. By enabling these connected data communities, Digital Realty provides the safe and open meeting place for companies of all sizes, from all types of industries to come together. This ensures that customers gain the traditional benefits of locating their IT within an MTDC – including cost, scalability, and environmental sustainability – with the network effects that come with being positioned alongside other key players in the digital marketplace.