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We've Hit a Tipping Point for Data Centers and the Cloud
Will enterprises migrating everything into a public cloud make wholesale colocation providers obsolete?

By David Liggitt · 11/16/2015

For years, businesses were told cloud-based information technology (IT) would change everything. With the cloud, their IT costs would flip from a large capital expenditure every few years to a more manageable monthly operational expense. It's the CAPEX vs. OPEX scenario: companies would only spend a couple of hundred dollars each month for cloud-based "as-a-service" IT on the employee's personal device rather than the $10,000-$12,000 (or more) per user every three years on a company-issued desktop PC, BlackBerry, and software licenses galore. Who wouldn't choose the OPEX model and save the company some money?

While 100% cloud-based IT sounds good in theory, it's hard to put into practice.

The companies that sunk big money into the "big iron" of email servers, databases, and other IT over the years found moving all of it to the cloud wasn't easy. For years, CIOs continued to spend more on CAPEX than OPEX for IT.

But a July 2015 report on IT spending and staffing shows enterprise OPEX budgets rising at the fastest pace in years. The three key takeaways from the report are:

  1. A majority (69%) of IT organizations are getting bigger operational budgets but those organizations' capital spending on IT hardware is flat and hiring is weak
  2. A net 56% of IT organizations are increasing spending on public cloud applications
  3. Only 10% are spending more on enterprise data center infrastructure

Overall, this indicates a shift to higher budgets for OPEX spending and less money for the "big iron" in the enterprise. So in effect, we finally reached an OPEX-over-CAPEX tipping point in corporate IT thanks to the cloud.

Should we interpret this to mean companies are migrating everything into a public cloud and large colocation providers are obsolete? No, because many industries either cannot or do not want to migrate their operations into a public cloud. Firms in heavily-regulated industries such as financial and healthcare often build "private" clouds with added security for their data. For legal reasons, some global organizations balk at the perceived weaknesses in privacy for public clouds. In essence, colocation is inherently better for some companies.

But it's crucial to understand that behind every cloud is a data center. The software that enables the on-demand provisioning of cloud resources is running on servers in one or more data centers. So there will always be a need for data centers. At datacenterHawk, we analyze the providers of colocation, cloud, fiber, and electricity so companies can find the perfect solution based on specific business needs. Our subscription-based online tools Hawk Search and Hawk Scope can literally draw a map to the best performing cloud.

As the shift in IT spending moves toward OPEX and the cloud, organizations will rely on quality information about data center providers and the infrastructure connecting those data centers. Get quality information about data centers in your market with a free trial of datacenterHawk services at

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