Build ecosystems by cross-connecting clients within cloud data centers

Providing customers with cross-connection services within and among a provider's cloud data centers can generate high margins with little investment.

Few companies operate in a vacuum, often needing to quickly and easily connect with partners or contractors outside their firewalls. A car manufacturer, for example, may need to pass hundreds of large engineering files back and forth with a parts supplier; a film production company may need to transfer terabytes of video to a special-effects contractor.

These aren't new challenges, but some cloud providers are offering a new solution. Some providers are launching services that can connect customers to other businesses using the same provider's cloud data centers, offering a searchable directory of the customers and the ability to provide a direct, low-latency connection between both parties. By connecting directly to cohabitants of the same cloud environment, customers stand to save time and money.

It takes little effort to connect two servers in the same facility, and it doesn't cost [the provider] anything. … It is extremely high-margin.

Michael Levy,
data center analyst for Enterprise IT analyst group, 451 Research

But customers aren't the only ones reaping the benefits of this emerging cloud business model. Many providers -- especially those that are also colocation providers -- already have the ability to quickly and easily interconnect two customers' environments without any additional overhead. By cultivating an open-client ecosystem in their cloud data centers, providers can enable customers to identify new partners, and partners can provide better services to those customers. Meanwhile, providers can generate a new revenue stream without much investment.

Savvis joins market for cloud data center cross-connections

Several cloud service providers -- including Telx and Equinix -- offer these cross-connection services through "networking-style marketplaces" or customer communities for various vertical markets, including health care, finance and media, said Michael Levy, data center analyst for the enterprise IT analyst group at 451 Research. These communities allow clients to take advantage of other companies' services in the same cloud environment, and prospective customers may choose to become part of the ecosystem based on other businesses already there.

Savvis, a CenturyLink company and cloud service provider, recently announced a similar service, ClientConnect, for customers residing in its cloud data centers. The service is opt-in, meaning Savvis customers can choose to promote their presence to other companies through the SavvisStation self-service portal, said Drew Leonard, vice president of colocation product management at Savvis.

Prior to the commercial launch of ClientConnect, some Savvis customers had already been taking advantage of the ability to directly connect to another business or partner residing within the provider's data center environment. Now, ClientConnect will help expand the ecosystem and onboard more businesses for Savvis, Leonard said.

Like other cloud providers' approaches, ClientConnect targets customers in media, financial services, health care and consumer brands.

"For some customers, it's important to know who the other players [in the data center] are," Leonard said. "For example, there could be value for some hospitals and health care facilities to cross-connect to an insurance company securely."

Savvis customers can request for cross-connections via the portal and be connected within 48 hours, Leonard said.

Any provider can offer cross-connection services: Myth or reality?

Cultivating client ecosystems can influence prospective customers to select a particular provider. It's also a simple way to expand a current customer's usage, said 451 Research's Levy.

"It takes little effort to connect two servers in the same facility, and it doesn't cost [the provider] anything," he said. "It is extremely high-margin."

But while these cross-connection services may seem like an easy way for a provider to turn a profit, it's not something that every cloud provider is prepared to offer.

"The downside is that [when] you create a client community, it has to be secured," said Tom Nolle, president of CIMI Corp., a consultancy in Voorhees, N.J. "If [a provider] has a mechanism in place that allows one business to use services from another business, [it] has to make sure that there is no risk created by that process and no malicious use [is] possible."

The effort required to ensure secure and compliance-friendly cross-connections may be a deterrent for some providers, Nolle said.

More frequently, however, collaboration among business partners in various commercial activities is creating a need for businesses to cross their organization boundaries to exchange with each other.

"Some [businesses] are even picking partners purely because they were available on these types of exchanges similar to ClientConnect," Nolle said.

Cloud providers are in the unique position to help companies connect while increasing their own stickiness in the market.

"[Customers] may not leave if they are able to connect directly with their partners' systems," Levy said. "Paying a bit over $600 dollars extra a month to be directly connected to a company that [they do] business with will just make sense for some tenants."

Let us know what you think about the story; email: Gina Narcisi, news writer, and follow @GeeNarcisi on Twitter.

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