Why the private data centre is persisting in 2021

August 6, 2021

5 min read

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The past 18 months has seen cloud infrastructure spending pick up an incredible amount of momentum, as organisations accelerated their digital transformation initiatives to cater for a more digitally enabled workforce.

Earlier this year, Synergy Research found that spending on cloud infrastructure even surpassed on-premise data centre spending in 2020 for the first time.

While these conversations around cloud’s adoption often position on-premise data centre workloads as being supplanted, research has shown that this isn’t the case. Synergy’s figures suggest that data centre spending is still registering at $90 billion, despite dropping by six per cent.

AFCOM’s state of the data centre report also shows that whilst 40 per cent of enterprise infrastructure belongs to the public cloud, 31 per cent remains on-prem and 29 per cent is in private or hybrid cloud environments.

Public clouds offer many advantages to enterprises, from increased economies of scale to lower total cost of ownership. However, many organisations still want to maintain control over some workloads in private data centre facilities, whether that’s on-prem infrastructure or private clouds.

That doesn’t mean we’re reverting back to on-premise – far from it – but it does suggest that private DC’s aren’t going anywhere just yet.

This is the first of four trends that we’ll be discussing as part of this article series, in partnership with AustCham Singapore.

We’re exploring how key trends across data centres, cloud, edge computing, and managed services are shifting as we move towards the end of the year, and how this can all be secured end-to-end as part of a comprehensive IT strategy that aligns business objectives with security and risk priorities.

Why organisations are sticking to their on-prem infrastructure

There are a variety of reasons why an organisation might want to stick with their on-premise data infrastructure, but often it comes down to cost, control (especially from a compliance perspective), and security.

In addition, organisations often see migrating legacy, monolithic, or mission-critical applications to a public cloud environment as too costly, complex, and risky when weighing up the potential benefits.

A recent Omdia study[i] found that very few organisations plan to move more than 60 per cent of critical apps to public cloud, with 60 – 80 per cent of firms hosting the majority of business-critical applications or workloads on-prem or in private clouds.

Omdia says it consistently heard a preference to retain these on-premise workloads, as decision-makers felt it was “more secure”, and they could better protect privacy and meet compliance requirements.

The on-prem data centre is also evolving in areas such as storage and scalability, as infrastructure providers offer cloud-esque capabilities to accommodate for petabyte-scale demands.

This includes options for flexible financing to make it easier for organisations to manage billing, supporting pay-as-you-consume expenditure models to reduce cumbersome CapEx investment footprints, mirroring one of cloud’s biggest advantages from a financial perspective.

The future is hybrid

While many organisations are opting to stick with their on-prem infrastructure for the time being, this doesn’t detract from the clear trend of cloud adoption we’ve witnessed over the past few years. This isn’t limited to the public cloud hyperscalers - another piece of the private DC puzzle is the uptick in private cloud adoption.

IDC says private cloud adoption has increased by 0.6 per cent YoY in the third quarter of 2020, reaching US$5 billion in spending for that period. On-premise private cloud accounted for 63.2 per cent of this amount.

The secret is in seamlessly stitching everything together into one hybrid cloud environment. Flexera’s 2021 state of the cloud report found that most organisations are taking a multi-cloud, hybrid approach, with 80 per cent of firms running at least one private cloud.

Efforts by colocation providers such as Equinix to move beyond the ‘power, pipes and ping’ model to providing rich interconnected partner ecosystems is also supporting this move to hybrid infrastructure models.

Enterprises can now lean on these providers to seamlessly connect their private workloads directly and securely into the ecosystems of public cloud providers, offering a robust hybrid cloud experience.

Regardless of which route businesses take, hybrid cloud is a great alternative for organisations with large on-prem footprints, as it provides additional choice and flexibility.

It gives firms the best of both worlds, allowing them to take advantage of the scale and depth of services offered by public clouds, whilst maintaining security posture and ownership of critical workloads and applications in their own data centres.

Additionally, when hybrid cloud strategies are supported by a best-of-breed managed services partner, organisations can spend less time managing and scaling their hybrid infrastructure, and more time on delivering value for their customers.

With a fully managed and diverse hybrid cloud ecosystem, enterprises can choose where to place workloads and data based on compliance, audit, policy, or security requirements.

This flexibility makes it easier to blend security posture with critical business objectives, ensuring security is embedded within everything the business does. We’ll talk about this in greater depth in our next piece in this AustCham article series, when we discuss how organisations can build a cyber business risk framework that brings security and senior leadership teams closer together.


This article is part of a 5-part series, first appearing on the Australian Chamber of Singapore’s weekly newsletter in August 2021.  Look out for the next upcoming articles on:

Article 1 - Four key digital transformation trends have evolved

Article 2 - Why the private data centre is persisting in 2021

Article 3 - Cyber Business Risk is the next Frontier

Article 4 - Edge vs cloud? It’s the wrong question for best-practice ICT strategy

Article 5 - Managed services are pivotal for alleviating the skills gap

[i] Omdia, Leapfrogging Australia’s Digital Transformation Through Cloud (2021 report)