Death of the Data Center?

While making dinner the other night I happened to have Jim Cramer’s Mad Money show on for some background noise.  This happened to be the day that Intel announced their blowout earnings and the addition of several new chip designs that allow them to put even more cores into a CPU.  A core is essentially a chip inside a chip for those non-techies.  Essentially a multi-core design allows you to put far more horsepower into a single piece of hardware.  After realizing what Intel was proposing, Mr. Cramer then went on to state that all investors should be selling or even shorting data center company stocks because they will have all this empty space once customers move to these new chips and lower the server count.  It was a classic misinterpretation to say the least.

Multi-core technologies and virtualization have been with us now for some time.  The rise of VMWare and Microsoft’s Hyper-V technologies have really lit the fire under the consolidation of hardware within the data center along with Intel.  On this point Mr. Cramer is correct.  However, what was missed is the groundswell of organizations either centralizing all their technology IN data centers and/or migrating to hosted solutions IN someone else’s data center.  Not since the days of mainframes have centralization and consolidation efforts been so hot.  You only have to look at companies like SalesForce.com, google docs and Amazon’s EC2 to see this really taking root. 

There are two main drivers pushing everything to the core…

1) ROI – In the VOIP arena for example the ROI for centralizing into a data center is immense.  Being able to consolidate all your point solutions into one common offering across the organization on commodity based hardware is a no-brainer.  The same is true for file servers, storage, training services and many other offerings.

2) Cap-Ex – In this economy and all the uncertainty going with it companies are more hesitant than ever when it comes to large purchases.  We are even seeing this in our own growth patterns within our CaaS (Communication as a Service) group here at Interactive.  Companies know that they need to invest but the option to get the same technology without all the upfront investment often times makes sense given today’s economy.

It is safe to say that the data center is here to stay for quite some time despite the dire predictions of Mr. Cramer and others.  For those with a technology focus this can be good or bad depending on how up to speed you have stayed on new technologies but for the data center hosting teams I don’t think they have much to worry about from the Mad Money crowd.

-Tom Fisher