Variable costs could boost Mexico's demand for data centers

Thursday, June 1, 2017

As Mexican organization assess information storage options, they will have to evaluate the option that best suits them, whether this is outsourcing a data center's services or opting for a cloud solution. 

In the case of data centers, technological evolution is allowing these facilities to provide more capacity in less physical space, but cloud computing is putting up a competition due to the variable costs entailed in its business model. 

BNamericas spoke to Sergio Carrera, executive director of Mexican ICT development organism Infotec, about the trends that are shaping Mexico's data center park and how organizations across the country are outsourcing these solutions. 

BNamericas: What are the current areas of opportunity you have spotted for data centers in Mexico? 

Carrera: Mexico is speeding up in terms of service specialization and that means people are deciding to outsource data center services while also discovering opportunities in cloud computing. 

The first alternative implies the more familiar choice and its associated best practices and efficiency. The second option, cloud computing, takes efficient management one step further by providing variable costs, as users pay for what they use. 

The trend is for medium-sized and large companies to have their own data centers. As the need for information technology grows inside the organization, the limitations of owning a data center start becoming evident. This pushes companies to pursue alternative models, and cloud models have sparked plenty of interest. 

Cloud models are attractive because of their low costs, which has made companies price-sensitive. However, not everything can be taken to the cloud just by signing a contract. There is an entire migration processes that has to be cared for. Once companies become aware of the migration costs, the cloud loses luster.

In this ICT landscape, companies will explore the more efficient option when it comes to better administering the costs of information storage infrastructure. 

BNamericas: Will Mexico's data center park be able to support the growing demand

Carrera: Data centers are progressively using less space to store the same amount of information due to the evolution of storage technology.

Existing data centers are being adjusted to support new-generation technologies. On the other hand, the energy demand per square centimeter is growing with new technology. As the market grows, we will not see the expansion of facilities but rather their reconfiguration. 

Several data centers that were exclusively used to cover the needs of telecom operators are now being put at the market's disposal because of the aforementioned technological evolution. While we might not necessarily see new facilities being built, we will see more available square meters. 

It is worth noting that certifications are an important matter. It is not easy to reconfigure a space to obtain Tier III or Tier IV certifications, so sometimes it will be more affordable to build a new facility rather than to revamp an existing one. The type of certification is dictated by the kind of information that the facility will store. 

BNamericas: How is the private sector embracing the use of data centers in Mexico? 

Carrea: A company's IT maturity has to be taken into account when migrating to a data center, and some sectors are more prone to advancing in this regard. The financial, insurance, automotive, advanced manufacturing, and retail sectors, have swiftly outsourced cloud center and cloud services. 

I do find that companies are reluctant to trust their information to a third party in cases when there is a strict regulation regarding personal data or when the information assets are critical, as in the case of a bank's customer data base. 

BNamericas: Is the public sector displaying similar levels of data center outsourcing? 

Carrera: There is also a trend to outsource data center services among private organizations. 

Infotec is a public entity that provides these services to both the public and private sectors. 

We have different government entities and organisms using our data centers. The government side of the financial and economic sectors, autonomous organisms, and the judicial branch are advancing the most in terms of outsourcing data center services. 

The government's national digital strategy will push entities that are not mature enough in this regard into better understanding and outsourcing of these services. 

BNamericas: What are some factors you see in the future adoption of data center services? 

Carera: In economic terms, it is more advantageous to have a variable cost over a fixed one. Therefore, data centers should offer variable costs in their models. The more data centers can go in this direction, the more demand we will see. 

In Mexico we should expect the demand for data center services to experience a growth rate greater than the average growth of the general ICT industry, and several times greater than the growth of the general economy. 

We will see this growth because companies need better control over their costs and outsourcing data centers grants them access to new-generation technology, without having to invest in infrastructure of their own. 

I do see some obstacles, such as how open certain companies may be to having its data stored at an external site. Secondly, IT managers want full control over their operations. Thirdly, cyber-security is an issue. There is an increase in the number of cyber-attacks because the amount of valuable information online has gone up. 

Finally, there will not be an accelerated growth rate for as long as business models do not provide flexibility through variable costs. 

About Sergio Carrera

Sergio Carrera was appointed executive director of Infotec in 2010 and ratified in 2015. He has designed and implemented policies and programs for the ICT sector, such as the federal government's digital economy strategy Economía Digital and software industry development program Prosoft.

About the company

Infotec is a public entity that belongs to Mexico's science and research council Conacyt. Its objective is to develop key projects to accelerate the country's development through the adoption of information and communication technologies. Infotec operates two data centers, one in Mexico City, and a Tier III data center in the state of Aguascalientes.