The Geographic Advantage

When Google started its first fiber network offering in the US, it also came up with a clever idea of free colocation service in its nearby data centers to content providers such as YouTube, Netflix and Akamai. In this way, it can minimize the content buffering and network congestions from transferring large amount of contents from remote hosting locations by the providers and thus greatly improve the customer experience from Google Fiber Network.

Amazon surely has exploited the similar idea more broadly and globally. Amazon, with its conglomerate products and services, is interested in both content delivery by itself and offering public cloud services for customers with streaming contents on their web sites. To fast expand into a dominant global IaaS provider, besides its global data centers, it has designed and implemented “AWS Edge Locations” in its Global Infrastructure strategies. Now Amazon has 50+ of them. These Edge Locations serve as the “caching” locations for local contents and data that are more convenient to its customers but outside its existing data centers. These Edge Locations provided AWS more advantages for serving global customers with local contents and faster data access without the full investment cycles of building data centers at each global location needed.

Google’s colos and Amazon’s Edge implementations not only help themselves and their customers with content and data deliveries, they will also allow the companies to proactively mitigate the potential negative impacts from the coming Net Neutrality ruling which is pending in the US congress. More importantly, they can be extended to significant geographical advantage and flexibility in the cloud service offerings in the near future, both in the US and internationally.

Global geographic advantage will be critical to the success of a global public cloud provider, especially in IaaS space. The importance of this advantage has already been discussed in TriStrategist’s earlier blog on The Positioning of Public Cloud Services-Part III published on September 19, 2014.

This week in the news, SAP signed a pack with IBM on October 14 to leverage the full fleet of IBM global cloud data centers, in addition to SAP’s own 20 of them, to expand SAP services and store SAP data in local regions to better accommodate the new regulatory requirements from different countries. IBM invested $1.2 billion from the beginning of 2014 to expand its global footprint on cloud data centers to about 40, including 15 from the SoftLayer acquisition and 12 existing ones of its own. Although many are still in the plan, IBM’s strategy of pursuing global geographic advantage apparently has already gained itself some needed edge to catch up on the global cloud war. Data security and sovereignty have long been concerns for many countries and governments to adopt public cloud services by global providers, certainly including the US government. The breakout of the NSA PRISM scandal only worsened the situation. Now several European countries have passed regulations or compliance requirements to have their business or government data reside locally in the country or on the continent. Countries in other regions will surely follow suit. Very soon, the global strategic spread of the data centers will become a prerequisite for a public cloud provider to survive in the global space or be reduced to a niche provider in a few markets.

In the next few years, geographic advantage will likely become the most significant deciding factor in the competitions among global IaaS providers.