NEXTDC (ASX:NXT) – Where the Cloud Lives

NEXTDC CEO Craig Scroggie

Established by one of Australia’s most successful information technology entrepreneurs, Mr. Bevan Slattery, NEXTDC (ASX:NXT) is a carrier and vendor neutral data centre operator, providing world class UTI Tier III certified facilities in every major market in Australia.

In a recent interview with CEO Craig Scroggie, The Australian Business Executive learned a little more about the growing business of carrier neutral data centres.

“The company’s goal is to serve both enterprise and the cloud computing providers, domestic and international, as the home for all of their computer infrastructure,” Mr. Scroggie tells us.

“We tend to say, when people think about NEXTDC, it’s where the cloud lives. It’s where people come to house their computing infrastructure, but also connect to their network providers and connect to their cloud computing providers as well.”


Data centres are not a new phenomenon, but the changing nature of the industry, and the rapid rise of cloud computing, means carrier neutral centres have become a big player in the industry, offering an alternative to in-house or vendor-run facilities.

“The data centre is somewhere where people come to do business together in a neutral location,” Mr. Scroggie says, “so enterprises will come to the data centre in order to get access not to just one outsourcing provider, they’re coming to get access to all of them.”

Carrier neutral data centres are fast becoming commonplace, both in Australia and across the world. In the emerging cloud computing world, organisations require a different kind of access, due to the bonding of networks together in order to provide pay-as-you-consume computing capacity.

“We provide not only the physical aspects of housing all of that computer infrastructure… but importantly a network connectivity, the ability for organisations to be able to connect to a multiplicity of carriers and cloud computing providers.”

The company is also soon to release NEXTDC switching fabric, enabling fast, direct connections to cloud services, bypassing the public internet.

Technical issues like the amount of power, cooling, security and standards are all highly important to a company like NEXTDC, but neutrality is the crucial component that puts such businesses in high demand.

At the enterprise cloud level, big, global public cloud suppliers have changed the way enterprises are consuming computing capability. Organisations can pay for exactly the amount of computing they need, no longer required to spend large amounts of capital on servers and software without an immediate return on the investment.

“In the pay-as-you-consume computing world,” Mr. Scroggie explains, “you can spin-up a server, and only pay for the minutes that you use it for. So too it goes for storage, or network, or anything else that is moved into the consumption economic model.”

Mr. Scroggie uses Apple’s iTunes model as a comparison, a platform where users have access to a huge catalogue of content, but only pay for it as and when they use it.

“As a consumer,” Mr. Scroggie adds, “those services that you’re eating in the application economy are far more pay-per-use, than they are just a payment for a fixed amount of capacity whether you use it or not.”

The switch to more on-demand content means issues such as latency, the speed of the network and the larger consideration of where the information lives, are far more important than they used to be.

“A lot of people tend to imagine one big cloud in the sky, one big cloud globally that all the information is delivered from at a very low cost. And that’s not the case.”

The reality of the distribution and consumption of content is now actually the opposite, driving content to the edge rather than it being centralised at the core. As a result, anything that is latency or application sensitive needs to be located in closer proximity to the end-user.

In Australia, all the data is cached in regional centres, with content going out to almost every major city. “The availability and the scale of the network is important today, and it’s going to continue to become increasingly important,” Mr. Scroggie says.

This means the majority of larger U.S and European content providers that come to Australia require local infrastructure service and content, a requirement that is driving a lot of investment from offshore in local hosting of infrastructure.

“This is only going to continue to accelerate the rate at which the amount of content continues to grow,” Mr. Scroggie says, “the way that we consume that content from an on-demand perspective is continuing to increase, and consumers wanting pay-per-use, that is increasing.”

The way Australian consumers are behaving, and the increase in on-demand type services means going forward, the infrastructure and software services will continue to be placed close to the user.

NEXTDC has been recognised for its leading carrier neutral data centres
NEXTDC has been recognised for its leading carrier neutral data centres

Network Infrastructure

Mr. Scroggie’s background in the industry was developed through the best part of ten years’ work with Symantec, as Vice President and Managing Director in the Pacific region. After working in storage and security, he went on to gain experience in the data centre space.

When Mr. Slattery began setting up NEXTDC, Mr. Scroggie was asked to join the board, and spent 18 months as a non-executive director with the company before being offered the position of CEO, taking the company on the next leg of its journey.

When asked about the decision to list the company on the Australian Stock Exchange in December 2010, Mr. Scroggie highlights the huge level of investment needed to establish a company like NEXTDC.

“In the data centre industry, you’ve got to build all of your project, or the majority of your project, up front, and that is the base building, and the core infrastructure needs to go in—so it’s hundreds of millions of dollars in order to build out a national network of data centres.”

“The only way really in Australia to put that together on such an enormous scale was to list the company very early in its life, and that’s why it was [made an] IPO, pretty much from the beginning.”

The company now works out of multiple locations, in all of the major Australian markets—Brisbane, Sydney, Melbourne, Canberra and Perth.

The establishment of such a wide base of operations represents the best part of a few hundred million dollars’ worth of investment. But the current rate of growth in data centres is huge. Considering the way organisations are consuming on-demand, NEXTDC expects the growth to continue, and the investment to be justified.

The benefit for the client is there for all to see; the security that comes along with facilitating large-scale deployment is a huge selling point in terms of luring clients into a co-location model.

From an operational standpoint, one of the most enticing aspects of carrier neutral data centres is that the customer needn’t have ownership of the land, building or any physical assets.

“Many organisations would not be able to offer either the physical security or the size of the infrastructure, or the high availability nature of what we do… in a lot of cases they’re more secure and more resilient than what they would have been able to manage inside their own organisations.”

For organisations looking to set up infrastructure, the amount of capital needed in order to support the level of computer capability is of paramount consideration. Nowadays organisations needn’t put up that kind of capital, as they can co-locate their infrastructure with public and private computing providers and other enterprises.

“One of the most important benefits… is that the ecosystem, the way that companies share information today, has changed, and if you move into a co-location facility, inside that ecosystem, you are doing business not only with other enterprise customers, but with telecommunications providers, with public and private clouds.”

This exchange of information is no longer done via the internet or fibre intercap from city to city, it is happening within the four walls of the data centre, saving companies sometimes tens of thousands of dollars per month on communication costs.

NEXTDC’s data centre management portal ONEDC® offers further benefits to the customer. Designed to give customers remote visibility of their data centre service, considerations such as access management and power monitoring, which used to be done at the data centre, can now be done remotely.

ONEDC is now being developed into a feature-rich cloud platform for Data Centre Intelligence that will enable end users to manage their data centre assets across multiple locations through a single pane of glass, creating new efficiencies and business insights.

“When you think about changing the user’s experience, and what’s unique,” Mr. Scroggie tells us, “ONEDC has been an important enabler for customers when they think about additional value outside of just the data centre.”

NEXTDC provides world class UTI Tier III certified facilities in every major market in Australia
NEXTDC provides world class UTI Tier III certified facilities in every major market in Australia

Head in the Clouds

Investment in overall larger network infrastructure to support consumers and businesses in Australia is critically important. Considering the change in consumption and creation of online content, high-speed network access will only further the productivity and economic leverage that will be gained from these pursuits.

There are still a number of companies in Australia, such as Fujitsu and Hewlett Packard, which still have their own facilities, with which they operate carrier or outsourcing data centres.

“One of the advantages when we’re working with enterprises,” Mr. Scroggie says, “is that they want choice… they don’t want to be tied to a single carrier. Generally when you go into a carrier-owned data centre, clearly that carrier would prefer that you consume their services rather than a competitor’s.”

“We tend to think of ourselves as the Switzerland of the IT and telecommunications industry because of our commitment to neutrality, so you can have access to everybody, rather than having access restricted to only the carrier or a small number of carriers that are available in a non carrier neutral data centre.”

The same can be said for cloud computer providers, which are predominantly interested in selling the services they provide. When customers move to NEXTDC, they have the option of over 40 carriers and more than 180 service providers offering a huge range of services.

“Within those 40 carriers and 180 service providers, there are many, many different public and private cloud computing services available to our customers, and they can move between them if they want to, they are not locked into having to stay with one particular provider.”

Cloud computing offers the ability to consume and pay only for what it used. Providers of public clouds are usually referred to as offering a ‘multi-tenanted environment’, involving sharing the infrastructure with multiple other users.

In contrast, a private cloud will likely be made available only to the individual user. Sometimes these two cloud services are combined, creating something known as a ‘hybrid cloud,’ allowing companies to have a greater degree of control, as well as the ability to customise the platform.

A number of enterprises will retain legacy infrastructure, as was the case with Australia Post, a great example of a company which, despite having the capacity to manage its own data centres, chose a more efficient method by using a large, hyper-scale, co-location facility run by NEXTDC.

“[It’s] not only the security and the availability that’s afforded to them, but it’s the multiplicity of other service providers that are doing business with them that they get access to. And the combination of all of those brings many economic benefits to an organisation the size of Australia Post.”

Australia Post has a traditional or heritage computing infrastructure, but is also an innovative organisation. By using several different public and private service providers, it created a hybrid infrastructure, which it moved to NEXTDC’s Melbourne facility.

“Depending on the organisation,” Mr. Scroggie says, “there are many and varied different considerations that they make relating to security, data sovereignty and pay-per-use.”

Many organisations will embrace public cloud platforms, as they are quick and cost effective to set up, and offer the added benefit of the customer paying only for what they use, but others are more wary of the model.

“Some organisations might be concerned that if they’re using a public computing service, that the data is not hosted in Australia, [so] they have to choose a provider that has the infrastructure and information that is based in Australia.”

Data sovereignty is currently a hot button issue in the industry. In 2013 NEXTDC sponsored a University of New South Wales whitepaper addressing the issue. When thinking about the use of public and private clouds, concerns about where the information lives are on the top of a company’s agenda.

“A primary decision criteria for any investment in a public or a private cloud is going to be: is the infrastructure hosted in Australia, and does the content stay in Australia?”

If information goes into another geography, it can cause significant problems. For example, if private health information has the potential to end up in a different country, there is an obligation for providers to make sure it stays in Australia.

“Depending on the type of information, we have different regulatory obligations for protecting information… every industry has a different set of regulatory requirements, but then there’s the governance requirements, and that is that an organisation might just say: we are not comfortable with our information sitting in a country where another government’s regulations govern how that information can be accessed.”

Any time information is stored outside the country, that country’s government will be able to decide and enforce the laws regarding how it is used and distributed, and dictate the rights a company has to access that information.

“Data sovereignty is a very, very hotly debated topic for organisations when they’re thinking about leveraging public and private cloud computing providers.”

Australia has a number of requirements in relation to data and what should be stored in the country. It is therefore down to the organisations to ensure they are complying with the government’s laws to help the system run smoothly.

“Certainly if you’re Microsoft or Amazon and others that have made big investments in Australia, there is no question that those organisations want to sell to federal and state and local government departments, and in order for them to get access to those government dollars they need to have infrastructure in Australia.”

So even the big multinational companies will have some kind of sovereignty in the country of origin, meaning user information will not travel halfway across the world to be regulated by another government.

“If you’re using Microsoft’s services, it is hosted locally in Australia, so the data is resolved here in a geo-cluster and it’s split between Melbourne and Sydney. Microsoft publicly made that announcement and you can get information about those services and the types of information that are stored locally.”

In contrast, a company like Apple has its services hosted offshore, and so any details entered by the user may be subject to another country’s laws. “Depending on the user and depending on the application,” Mr. Scroggie adds, “whether you’re a consumer or an enterprise, those things matter to varying degrees.”

To read our NEXTDC editorial profile as it appeared in The Australian Business Executive magazine, click on the cover image below.

To see this editorial as it originally appeared in The Australian Business Executive magazine, click here.


Written by Nicholas Paul Griffin