Life On The Edge: Why Micro Data Centers Are The Next Frontier

Solution providers that have been hit hard by a data center hardware retreat are finding sales and profit growth by living on the edge—the network edge, that is.

The edge computing phenomenon—powered by an Internet of Things revolution—has opened up a new frontier for solution providers working with hardware and software vendors of all sizes and shapes.

The same customers that moved aggressively to reduce their data center footprints in the midst of the cloud computing boom are now, ironically, rushing to buy compute at the edge. They see micro data centers—self-contained, stand-alone rack-level systems at the edge—as the means to gain a competitive advantage in the IoT gold rush.

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"2010 was the decade of the cloud, but 2020 will be the decade of micro data centers," said Jeff Ready, CEO of Scale Computing, a hyper-converged midmarket hardware appliance maker that is working closely with its partners to drive edge compute solutions.

Indianapolis-based Scale Computing is one of a number of vendors retooling their product and partner strategies to drive edge computing sales growth. Other vendors betting big on the edge: APC by Schneider Electric, AT&T, Cisco Systems, Dell Technologies, Eaton, Hewlett Packard Enterprise and its Aruba networking subsidiary, HP, Intel and Vertiv.

Even cloud computing behemoths Amazon Web Services and Microsoft, which prospered from the data center retreat, are placing big bets.

In edge computing, sensors and other connected devices collect and analyze IoT data locally, alleviating the dependence on cloud or internet connectivity in specific situations where information needs to be processed quickly, reliably and securely. That means compute, storage and network connectivity are all at the edge—either on the IoT device itself or in a local gateway—and data is processed there.

Today, new trends such as improved NVM Express storage, mobile computing and the decreasing cost of computer components are moving data from centralized, cloud-based systems to decentralized edge systems, said Ready.

Scale Computing has sought to lead the charge in edge computing with its new HC3 Edge platform, a hyperconverged infrastructure system introduced in November that's purpose-built for edge computing environments like lightweight IoT devices or larger micro data centers.

Many customers remain confused about how they can take advantage of and drive value from edge applications— and that's where channel partners can step in, Ready said. "The opportunity for the channel lies with customers to the edge and maintaining the edge environments moving forward."

Bill Barnier, sales manager at Bloomfield Hills, Mich.- based solution provider Data Partner, said he is now seeing large customers that have put data in the cloud begin to "pull things in-house" and keep their computing local.

"I feel a fear in the market today as customers are concerned about putting all their information in the cloud. … I see there's a bigger mixed play of both pushing compute at the edge and dabbling in the cloud."

Data Partner's sales team has built up skill sets around virtualization and compute to better understand how to tap into edge computing solutions, he said.

"We're bringing in guys with virtualization backgrounds who can deploy and implement services on these plays. … We want to shift gears and learn about how people are doing compute," Barnier said. "It's been a learning curve for the team because you have to better understand the compute side of the business and how to implement it."

Data Partners is working with several large retail customers to run compute applications on smaller appliances including Intel NUCs or towers at the edge.

"A lot of people want to go hyper-converged and keep their computing local … I'm seeing a lot of that," he said. "Companies like Scale Computing and Nutanix are doing well in that play because customers want to use a platform where they can put all their eggs in one basket."

Michael Goldstein, CEO of LAN Infotech, a Fort Lauderdale, Fla., solution provider, said edge computing is enabling his business to "go back to the same models we had with the data center."

Edge computing is allowing LAN Infotech to offer more types of services, according to Goldstein. "We can offer old-school hardware-based solutions that are based on an upgrade model, we have the higher-end 100 percent in the cloud, and we have a hybrid.

"Our sales representatives are hearing about both pure cloud and edge opportunities, and it's giving them an opportunity now to go back and understand traditional compute," he said.

Companies on a "fast growth path" are adopting cloud solutions, while customers experiencing "steady growth" are looking for edge solutions, Goldstein said. "The cloud's unlimited horsepower might not appeal to them … we try to hear customers out as opposed to walking in with a solution, they might be open to the cloud or to edge," he said.

Bob Venero, CEO of solution provider Future Tech, Happauge, N.Y., said that since he focused his sales team on the edge rather than the core network/data center market, the company is seeing three times more sales opportunities.

With shorter sales cycles and more sales at-bats, Venero expects the edge to drive more than $20 million in sales over the next year for Future Tech, No. 119 on the 2017 CRN Solution Provider 500. "We expect exponential sales growth from what has been an entirely new sales approach for us," he said. "Our salespeople get it. They are seeing shorter sales cycles, higher revenue and better margin. It is double- digit margins and the sales cycle can be one-third the time, depending on the customer."

The edge computing paradigm shift represents one of the biggest opportunities Venero said he has seen in the business since founding Future Tech 21 years ago.

"There is a much larger TAM [total addressable market] for the partner community at the edge than there is in the core network," he said. "The core doesn't get refreshed as often. The core doesn't need to be as cutting edge in terms of the technology. It was inevitable that the edge was going to be more important to the core as it relates to our business and the channel."

The shift to the edge forced Future Tech to re-examine its entire sales and technology methodology and look at new vendor partnerships. "There are hundreds and hundreds of different solutions and offerings that are edge-related versus core-related," said Venero. "Core-related solutions you can count on one hand. The edge is a very different dynamic approach. It can be networking, software-defined networking, Internet of Things, security or printing. You have to look at the full vendor set in order to meet customer requirements. Every user is different."

One of the biggest issues with the edge is the need for strong security. That's why Venero is betting big on HP Inc.'s printers, which are aimed at preventing edge computing breaches. "We are going to see huge growth from HP print in 2018 with secure print in what is an ever-changing and risk-driven world around security at the edge," he said. Frank Vitagliano, CEO of Houston-based Computex Technology Solutions, No. 121 on the 2017 CRN Solution Provider 500, said the edge computing solution trend is taking hold at a rapid pace.

"This is definitely happening," Vitagliano said, noting that Computex is working closely with Aruba on a breakthrough "refinery of the future" edge computing solution. "There is a transition away from big massive data centers." Vitagliano said the ability to control devices at the edge with IoT and then to crunch the data at the edge with analytics is critical to customers' success. "There is a ton of productivity gains that come from the new edge solutions," he said.

According to a November report by research firm MarketsandMarkets, the edge computing market is expected to surge from $1.47 billion in 2017 to $6.72 billion in 2022, at a compound annual growth rate of 35.4 percent.

"The explosion of the edge will generate way, way more data than anybody has ever imagined. All these devices, as you go from a couple of billion connected devices to one hundred billion or a trillion, you are going to generate incredible quantities of data," said Michael Dell, CEO of Dell Technologies, during The Channel Company's Best of Breed conference in October. "We are seeing a boom in edge computing that is driven first by embedded intelligence. When we look at the companies that make things, they are putting in sensors that is going to require all kinds of computing, [artificial intelligence], machine learning close to those edge devices."

To that end, vendors are innovating at the edge with new products and services. HPE, for instance, has touted its HPE Edgeline Services Platform, as well as its "converged" IoT gateway systems designed for the edge of the network, to help manufacturers manage and control industrial-connected systems and networks at the edge.

Even as they innovate on the edge, vendors are recognizing the essential role that partners play in helping customers identify edge application use cases, implementing edge solutions, and helping end users juggle data processing at the edge and in existing data center environments.

HPE CEO Meg Whitman said during the Best of Breed conference that she defines the edge "as everything but the data center in terms of compute and storage and wireless and wired LAN." That, she said, is creating massive opportunities for partners to come in and define value-driven applications in the IoT space.

"I would really be thinking hard about what's going to happen in branch, the office, the areas where compute and storage is not happening in the data center," she said.

"Compute and storage is going to move to the edge. The edge can be a hospital bed. The edge can be a jet engine. It can also be a factory floor. Real-time decisions are going to need to be made at the edge. You can't tolerate the latency that it takes for the data to go back to a data center and then come back to a factory floor or a jet engine. You need those decisions being made in real time."

Pittsburgh-based industrial solution provider GrayMatter has found massive opportunities for edge computing on manufacturing floors where customers may have missioncritical infrastructure that requires high reliability and can't afford downtime.

"Edge is almost a continuum of possibilities, from servers with tons of edge computing power and storage, down to a really simple, not expensive, lower intelligence to just bridge the data up to the cloud—so it depends on how much latency you can handle in an application, how much local intelligence needs to go on," said CEO Jim Gillespie. "For a manufacturing plant, it's very important to close the loop locally, for other applications like lighting going up to the cloud, you don't need as much at the edge."

GrayMatter has a big role in working with customers to understand where the edge will really drive value and how that will impact business outcomes, according to Gillespie. "It's a conversation around the outcomes, so you really have to understand the right questions to ask and the right way to design [a solution]," he said. "We would weigh in with the client and design something that meets the outcomes they're looking for. Almost everything has edge computing, and then it depends where the analytics need to happen, and there's some sort of connectivity or either local buffering or on ramp to the cloud."

Looking ahead, edge computing will also open more opportunities for solution providers to deploy managed services, particularly as vendors create pre-packaged edge solutions making it easier for partners to bundle the storage, connectivity and computing features for edge solutions, said Scott Udell, vice president of IoT Solutions at Boston-based Cloud Technology Partners, an HPE company.

"I think you will see more and more plays and opportunities for the channel, especially as vendors focus more on pre-packaged [edge] solutions," he said. "Partners will see opportunities around reselling those, rolling your own and building a management service, and that's where a lot of IoT at the edge will play out."

STEVEN BURKE contributed to this story.