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With our heads firmly in the “cloud”

October 2017

Alicia Gregory, Head of Private Equity, MLC

So much of our data is stored in the “cloud” these days. But where exactly is your data? Is it safe? And why are companies comfortable putting your valuable information into this virtual world?

 

So what is the cloud?

Cloud computing is the delivery of computer services, such as storage and software, over the internet. Companies have been adopting cloud computing as part of a broader trend to outsource their IT infrastructure and focus on their core competencies. Cloud providers can generally provide services cheaper and more reliably than companies can in-house.

 

A public or private cloud?

A public cloud provider makes their resources available to the general public over the internet.  Public clouds offer the cheapest and most flexible form of raw storage and computing capacity for companies. The space has become dominated by large players, such as Amazon Web Services (AWS) and Microsoft Azure, and is forecast to grow from 8% of enterprise applications today to over 20% within three years.1

The public cloud, however, is not suitable for every type of application, such as banking data, as companies can’t control or have visibility into exactly where their data or operations sit. In cases where security and control are important, private cloud solutions, dedicated to a single organisation, are more appropriate.

The private cloud can be either in:

  • Wholesale co-location: whereby companies lease large “empty shells” of power and space, which they then manage themselves.  This is appropriate for very large and IT-sophisticated enterprises; and
  • Retail co-location: whereby companies lease smaller pieces of power and space, often tied with additional services.

The advantage of private clouds is that the company physically knows where their infrastructure sits, so that they have control, which can be important in the case of a problem.  Going forward, most enterprises are expected to employ a “hybrid” approach that involves on-site resources, public clouds, and private clouds.

 

Investing in a bunch of garages?

If the internet is like an “information superhighway”, data centres are the “garages”, where you store all your data (and junk!). As cloud computing continues to accelerate, data centres have benefited as cloud providers need to purchase large amounts of space from them. MLC Private Equity has invested into a number of high-quality data centres globally, including in the second largest independent retail co-location player in the US, as well as Asia’s largest fully fault-tolerant, mission critical data centre. These are unique assets in markets experiencing long-term double-digit growth. While projections are no guarantee of future success, the global data centre co-location market is expected to grow at 15% pa between 2017 and 2022.2

Both these assets have placed great emphasis on providing secure IT infrastructure services, given the importance placed by companies on IT security following high-profile breaches of large well-known organisations including Sony, Target, JP Morgan Chase, Blue Cross Blue Shield, Wal-Mart, and the US Army, just to name a few.

While you may worry about companies outsourcing storage of your valuable data to others, in most cases this is more secure than them storing it in-house at the company’s premises. At MLC Private Equity, we continue to seek high quality and secure offerings, which in our view are not just great for their customers, they are also attractive investments on a risk and return basis. For example, our Asian data centre is built on foundations that can withstand earthquakes, has its own backup water and electricity pipelines, multiple onsite generators, its own groundwater supply, separate disaster recovery data centres, and compartmentalised security zones controlled by biometric access controls. So next time you click “backup” to store your data in the cloud, rest assured, your most valuable data is typically well protected in a secure private cloud and hasn’t just disappeared into thin air!

 

1 RightScale 2016 State of the Cloud Report.

2 ‘Data centre colocation market’, MarketsandMarkets, July 2017.

 

Important information

This material is issued by MLC Investments Limited (ABN 30 002 641 661, AFSL 230705) (‘MLCI’), a member of the National Australia Bank group of companies (‘NAB Group’). Any advice and information in the material is of a general nature only. Opinions constitute our judgement at the time of issue and are subject to change. Neither MLCI nor any member of the NAB Group, nor their employees or directors, gives any warranty of accuracy or reliability, or accepts any responsibility for errors or omissions in this material.

This information is directed to and prepared for Australian residents only.