Cashing in on Technology: How Multi-Tenant Data Centers serving financial services can benefit from AI-as-a-Service and increasing computing needs
Michael Crook
Published: June 27, 2024
The explosive growth in data processing in recent years is pushing businesses in nearly every industry to rethink the way they manage their storage and compute needs. This is especially true for the financial services industry, which is increasingly relying on power and compute-intensive AI tools to aid in everything from risk management to customer service. These rapidly expanding needs can place a considerable strain on the IT capabilities of the banking sector, an industry accustomed to operating its own data centers.
As a result, many financial institutions are turning to multi-tenant data centers (MTDCs) that can not only provide the computing power they need for their enhanced services, but also offer a more economical hosting proposition for their core transactional computing, as well. For MTDCs, this represents a tremendous opportunity for growth.
In this blog, I outline how MTDCs are evolving to take advantage of the rising storage and processing needs of AI in banking, as well as how they can ensure their new facilities are best equipped to handle the customer needs of the future.
The rise of MTDCs
Business needs have spurred a dramatic shift in the way MTDCs operate over recent years. During their inception in the 1990s, they primarily operated as real estate ventures, providing a building with power, connectivity, and HVAC infrastructure. Operators could lease out space to enterprise companies to bring their own storage and computing hardware. In this basic form, they offered businesses a shared space that was more flexible and typically more cost effective than owning their own data center.
As technologies evolved, MTDCs began to offer additional value-add options like managed services and later, with the advent of cloud computing, started to provide their own services for customers to use on demand. Now, as the adoption of AI pushes the requirements for computing resources through the roof, MTDCs are seeing a tremendous uptick in demand, driving the need for new facilities—including data centers built around AI-as-a-Service offerings.
Financial services companies are among the businesses spurring the growth, but they also have other distinct needs that savvy MTDC operators can capitalize on to maximize their revenue from this important sector.
Banking on growth
For an industry where data security is paramount, financial services has historically preferred to keep tight control over its IT infrastructure, typically through on-premises data centers. Since the late 1950s, this has revolved around mainframe computers running on the Common Business Oriented Language (COBOL) language. More than a half century and countless modernizations later, the bulk of the banking industry’s core functions like account management, loan processing, and transactions are still carried out on mainframes running COBOL due to the prohibitive cost, complexity, and risk associated with a full-scale migration to the cloud.
In the meantime, banks have been building out applications for services like credit card offers and rewards programs on modern coding languages that are cloud friendly, as well as employing AI tools for a variety of business tasks, such as credit scoring, fraud detection, and investment analysis. As these applications evolve to demand more processing power, banks have begun to explore alternatives to housing all the storage and compute necessary for these functions in house.
Attracting financial tenants
In recent years, MTDCs have emerged as a great fit for financial service customers looking for a more affordable storage and compute solution, largely because of their convenience, flexibility, and diversity of offerings. Rather than owning all their data center operations, it can be a better value proposition for banks to house their ever-expanding roster of servers in an MTDC to take advantage of the shared power and cooling costs. Indeed, many institutions have begun moving their mainframes into MTDCs to take advantage of the greater space and power value they offer.
From the data center side, to further entice financial institutions, MTDCs should look to expand their portfolio of service providers to include hyperscale cloud operators, who can then offer tenants (like banks) direct access to their cloud services. The more cloud and AI services an MTDC has in house, the better they can differentiate themselves to prospective tenants looking to future-proof their data center needs.
Building considerations
Regardless of their desired approach in terms of tenant mix, all MTDC operators must plan their facilities with a fiber-rich infrastructure. A high-density fiber foundation is critical for the efficient operation and growth of diverse equipment—from storage arrays to high-end central processing units (CPUs) and graphical processing units (GPUs) for AI, to financial institutions’ mainframes—both today and as needs increase in the future.
When planning new facilities, MTDC operators need to consider future networking needs and how the fiber interconnect needs within a will scale over time. Typically, in areas of the facility that provide presence for multiple service providers/cloud providers, like a meet-me room, this will require multiple Optical Distribution Frames with thousands of ports per frame, like those in Corning’s Centrix™ System. With Centrix, access fiber can be spliced directly in the frame or spliced in from an optical splice enclosure using pre-stubbed housings, providing additional flexibility.
For larger MTDCs that operate multiple buildings on a campus, products like Corning’s EDGE™ Rapid Connect Solution can greatly speed the data center interconnect process. Based on trunk cables featuring our new Fast Track MTP® Connector, EDGE Rapid Connect can be pulled through crowded conduits with greater ease than traditional solutions, aiding in the construction of high fiber-density facilities.
As financial services organizations evolve to operate with greater intelligence and efficiency, their expanding storage and compute needs are creating a tremendous opportunity for MTDCs. Whether MTDC operators are planning to go the traditional route of just leasing space, or offering a mix of services, it’s critical to ensure that they’re wired with a high enough density of fiber to handle the demanding throughput and latency requirements of the financial sector, both today and into the future.
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