One of my all-time favorite movies is Top Gun. Remember the scene following a training exercise when Maverick tells Goose, “I feel the need…the need for speed.” That line is being lived out today as enterprises focus on the pursuit of the lowest possible network latency. This is coupled with the continual demand and introduction of data rich applications, and especially true when considering colocation or moving to a third party data center.

Market demand for ultra low latency networking is growing rapidly. While traditional applications can tolerate more than 100 milliseconds of one-way packet latency, a growing number of applications such as interactive video conferencing, network gaming, high-performance computing, cloud computing, and any kind of algorithmic trading can be sensitive to much lower latency requirements.

Low latency networks for distributed applications have become a competitive advantage especially in regard to institutions with trading platforms, where the slightest delays in trades impacts profits.  Therefore, great consideration must be taken on the network connectivity between where the applications run and their end user.

With latency becoming more of a significant issue, an increasing number of organizations are choosing to use third party data centers to host their applications.

Why?

An agile data center that understands the business demands of its customers from both a LAN and WAN perspective will have already done its homework and be able to offer access to a significant number of best-in-class low latency carriers.

Telco carriers within colocation data centers must meet strict requirements for bandwidth and most importantly, latency.  This “leg work” alone can save you valuable time in your decision making process and help eliminate much potential heartache in the future.

However, latency requirements alone are not usually enough to justify the decision to move to a third party data center…for most companies. Consider this example to help make justification a little easier.

If you’re business is involved in any kind of trading with a financial impact on your bottom line, then ponder this recent estimate from TABB Group, a financial market research and strategic advisory firm.

If a broker’s electronic trading platform is 5 milliseconds behind the competition, it could lose at least 1% of its flow. That’s $4 million in revenues per millisecond. Up to 10 milliseconds of latency could result in a 10% drop in revenues.

Latency is a business issue. Improving the speed at which your company does business from a data perspective is an operational decision that must be taken seriously.  In some cases, placing your applications in a third party data center for the reason can be justified.

For your enjoyment!

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