The demand for cost-effective high-performance cryptography solutions for data-centers continues to grow under the weight of almost constant threats of hacking, both strategic and malicious. At the present time, asymmetric cryptographic solutions and bare fiber links form two of the most critical weak points for data-center security. Both of these security incursions could be defended against by deploying adequate quantum key exchange (QKD) solutions.
But as IQT Research sees things, several factors are holding back QKD deployment in the data center and suppliers of QKD systems must address these issues if they are ever going to tap into the data center market; an addressable market that is larger in volume terms than these suppliers have ever had available to them before. The most obvious problem is that QKD firms have not yet come up with QKD solutions that would be affordable to most data center managers.
The current cost of QKD systems is arguably the most important issue holding back QKD in the data center, but it is also the problem that IQT Research believes is most easily solved, since higher volumes and experience curve effects inevitably fix initial high prices in the data communications equipment market. Instead, IQT Research believes that the trickiest aspects of marketing QKD to data centers will be in terms of market messaging and in terms of the organizational adjustment by the QKD technology providers themselves.
Market Messaging: Telling Data Center Managers Why they should Care About Quantum Encryption
Data center managers are mostly just that – managers. Generally, they are suspicious of new technologies and mostly likely to go with tried and trusted technologies on a well-established technology roadmap. The reasons for this are easy to understand. The first priority of data center managers is to keep the data center running smoothly. Most new technologies are buggy and run counter to this goal. For a data center manager, a wrongly placed bet on a new technology can be a career-destroying mistake.
The pioneer: But there are exceptions – some data center managers don’t fit this description at all. Indeed, they may actually become advocates for particular technologies, writing about such technologies enthusiastically in trade magazines. Quite why such exceptions to the rule exist is a topic that goes well beyond the discussion in this article. However, IQT Research has seen such pioneer end users emerge for almost all strategic IT/datacom technology that has appeared in the past 25 years. Always there seems to be some individual who seems willing to put his or her career at risk to promote a favored technology.
In IQT Research’s opinion, QKD suppliers targeting the data center market would be well advised to seek out such pioneer users who may not only provide them with early orders but also provide public relations assists for free. Note that, to be really effective these pioneers will have to be QKD enthusiasts specifically, not just boosters of encryption in general or even of post-quantum encryption (post-quantum encryption is, of course, something of a two-edged sword with respect to its relationship to QKD).
And the rest: Yet the pioneer end user will get QKD just so far into the data center; the pioneer is a place to start and this shouldn’t be underestimated. To take data center sales to the next stage, the QKD supplier will have to have to go heavy on the messaging to the data center manager to convince them that the corporate infrastructure that he or she manages is seriously vulnerable to attacks and that QKD is the unique solution to this problem.
This vulnerability – or so would the marketing material should claim – is due to the data center manager (1) placing too much trust on (1) asymmetric cryptography and on the supposed invulnerability of fiber optics and (2) over optimism about the organizational capability to uphold and distribute traditional secrets. QKD suppliers should point out that things can only get worse. As the data-center facilities grow in size, security leaks are potentially more serious and there are usually more links to protect.
The bottom line here is that in order to create successful and profitable supply of quantum grade network sovereignty, technology providers must create marketing messages that respond to the actual requirements of data center managers. This much is obvious at the theoretical level, but may not be so obvious to QKD technology providers in practice.
Organizational change: Refocusing QKD on the Data Center Market
The problem here is that QKD firms are currently focused on selling primarily into the government and military sectors or to the very largest financial institutions (See Exhibit below). IQT Research believes that the skills that QKD companies have learned from their marketplace experience to date are not easily transferrable to world of more general-purpose data centers. For example, the government sector projects in which QKD firms are often involved are typically heavily subsidized by various public sources.
Not so in the private sector. In the past IQT Research has seen telecom equipment firms fail badly when making a marketing switch from the economics of the public sector to serving the very different needs of private sector end users. Similarly, some QKD supplier companies have largely dedicated their efforts towards academic research and may not even have commercially capable product catalogue, let alone a production process. Such companies are highly unlikely to be positioned or organizationally capable of delivering QKD systems of a kind or in a manner that will appeal to most data center managers.
Selected QKD Suppliers
Source: IQT Research
IQT Research therefore believes that in order to facilitate the growth of QKD deployment markets in the data center context, QKD suppliers will need to realign their portfolios and marketing strategies in order (1) to provide effective response to the practical needs of data centers to deploy optimal security investments and (2) supply their QKD customers with cryptographic superiority, if possible, in order to provide some kind of competitive advantage.
We believe that if QKD firms are able to adjust to the marketing demands of private data centers, supply systems in an appropriate price range and identify and target the pioneer customers, we could see a leap in revenues for the QKD sector in the next five years or so as the demand for QKD move from high-end financial, governmental, military and intelligence sectors radically towards commercial data-center businesses. If the current QKD firms do not make such adjustments the scene will be set for the entry of QKD start-ups who get what the data center managers are looking for.