August 2019:

Data Centers at the Heart of the Digital Economy

IoT technologies are spurring data center growth, creating new trends in data center asset management, sustainability, and construction.

The future for data centers looks bright. In the U.S. alone, the data center market is expected to reach about $10 billion by 2023, while the global data center market could reach $174 billion by 2023, according to intelligence and advisory firm Arizton. Driving this growth is continuous adoption of the IoT (Internet of Things) and other advanced technologies like cloud computing, big data analytics, and AI (artificial intelligence), which in and of itself could create trillions of dollars worth of GDP (gross domestic product) growth in the next decade. As these types of innovative technologies help businesses create new products and services and discover ways to optimize supply chains and streamline operations, the demand for data centers will continue to flourish.

Any company, organization, or entity that generates or uses data may invest in (and, indeed, are already investing in) data centers, including government agencies, universities, hospitals, retailers, banks, cloud service providers, and beyond.

A data center is a facility that stores IT infrastructure—servers, storage systems, etc.—and all the systems required to keep this infrastructure safe, secure, and running reliably. A data center can be any size, ranging from a closet in an office building to a mobile shipping container to an entire warehouse.

Single-tenant enterprise data centers store one company’s data, while multi-tenant data centers or colocation centers serve multiple companies that have outsourced data storage and related services like backup, recovery, and data management to the provider.

Because it houses critical business systems, a data center is itself a critical asset. Many enterprises’ daily operations rely on their data centers doing their job to store, communicate, and transport data without a hitch. To achieve this goal, data centers must consider factors like energy use/energy efficiency and security.

Since data centers store sensitive or proprietary information, they must be secure in both the digital and physical sense of the word, which requires data centers to implement stringent security measures like video surveillance and biometrics systems to enforce restricted physical access to systems, alongside firewalls and SIEMs (security information and event management tools) to protect against digital infiltrations.

These considerations will become even more important as disruptive IoT technologies create a spike in demand for data centers and as data becomes more valuable to owners and adversaries alike.

Steve Madden, senior director of solution marketing at Equinix, says the data center industry is definitely feeling the disruptive impacts of cloud and edge computing, along with advances in colocation and hosting services. He discusses trends like 5G, software-defined ecosystems, and digital business and how data centers will play a role in each of them. “5G will facilitate massive leaps in device and consumer demand that will drive us towards a hyper-interconnected world,” Madden says.

“Data centers will play a key role by providing the vital data capacity at a sufficiently high speed to keep digital ecosystems and the digital economy ticking. 5G will make data centers and the interconnection happening within their walls increasingly vital to the global economy.”

Regarding software-defined ecosystems, Madden says an increasing number of companies will begin working in software-defined ecosystems, which means that data and the parties that generate it need software-defined interconnection to interact in realtime and to support sophisticated applications. “Data centers will act as the hubs through which the world’s most valuable information passes, and on which the digital economy itself is built,” he adds.

Data centers will also support digital business and business-critical realtime interactions among people, things, locations, clouds, and data. “New technologies like 5G, edge computing, and IoT rely on realtime processing and use huge amounts of data that depend on cloud computing,” Madden concludes. “These data-dense technologies will drive the need for data centers, because they offer more scalable and cost-effective cloud computing.”

David Cappuccio, distinguished vice president and analyst, IT infrastructure strategies, at Gartner, says as this market grows, there are a couple of key trends to watch. “For enterprise data centers … the trend is to get away from them, and a lot are moving towards colocation and cloud, essentially deciding which workload belongs where, and setting a strategy accordingly,” Cappuccio says. “For those where CAPEX (capital expenditure) is better than OPEX (operating expenditure), we see retrofits and new builds, but the focus is on energy and space efficiency, essentially (to) optimize vertical density and optimize power/cooling at the same time. This reduces floor space and overall spend.” For colocation providers, Cappuccio says he is seeing increased interest in secondary services toward cross-connect and interconnect services, allowing customers to implement a cloud migration, build a partner ecosystem, or incorporate an as-a-service offering.

…For enterprise data centers … the trend is to get away from them, and a lot are moving towards colocation and cloud, essentially deciding which workload belongs where, and setting a strategy accordingly…

Cappuccio further suggests the IoT is driving interest in smaller edge environments and micro-data centers. “In many cases, IoT hubs need to be near sensors, because analysis and resolution might be needed in milliseconds,” he says. “Within four years, we expect over 50% of all generated data to be at edge environments, not in traditional data centers. Much of this might be temporary data—digital twin as an example—but initial use/analysis of the data will be localized. Some will be eliminated, some will move to an aggregation point (like a) data center (or) cloud for future use.”

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Data Center Trends

In the coming years, a lot of data center activity will take place at two ends of the spectrum. On one hand, as Cappuccio noted above, there’s edge computing, in which businesses move compute and storage closer to end users to achieve low latency. On the other hand, there is the trend toward hyperscale facilities.

Major cloud players like Amazon, Facebook, Google, and Microsoft are pushing the boundaries of traditional data centers in the race to support cloud growth. Cisco’s Global Cloud Index suggests the number of hyperscale data centers will reach 628 by 2021, up from 338 in 2016. Cisco further predicts that traffic within hyperscale data centers will account for 55% of total traffic within all data centers by 2021.

Considering all of this movement among hyperscalers, will there be a 100-megawatt deal in the near future? James Leach, corporate vice president at RagingWire Data Centers, says it may have already happened and outsiders just don’t know about it yet.

“Data center companies have expanded around the world and now offer a range of offerings from move-in ready, to customizable core and shell, to green-field developments,” he says. “The combination of a global data center platform, a wide range of data center solutions, and annual data center absorption approaching 1 gigawatt means there is most likely a 100+ megawatt deal in place.”

Industry growth is also changing asset management in data centers. “Two interesting trends in asset management and data centers are both centered on economics and useful life,” Leach says. “The first is that large computing deployments are refreshing servers faster than in the past. Ten years ago, you would plan for a useful life of a server as five, seven, or even 10 years.

…The combination of a global data center platform, a wide range of data center solutions, and annual data center absorption approaching 1 gigawatt means there is most likely a 100+ megawatt deal in place…

RagingWire – Data Center Lobby

Today, that number is closer to three years. The combination of price performance improvements in technology along with a better understanding of the financial impact of failure rates from aging equipment is leading compute-centered businesses to swap out old technology for new technology.”

Leach points out that the useful life of data centers themselves is also changing. “When the data center industry was in its infancy, data centers might have (had) a useful life of 15-20 years,” he explains. “Now that the industry has matured and products have become established, a data center can have a useful life of 30, 40, or even 50 years, which leads to better economics for the industry.”

Sustainability is another important trend playing out in the data center space. Organizations are under pressure to demonstrate that they are responsible corporate citizens, and Equinix’s Madden says having visibility into assets and current usage patterns is an important first step in becoming more sustainable. Equinix and other companies offer data center monitoring software that allows customers to monitor power and mechanical and environmental conditions of their owned infrastructure within a data center. Data center monitoring software can provide realtime and trended visibility of operating data for infrastructure assets through an online portal or customizable APIs (application programming interfaces). “By tapping into those insights, our customers can make better decisions about improving efficiency and sustainability,” Madden says.

Leach from RagingWire Data Centers similarly says data centers will increasingly help organizations meet corporate sustainability goals. “Over the last 10 years, data centers have established themselves as the most efficient way to run large-scale computing systems, meaning there is very little waste in data center operations,” he explains. “The next wave in data center sustainability will be renewable energy. The journey started with data center companies investing in renewable energy certificates. Now leading data center companies are using renewable energy to power their data centers.”

RagingWire – Data Center Exterior

Chris Sharp, chief technology officer at Digital Realty, says government regulation is playing a role in shaping data center sustainability. “From our vantage point, the majority of governments allow operators to build data centers as long as they are able to procure land and power,” Sharp says. “That being said, we see regulation becoming increasingly important as governments look to ensure the sustainable development of data centers, particularly as it relates to resource management and energy consumption.”

Sharp says data center operators need to develop and deploy green strategies that include more efficient data centers, renewable power sources, and minimized water usage. “Water usage in today’s data centers is something not many people are asking about,” Sharp adds. “As climate change becomes more extreme, the water needed to cool many of today’s data centers will become both scarce and expensive. This may present significant challenges for data centers that don’t adapt accordingly, given the high cost of retrofitting with water-free or water-light cooling solutions.”

RagingWire – Data Center Exterior

Finally, Nancy Novak, senior vice president of construction at Compass Datacenters, says the need for facilities delivery is an important overarching trend to watch in the data center industry. “Six months is becoming the standard customer delivery expectation, and this need is manifesting itself in changes of the methods of data-center construction,” Novak says. “Building an entire data center onsite is too inefficient to meet compressed delivery times, and the industry is rapidly adopting offsite construction as the most effective way to deliver a facility on these new aggressive timelines.”

For example, she says walls prefabricated offsite can simply be assembled when they arrive onsite. “Not only does this reduce the time formerly required to perform the tasks, but it also enables many onsite activities to be performed in parallel that formerly needed to be done sequentially,” Novak explains. “Reducing construction schedules and driving costs out of them will characterize the data center industry for a long time.”

Going forward, Novak encourages the data center industry to pursue diversity to help support growth and innovation. “The continued level of disproportion at all levels of the data center industry, and in technology in general, limits the available workforce at a time when the demand for people capable of doing everything from designing data centers to building them is at its highest,” she says. “This situation shows no signs of abating itself any time in the near future. We, as an industry, have to do a much better job of outreach to groups like women and minorities, to demonstrate why a STEM-based education isn’t something to be afraid of or avoided, but the key to better job prospects and future career growth.”

The forecast looks sunny for data centers, but what will this bright future look like? Watch for high-quality data centers delivered in shorter cycle times and at lower price points. Expect to see major advances in scalability, flexibility, and sustainability in data center design and operations. Ideally, data centers will be scalable, with flexible growth options to help organizations match data center capacity to their business needs, and the people working in the data center industry will be more diverse.

Rapid growth in data and continued IoT and cloud adoption are driving demand for data center infrastructure and creating unprecedented data center growth. However, since needs aren’t fully known yet for many up-and-coming technologies (like 5G, for example), the evolution of data centers isn’t completely predictable. However, one truth is certain: Data centers will be front and center in the thriving digital economy.

“The rapid increase of data creation, consumption, and storage are fundamentally changing how enterprises think about data center services,” says Digital Realty’s Sharp. “Beyond the vast increase in the volume of data being created, the sophistication and significance of advanced technologies are driving unprecedented growth in the digital economy, and data centers are at the heart of it.”

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