The global pandemic triggered a societal paradigm shift beyond anyone’s expectations. Over the past two years, the data center industry has recognized that activities such as remote work, online schooling, e-commerce, and the increased use of gaming and video streaming services are not short-term trends, but rather lasting changes, requiring corresponding adjustments across the data center ecosystem.
While the pandemic has wreaked irreparable harm that should never be minimized, it also led to some positive changes, particularly in the advancements of technology to support our increasingly digital lifestyles. The greater push toward digitalization and increased reliance on computing has created massive opportunities for the data center industry.
Companies must move quickly to scale their computing capacity and increase the resiliency and connectivity of their networks. When Vertiv’s team of experts came together for our latest ‘Colocation data center market prospectus,’ we agreed that rather than a bounce-back year for data centers and data center construction, 2022 will be a “bounce forward” year.
As organizations seek alternatives to legacy network architectures, colocation data centers (colos) are an increasingly popular option, particularly for several major hyperscalers, including Alibaba, Amazon Web Services (AWS), Google, Meta, and Microsoft.
The speed and costs associated with building colos and bringing them online make them particularly attractive for cloud providers and other hyperscalers trying to meet increasing data demands. Colos offer the ability to scale both construction and operation, freeing the hyperscalers to focus on deploying their applications.
While the increased demand for data center capacity has colocation providers feeling optimistic about the future, there are challenges to overcome. In several countries across the globe, there has been public pushback regarding energy concerns related to data center construction and operation.
The data center industry is also coping with the unprecedented supply chain issues that seem likely to drag into 2023, as well as a shortage of skilled engineers to build and operate new data centers.
In this year’s prospectus, Vertiv’s experts discussed the key players driving growth in the colocation market, the issues the industry is facing, and the solutions that can help keep this growth on track. Here are some of the highlights from our findings.
The colocation boom is reaching all corners of the globe
With the current demand for remote work, online schooling, telehealth, and other IT-enabled essential services, the data center has achieved utility-like status. Therefore, data centers, especially colos, continue to expand into new and emerging markets.
Europe has long been one of the world’s most established data center markets with many of its sites concentrated in Dublin, London, Amsterdam, Paris, and Frankfurt. But in the global race to attract hyperscale data centers, our experts have seen recent growth in secondary European cities, including Dublin, Madrid, Milan, Vienna, and Warsaw.
In North America, the data center market growth is centered in northern Virginia, Dallas, Chicago, and the Silicon Valley region in California, as well as New York and Atlanta.
Colocation is the most important data center sector in the Asia-Pacific region, where the current number of self-built hyperscale facilities is relatively small. Instead, those hyperscale providers are leveraging colos that have established regional presence, expertise, and cable connectivity.
One of the leaders in this space is AirTrunk, which was recently acquired for nearly $2 billion and just announced plans for a new 320 megawatt (MW) hyperscale data center in Sydney. India, Philippines, Thailand, Indonesia, and Taiwan also are experiencing significant growth in the region.
Colos are also flourishing in Africa and the Middle East, where countries like the United Arab Emirates, Saudi Arabia, and Qatar are seeing tremendous expansion in the market with potential deals for 30-40 MW data centers on the horizon.
As connectivity increases, countries like South Africa, Kenya, and Nigeria will likely attract some of industry’s major players, especially as the continent continues to pass various data privacy laws to protect personal data and mitigate cybersecurity threats.
Colocation providers have an increasing need for speed and cost
Traditional hyperscale operators don’t have the immediate access to in-country local staff to design and construct data centers in many of the developing regions, so these companies are relying on colos to meet demand.
To quickly add capacity, have more control of operating costs, and meet demand without overprovisioning, developers are normalizing their designs and equipment with increasing value being placed on the repeatability and reliability of prefabricated modular building blocks. This method shortens the time of a build, delivers schedule reliability, and helps address the industry’s labor shortage.
Scrambling to address global supply chain woes
The global supply chain issues are putting enormous pressure on the data center industry and have hindered builders’ ability to accurately predict delivery times. Major shortages in key electronics, base metals, and plastic resins remain, and the industry is also experiencing last-minute supplier decommitments for parts like compressors and switches.
Additionally, container costs and air freight have reached record highs. As a means of mitigating the strain, suppliers are increasing costs and extending lead times. For infrastructure providers, one solution would be to leverage collaboration with supplier partners to lessen supply chain risk.
Skilled labor shortages threaten industry growth
The global lack of project managers, engineers, and other skilled labor forces to build, maintain, and operate new data centers has become a major concern for colocation providers, and it’s becoming a threat for completing projects on time and developing new products. This issue is exacerbated by the pandemic because of restrictions involving international travel for employees.
For short-term solutions, experts believe data centers can use more artificial intelligence, automation, and predictive maintenance to compensate for the lack of human labor. However, the skills gap is an existential threat to the industry, and it will take a great deal of collaboration between industry leaders, educators, and other key stakeholders to make any significant improvements in the coming years.
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