To say that 2022 was a disruptive year would be an understatement. Much of last year’s outlook for the data center sector was concerned with balancing the growth in digitalization with more sustainable practices.
But we had no way of knowing about the impact the ongoing massive disruption to the geopolitical landscape would have – not least that we’d be facing a severe energy crisis.
The current situation brings a sharper focus on the importance of addressing the issues raised last year, as well as highlighting new challenges.
It’s not all doom and gloom, though – ongoing digitalization, for example, represents new opportunities for the sector.
Here, then, are some of the developments – for good or ill – that we can expect to see in the data center sector during 2023 and beyond.
The biggest issue we face right now is the extraordinarily high price of energy. The cost has skyrocketed to the point where it becomes a real concern for large energy users, such as data center owners.
Can they pass these costs on to their customers? Will the prices continue to rise? Do they have the cashflow to manage this in their business model?
While the argument for a renewable generation strategy has always been around sustainability and the environment, today we need in-region renewables to protect supplies for European countries primarily for reasons of energy security and cost.
Microsoft is taking a step in this direction, for example. Its Dublin data center features banks of lithium-ion batteries approved for connection to the grid, to help grid operators provide uninterrupted power should renewable sources such as wind, sun, and sea be insufficient to meet demand.
This need to accelerate the generation of renewable energy is, effectively, an extension of last year’s outlook. But the need for renewables is much more acute now and should serve as a wake-up call to governments across EMEA that they can no longer rely on traditional energy sources.
Broken supply chains
Covid-19 had a tremendous impact on global supply chains across many sectors. However, once the pandemic receded, businesses everywhere were lulled into something of a false sense of security, believing they’d been through the worst.
No-one was expecting a second body blow, a geopolitical crisis that’s proven to be even more disruptive to some supply chains than Covid.
As a high growth market, the data center industry is highly sensitive to supply chain disruption, especially at a time when it’s looking to scale up ‒ with markets for the semiconductors and base metals vital to data center construction particularly impacted.
The industry as a whole is still struggling with supply chain disruption. And the current geopolitical landscape means this is only likely to continue.
Tackling growing complexity
The requirement for digital growth has reached an unprecedented level. Every possible avenue has been explored to fulfil that need more simply, more cost-effectively, and in the shortest possible time.
But doing so can be contradictory to the nature of many highly complex, mission-critical environments. A data center is home to a wealth of different technologies – from HVAC systems to mechanical and structural engineering, IT and compute. The challenge is trying to accelerate such highly complex, interdependent types of environments to maintain the current trends for digitalization.
To this end, data center designers, operators, and vendors are fashioning systems that will reduce this complexity while respecting an application’s mission-critical nature. The industrialisation, or modulization of data centers, where prefabricated, pre-engineered, and pre-integrated units, are delivered to site, is one way of making the design and construction of a data center less complex while ensuring faster time-to-market.
Moving beyond traditional clusters
Until now, London, Dublin, Frankfurt, Amsterdam, and Paris have been the traditional data center clusters, either because companies are headquartered in these cities, or because they’re natural economic clusters with a wealth of telecom connectivity and ideal client profiles.
To provide quality of service and to be in closer proximity to centers of population and economic activity, it’s becoming more favorable to build data centers in the secondary cities of the main economic nations and in the capitals of smaller economic nations.
Competition amongst the data center providers is strong, so many of these Tier II cities and nations provide growth for existing operators or low point of entry for new operators. For this reason, you will see increased activity in cities like Warsaw, Vienna, Istanbul, Nairobi, Lagos, and Dubai.
But this expansion is not without its challenges. Considerations around the availability of appropriate sites, power, and engineering labor all add complexity to an organization’s overall operations, for instance. And many of those countries may not have a lot of experience or personnel to help with the design, construction, and operation of a new data center.
Overcoming such challenges will require data center owners to relearn the industry each time they move into a new geography. Regardless of such challenges, though, new markets continue to open up, with many operators trying to achieve first mover advantage into developing secondary markets.
In fact, many jurisdictions are welcoming data center operators with open arms, with some even offering incentives and subsidies to entice them.
One thing this past year has proved, is that we can’t be certain about anything. The after-effects of Covid and the current geopolitical system have left the sector facing a series of unprecedented challenges. But growth opportunities exist. Trends would indicate that more forward-looking operators will be able to weather the storm, to face whatever the future holds.
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