Light At The End Of The Tunnel. COVID-19 To Push Growth Trajectory Of Data Centre Industry
COVID-19 has changed the business landscape in all industries across the globe, and the data centre sector is no exception.
The data centre has emerged into the spotlight as the pandemic forces the increase of remote working and information from governments, causing the growth trajectory of the industry to scale up.
With data centre operators being established as key/essential workers, data centre operators are facing a number of Covid-19 related challenges, including limiting routes for infection whilst providing continuity of service.
Taking a little trip down memory lane – pre-Covid-19 – the growth of cloud technology played a major part in the data centre sector’s success.
In 2018, global revenue from the wholesale and retail data centre colocation market amounted to around $38 billion, according to Statista; with industry revenues expected to increase to over $50 billion per year by 2023 – as an increasing share of global businesses adopts data collection and analysis into their strategy.
Ed Cooke (pictured), founder of Conexus Law told Data Economy that the virus will not have too much of a negative impact on the data centre sector as its need becomes more prevalent.
“It is no secret that the use of social media, online videos, gaming and all other underling fundamentals to do with the Internet of Things (IoT) is all on track to boost the requirements for data, data processing and IT infrastructure,” he says when giving a general overview of the industry before the pandemic began.
“There were still great amounts of construction taking place in the tier one cities; France, London, Amsterdam and Paris and Dublin, and there has been growth occurring in other markets too – particularly in South America, the Nordics and in Africa, and quite a lot of expansion is happening in Asia.
He was right. In the last seven days, companies in the sector have still been announcing mergers and acquisitions as well as the beginning of a new data centre build in London by Netwise.
Despite all of this, Cooke says that there are some cracks that appear as there has been some constrain in the supply chain.
“There are very few main contractors out there who have expertise in building data centres securely, and they were over-reliant on an even smaller group of suppliers who would supply the equipment,” he explains.
“However, what is interesting about Covid-19 is that in many ways it will push the growth trajectory of the industry.
“People have had it demonstrated to them now that they can work remotely, and many companies have already had it demonstrated to them now that their business continuity plans are not what they thought they were.
“I suspect we will see an increase in the purchase of cloud technology and the purchase of IT infrastructure and backup systems.”
Cooke explains that he fears the supply chain may get even more constraint, as he predicts that businesses may be lost as a result of the virus.
“Many clients are now starting to think about what happens when construction starts again, there will be a real fight for resources both in terms of labour and spaces on the manufacturing lines of these equipment providers, the generator providers, the transformer providers.
“People will want to make sure that their project starts up again first. In the short term after Covid-19, it will be a bit of a battle.”
Cooke went on to explain that one of the other things that the industry is witnessing is the likes of big internet companies like the Microsofts of this world starting to take up the spaces that they had reserved in data centres.
Covid-19 and finances
Recently, US data centre power biz Vertiv cut its financial forecasts for the next quarter in response to the impact of the coronavirus outbreak on its supply lines.
HPE, Microsoft and Samsung have all warned that the virus is likely to affect their supply chains this year.
Facebook pressed the pause button on the construction of its Huntsville, Alabama data centre campus due to safety concerns over staff during the Covid-19 outbreak.
Cooke previously told Data Economy that the pipeline of new data centres is under threat as the supply of labour and parts have been paused by the international response to the COVID-19 pandemic.
All hope is not lost as companies like Tencent and CyrusOne amongst others have all pledged to donate money to combat the virus as well as offer support where it is needed.
Data centre businesses rally on markets fightback after governments around the world pour more than $1.5tr into economies.