The data centre sector in 2021
According to Statista, the total amount of data created, captured, copied and consumed in the world is estimated to reach 59 zettabytes in 2020.
This exponential growth has been accelerated by this year’s pandemic. The sector has been remarkably resilient during this period to maintain capacity and uptime. For instance, despite the pandemic, the London market which had 711megawatts during the Q2 2020 and expected to end the year with 67 megawatts more capacity than 2019.
This effort has ensured that the public could access healthcare and other critical services during lockdown and stay at home measures. As we enter the new year, how will the challenges of 2020 impact the data centre sector in 2021?
Growth in Demand for Cloud Services
The data centre industry has witnessed significant changes over the past year. COVID-19 has driven the demand for cloud services in most major cities around the world as consumers spent the majority of the year working, learning and entertaining from home like never before. While there are indications that the crisis will ease next year, the changes that the pandemic created - most notably remote working - will be here for the foreseeable future.
As we look to 2021, we anticipate an increased enterprise spend in cloud technology to ensure the smooth and efficient running of businesses. This continued accelerated demand for cloud services will also accelerated data centre construction projects as operators look to build more capacity to accommodate hyperscale needs. So, what does this mean for the next phase of data centre construction? It is possible that this will result in some of the largest facilities ever built.
We anticipate that budgets will increase in 2021 to account for the additional investment necessary in technology. While this will be somewhat offset by write-downs in other business costs such as travel, office leases and equipment, CIOs will need to invest heavily in hardware and applications to enable businesses to survive and compete in a challenging economy.
Looking at the data centre industry specifically, we expect overall costs to increase. This will be driven by increased costs of construction, materials and operations as a result of COVID-19. At the same time, reliance on data centres will continue to grow as companies become more liberal in their adoption of the cloud and ‘work from home’ becomes the norm.
Critical National Infrastructure Risk / Opportunity
The pandemic has put the importance of data centres into sharp focus. In Europe, several countries such as Germany already recognised the sector as critical national infrastructure (CNI), whilst those that didn’t quite so uniformly, such as the UK, afforded the industry key worker status when the Pandemic struck to ensure the ‘lights stayed on’.
Going forward, there is potential for the industry to leverage its position on key decisions concerning land and power permits for future developments. However, this could also lead to greater legislative oversight and scrutiny on emissions, power usage, planning permissions and utility permits for future facilities.
New Market Growth
Through the pandemic, we’ve observed increased customer demand outside of Europe’s four major markets (London, Paris, Frankfurt, Amsterdam and Dublin) with hyperscale customers exploring growing European hubs such as Berlin, Madrid, Milan and Warsaw. These new markets provide access to other major cities, a growing client base, available land and power and utility access that the mature markets, such as London and Frankfurt, may no longer be able to provide.
Delays to Delivery of New Capacity will Continue
Data centre capacity consumption patterns have changed over the past year. Before the pandemic, cloud customers in colocation facilities typically utilised 75-80% of their capacity outside of peak times. During the Covid-19 crisis, they have regularly drawn 100% of their available capacity for extended periods to meet public demand for applications and services. This poses a long-term challenge for data centre operators and may directly impact their ability to maintain resilience.
As each market approaches full capacity, providers will be under enormous pressure to deliver new facilities quickly. For instance, with markets such as France, Germany and UK entering an on/off lockdown cycle, this would inevitably slow down progress on developments across these regions. It is also likely that building and utility permits would continue to take longer as local authorities priorities Covid-related concerns, which would also add to existing timetables.
We are in an incredibly fortunate position, working in an industry for which demand has spiked during the pandemic, yet it has presented some significant challenges. The key for 2021 will be to leverage this momentum and buildout much needed capacity to meet rapidly growing demand.
by Matt Pullen, EVP and Managing Director – Europe, CyrusOne