As the global demand for ICT services escalates, there has been a corresponding boom in the need for data centres to house the infrastructure that supports them, such as servers and network systems.
According to The fDi Report 2015, between 2009 and 2014 data centre FDI increased, on average, by almost 12% year on year for projects and by 3.5% by capital investments, making this the fastest growing sub-sector for FDI.
Industry insiders point to the huge growth in ICT-dependent activities that are massively increasing the amount of data that needs to be stored. Areas such as the Internet of Things, e-commerce, social media, robotics, artificial intelligence, video streaming, enterprise security, private connectivity to the cloud, data management and analytics, customer relationship management and billing are responsible for this expansion in global digital demand and will continue to feed the need for data centres.
Analyst International Data Corporation predicts that by 2020, the global digital universe will reach 44 zettabytes – more than 10 times the current figure. According to 451 Research, five of the largest digital companies – Apple, Google, Microsoft, Amazon and Facebook – are investing heavily in data centres around the world, with a combined total capital spend of more than $115bn over the past 14 quarters. It says that in the second quarter of 2016, capital expenditure at the five companies increased by 9.7% sequentially and 60.5% over the same quarter in 2014.
“One of the biggest trends at the moment is the movement towards commercialisation within the sector,” says Andrew Donoghue, European research manager of data centre technologies at 451 Research. “That’s happening in two ways: retailers and big banks are steering away from building their own big sites, and we’re seeing a move towards co-location – this is a strategy that has been supported by co-location providers such as Equinix.
“At the same time, we’re also seeing a move towards the cloud, so a hybrid approach is being adopted. For example, if you’re a bank, you may have your own facility as well as some infrastructure co-located and some in the cloud.”
There is also a growing demand for reliable and economic power supplies to keep these data centres up and running. “Data centres represent one of the fastest growing consumers of electricity in the world and, no matter the industry, data is continuing to grow in significance,” says Jorge Balcells, director of technical services at Verne Global, the owner and operator of a data centre campus in Iceland.
“With this growth comes challenges in sourcing energy to power these systems, and with enough abundant resources to meet the increasing demand.”
The European Commission’s RenewIT project was established with these concerns in mind, and in September 2016 it launched the final version of its online tool for the design and siting of energy-efficient and renewable-powered data centres. The RenewIT Tool is designed to make it easy to compare more than 60 locations across Europe in terms of cost of electricity, access to renewables and other factors that influence decisions when planning the site of a new facility.
On the edge
Locations close to cities such as London, Frankfurt, Paris, Dublin, Singapore and Hong Kong are frequently listed as tier one favourites for siting data centres. “However, there is a move towards building out sites in less well-established locations driven by so-called edge data centres,” says Mr Donoghue. “This is going to accelerate in the future driven by the expected growth in Internet of Things-related data, plus content delivery networks delivering video and other bandwidth-intensive content.”
In June 2016, Colt Data Centre Services announced a 7000-square-metre expansion in its global data centre capacity. The company says this was driven by a surge in demand for its cloud hosting and co-location services. It includes a new data centre in Inzai, Japan, as well as adding capacity to existing data centres serving London, Berlin and Hamburg.
“What drives choice of location isn’t just based on which city, it’s actually how close to the population that consumes this data you need to be,” says Robin Brown, vice-president at Colt Data Centre Services. “Large metropolitan areas have both large numbers of people and businesses, so being close to these large areas is in vogue.
“Increasingly, the networks that deliver the traffic to data centres are not seeing the same increases in speed. Proximity reduces that issue and also reduces any risk associated with increases in data in the future. This means that one trend has been to ensure you are close to your audience.
“What that results in is lots of multiple sites being purchased close to the audience of whatever is being delivered. So a lot of our clients want to purchase in multiple cities around the world, and then they want to purchase in multiple sites throughout those cities to give themselves more resilience. But that doesn’t mean that they won’t also build hyperscale data centres in colder locations.”
Hyperscale data centres
“Facebook, Google and Amazon are all expanding their footprint and building out extremely large hyperscale data centres,” adds Mr Donoghue. “Sometimes they use co-location strategies, but they also build out in areas where land and energy are cheapest. In the US, Washington state has lots of cheap hydropower. In Europe, the Nordic states – Norway, Finland and Sweden – are becoming important locations. For example, Facebook and Google have set up base in these locations.”
Mr Balcells agrees: “Cooling is responsible for up to half the energy consumed by a data centre, making this the main culprit for high operation costs. Data centres also benefit from lower ambient temperatures in these cooler climates, allowing providers to utilise natural air to cool servers at little or no cost, and with zero emissions released for those using renewable energy sources. It’s a win-win for businesses in search of cost and environmental efficiencies.”
Verne Global’s data centre is located in Iceland. “We built our data centre campus in Iceland as we identified a problem in the industry,” says Mr Balcells. “Companies pay more than ever for power-hungry data centres, and the energy prices in some parts of Europe continue to increase.
“This location was a no-brainer: according to Cushman & Wakefield’s latest Data Risk Index, Iceland’s power grid is ranked the lowest risk in the world and operates at just 10% capacity and to 4:9s of availability – meaning it experiences an average of just 52 minutes downtime a year, if at all.”