The ICT industry is currently a hotbed of innovation, with cloud computing going mainstream, mobile services increasing in demand, drones and autonomous vehicles dominating the future of navigation, and the Internet of Things rapidly changing how industrial and consumer-orientated companies conduct business.
At the heart of all this are data centres, the backbone of the ICT industry. “Data centres provide the industry with strong communications, data storage and processing capabilities,” says Tim Comerford, senior vice-president at advisory firm Biggins Lacy Shapiro’s energy services group and principal of energy specialist Sugarloaf Associates. And these are the reasons why the construction of data centres is ICT’s biggest growth area.
The Telecommunications Industrial Association in Arlington, Virginia, reports that firms currently spend an estimated $36bn on storage and infrastructure a year. The Cisco Cloud Index estimates the number of hyperscale data centres will grow from 259 globally in 2015 to about 485 in 2020, and by then will represent 47% of all installed data centre servers, while 92% of all data centre traffic will come from the cloud.
While location and growth depends on the type of data centre being discussed, Mr Comerford says the larger US cities are the first locations to see growth. “More recently, however, development is occurring in secondary markets such as Columbus, Ohio; Omaha, Nebraska; and Hillsboro, Oregon,” he adds.
Accordingly, Reno in Nevada has also become an alternative for data centre development, given its safe location with regards to earthquakes, proximity to main fibre channels and access to renewable energies. Apple recently announced a $1bn data centre expansion in the city to meet soaring iCloud storage demands, while Google has reportedly purchased 490 hectares of land close to Tesla’s Gigafactory site near Reno.
Northern Virginia is developing into the world’s largest and fastest growing data centre market. The reasons for this include its proximity to Washington, DC, as well as its universities, research organisations, federal agencies and laboratories. Each year more than 1000 students graduate from nearby George Mason University with degrees in big data and analytics.
In September, Iron Mountain broke ground on an 34-hectare campus, dubbed VA-1, in Virginia’s Prince William County. It is the first of the company’s four planned data centres in the county. “This data centre, like our others, is especially suited for heavily regulated enterprises, cloud providers and government agencies who seek a highly secure, highly compliant environment for hosting their data centre operations,” says William L Meaney, president and CEO of Iron Mountain.
Neighbouring Ashburn in Loudon County, known as 'Data Centre Alley', has some 75 data centres totalling more than 900,000 square metres either in operation or under development. According to JLL’s 2017 Data Centre Outlook, Loudon County has nearly double the number of data centres in Northern California. Local officials are considering lowering the county’s business personal property tax to make it more competitive with Prince William County as well as other popular data centre hubs in Atlanta, New York and Ohio.
Beyond the US
Besides the US growth in data centres, the US Department of Energy-led Center of Expertise for Energy Efficiency in Data Centers points to China as a huge player in the industry. Apple recently announced plans to build its first data centre in Guizhou, China. This is in response to strict new cybersecurity laws that require companies to store Chinese users’ data in China.
Amazon, IBM and Microsoft already have partnerships with Chinese companies for cloud computing services. But locations worldwide are carving out economic opportunities based on ICT trends. Scandinavia is very enthusiastic about the ICT sector, and Multigrid Data Centers is building a multi-tenant centre in Kista Science City in Stockholm, Sweden.
Denmark, too, has put a lot of emphasis on digital solutions for its citizens. “In many ways, the public sector is driving the demand for advanced digital solutions,” says Lasse Grøn Christensen of Invest in Denmark.
Apple is building its second data centre in Aabenraa, Denmark, which is expected to open in 2019 – its first, which opens this year, is in Viborg. Meanwhile, Facebook is also building a Danish data centre in Odense, the company’s third outside the US, the others being Lulea, Sweden and Clonee, Ireland. “These investments have put Denmark on the map as attractive for data centres,” says Mr Christensen.
He adds that Danes are eager to test new digital solutions and have a strong culture of public-private co-operation that contributes to ICT developments. This is illustrated by the companies to come out of Denmark, such as Skype.
Scotland has developed a thriving and connected ICT scene with strong government and academic support. “It’s easy to set up a business in Scotland and our workforce has high skill levels at an affordable cost,” says Rosa Stewart of investment promotion agency Scottish Development International. “Scotland offers an outstanding quality of life with vibrant cities such as Edinburgh and Glasgow and beautiful countryside less than 30 minutes’ drive from the main cities,” she adds.
In July 2017, the UK and Scottish governments announced a £1.1bn ($1.46bn) investment to develop the Edinburgh City Region into the 'data capital of Europe', an investment that spans 10 years. The University of Edinburgh will have a pivotal role in attracting ICT activities and companies – its Bayes Centre for Data Science & Technology is currently under construction and scheduled to open in mid-2018.
Small markets also play a role in ICT, but can be subject to unrest or natural disaster. The US Virgin Islands (USVI) is one example. While in the throes of recovering from the catastrophic Hurricanes Irma and Maria, the USVI has attracted some 45 ICT companies on its islands of St Thomas and St Croix. These range from online insurance and data hosting to multimedia services, cloud services, internet advertising and supply chain management. Companies there have benefited from fibre cable that was laid off St Croix during the Obama administration in the US, which provides high-speed internet connections to all three islands of the USVI.
While the recent hurricanes have caused widespread power outages that have knocked out cable or wireline services, the US Federal Communications Commission’s Disaster Information Reporting System is keeping tabs on these outages. Obviously, rebuilding is critical to the economy of the islands, where companies have long taken advantage of tax advantages to set up shop.
USVI Economic Development Authority spokesman Andrew Clutz says: “Approved USVI companies receive a 90% tax exemption on corporate income, as do principals who reside there for six months plus one day. Small companies pay 4% in corporate income tax.”