What to Expect From Enterprise Data Center Demand in 2023

Eric Boonstra, Iron Mountain Data Centers

Enterprise IT users enter 2023 seeking to manage digital transformation across a complex tapestry of infrastructure, including cloud, colocation, on-premises data centers and edge deployments. Data center service providers and vendors are key partners as enterprises sort out the best way forward, according to the six veteran executives in our quarterly DCF Roundtable.

Our panelists include Peter Panfil from Vertiv, Phillip Marangella of EdgeConneX, Schneider Electric's Frank Nash, Shannon Hulbert of Opus Interactive, NTT Global Data Centers' Steven Lim, and Eric Boonstra of Iron Mountain Data Centers. The conversation is moderated by Rich Miller, the founder and editor of Data Center Frontier. Here’s today’s discussion:

Data Center Frontier: How would you assess enterprise IT demand, and what do you see ahead in 2023?

Phillip Marangella, EdgeConneX: For years now we have watched enterprise customers pursue digital transformation projects and cloud looking to grow their capabilities and save money. And these are important, valuable steps for businesses to take. But it’s important to remember that they are a means, not an end.

So, today, as the cloud provider bills start to come due and as different providers offer different solutions, a lot of businesses are looking more closely at multi-cloud and hybrid cloud solutions. They understand that digital transformation is an ongoing process, not something they do once and forget about. As a result, demand may fracture a bit, as enterprises explore different paths to efficiency and optimization, but it will continue to grow around the globe.

Peter Panfil, Vertiv: We mentioned the growth at the edge and in hyperscale previously, and that’s true, but I think the growth in those areas is creating the perception that the enterprise data center is something of an endangered species. We don’t see it that way at all. Too many organizations still value the security and autonomy of owning their own data center to give up that resource completely. They’re going to maintain or even add enterprise data centers, but those facilities are going to evolve to better serve the organization’s needs.

These new enterprise data centers are the hubs of an increasingly distributed hybrid network that also includes cloud resources and a robust edge of the network. These hubs are and will be higher energy density, more efficient, and highly secure, while housing the organization’s most sensitive data. Depending on the company and the nature of the business, it’s not uncommon to see several of these smaller enterprise facilities deployed as needed in a modified hub-and-spoke network design, similar to the way a telecom central office can support a defined section of a telco network. These are owned facilities that function almost like a multi-access edge computing (MEC) deployment.

Enterprise is also embracing the focus on sustainability. Higher efficiency, less water usage and decarbonization efforts that were thought to be the purview of hyperscalers and MTDCs are just as important if not more at the enterprise level.

Steven Lim of NTT Global Data Centers Americas.

Steven Lim, NTT Global Data Centers: At the start of the COVID pandemic, we saw the hyperscalers move aggressively to capture a large amount of the available capacity in almost every major market. At the same time, our enterprise clients took a more cautious approach to expansion given the initial uncertainties of everything at that time. As a result, many of those enterprise clients were left out when they did make decisions as the hyperscalers had consumed the vast majority of available capacity.

As we sit today, many of those same enterprises are now trying to catch up with their own data center requirements and build out for the future. These enterprise customers have started adopting some of the same buying strategies and sophistication as hyperscale customers, and they’re buying larger footprints around the world to take advantage of available capacity in the markets they’re looking for. We don’t anticipate this to slow down anytime soon, although the rapid shift in economy and looming recession may change that outlook yet again.

To keep up with this demand today, we are having to look at larger campuses and buildings to support our customers of all sizes. NTT must continue to maintain flexibility while offering the right mix of technology, products, and services to help enterprise clients effectively manage the growing complexity of their infrastructure.

Eric Boonstra, Iron Mountain Data Centers: It is interesting to see that Gartner predicts that global IT spending will climb to $4.6 trillion in 2023, registering a year-over-year increase of 5.1%. This basically makes enterprise IT spending ‘’recession-proof,’’ although tech stocks dropped significantly this past year.

I feel that IT demand for enterprises is a wide net, where some are working fully in hybrid multi-cloud platform environments while others are just starting their journey by taking their IT infrastructure off-prem. If one thing stays through throughout the years, that is that digital transformation is reshaping and creating new revenue streams for enterprises. So rather than slowing or declining, enterprise companies, large and smaller, keep investing in their IT spend, and we see that as a data center operator with a global portfolio across the board.

Frank Nash, Schneider Electric: We expect to see significant growth in IT and Network infrastructure in the small and midsize business (SMB) and state, local, and education (SLED) markets -so much so that we’ll see a higher degree of focus on these markets from HPE, Cisco and others. We’re also hearing of numerous instances where enterprises, who may have “overbuilt” in the cloud, are scaling back and even repatriating applications from cloud to on prem.

Yet, we also see companies committing to 100% cloud (FedEx) so we expect to see a continuation in hybrid environment deployments as we alluded to in our observations on the Edge. Lastly, recent programs and government funding are fueling significant investment in the K-12 and SLED space so opportunities will abound as educational systems invest heavily in upgrading and expanding their IT capabilities.

Shannon Hulbert, Opus Interactive: Managed hosting and hybrid and multi-cloud services are growing in demand. Some of the growth can be attributed to the factors impacting the industry right now, and some is the result of a maturing industry.

Savvy IT buyers are building to take advantage of solutions that offer the right levels of security, compliance, location, and cost. We’ll see more or that in 2024 and beyond.

NEXT: Our panel discusses the key trends in data center sustainability for 2023.

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