Data is the foundation of the new economy. Almost no one is using less data today than they did yesterday, and we will all probably consume even more data tomorrow. This growing tsunami of data has to live somewhere.
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This trend is part of a larger densification of America’s IT infrastructure, which will include data centers in many new and unexpected places. The rise of hyperscale computing is all about businesses, and their relationships with their data and IT operations. Companies don’t want to spend millions of dollars to build and operate data centers. For most companies, it’s not their core competency.
As a result, data is flowing out of computer rooms and IT closets and into the world’s largest and most efficient data center facilities, which are designed to easily add more servers and power as they grow.
The rise of hyperscale computing has created a new paradigm in the data center business, changing the landscape for providers and customers alike. Hyperscale companies have become the largest customers for leasing wholesale and build-to-suit data center space. As a result, these customers hold huge sway over data center development, which has evolved rapidly to adapt to larger requirements.
This digital transformation will create layers of distributed infrastructure, from the core to the edge of the network.
There are four key drivers to keep in mind that are directly influencing hyperscale growth:
- Cloud Computing
- Social Media
- Software Platforms
- Content Delivery
Familiarizing Yourself with the Hyperscale Landscape
To fully understand the hyperscale market and its players, one has to understand that the business is made up of two tiers of companies, including:
- Tier 1: The Mega Hyperscale Operators: Think cloud services and social media — the big guys, like Google, Microsoft, Amazon Web Services, Facebook and Apple. Deals range in size from 10 MW to 70 MW, including multiple data halls in a single building, multiple data halls across several buildings, a build-to-suit project, or even a multi-building campus.
- Tier 2: SAAS, Platform Companies & Cloudlets: This tier includes companies like Oracle, Baidu and and China Telecom, and SaaS providers like Salesforce, SAP, Workday, Paypal, Dropbox and platform companies like Uber and Lyft. These customers are looking for just two to five megawatts at a time.
Regardless of which tier the customer falls into, they have to make the decision of whether to build or buy? A variety of factors influence the decision.
For Tier 1, hyperscale companies can either build their own data centers, lease space from wholesale data center providers, or partner with developers on build-to-suit projects. These decisions are often driven by cost and time. How quickly does the company need the capacity, and what can they afford to pay?
Tier 2 hyperscale companies, with smaller megawatt needs, prefer leasing wholesale space and working with data center developers to plan for long-term growth. Partnerships are key for these hyperscale players.
How is A Hyperscale Data Center Different?
Hyperscale data centers represent less than 10 about of data centers by number, but they are dominating new investment in infrastructure and servers. The influence of hyperscale customers and the geography of hyperscale data centers, among other factors, sets them apart in the data center community.
The latest Data Center Frontier hyperscale data center report, cites stats from Synergy Research that highlight capital expenditures by the 20 largest global hyperscale providers surged 43% in 2018 to almost $120 billion.
So what makes a hyperscale data center different?
Prior to 2016, wholesale data center leases rarely involved more than 10 megawatts of capacity. In 2018, market research from Jim Kerrigan at North American Data Centers found that were 11 deals of 10 MWs of more, including a whopping 72 MW lease in Northern Virginia. As you can imagine, these deal sizes require different approaches.
For many years, data center providers built turn-key data suites of slightly more than 1 megawatt of IT capacity and sized at about 10,000 to 12,000 square feet. Nowadays we see providers offering data halls ranging from 30,000 to 60,000 square feet.
This trend super-sizing of data halls is prompting some companies to optimize their construction process and supply chain to compete for these huge hyperscale deals.,
The design and construction of hyperscale facilities are different from traditional enterprise data center space in a number of ways, including:
- Real estate and site selection: Hyperscale operators grow faster than enterprise companies. This trend has been illustrated through new campuses being built by data center REITs, which are now typically designed for between 100 MW and 150 MW of capacity.
- Power sourcing: Sustainability is key to most major hyperscale operators, and a growing number of data center providers are developing teams that specialize in navigating the complexities of the energy markets.
- Power infrastructure: Hyperscale operators also explore innovative power infrastructure approaches, such as foregoing centralized UPS systems in favor of in-row units, to operate at lower Power Usage Effectiveness (PUE) ratings.
- Software-focused resiliency: Cloud computing is bringing change to how companies approach uptime, and bringing about new architectures that create more resiliency using software and network connectivity, including the use of availability zones (AZs) by cloud platforms.
- Cooling methodology: Cooling has been the focus of optimization for the hyperscale community, some of whom have adopted Kyoto Cooling (indirect air), membrane-based evaporative cooling (Facebook), water to the chip (Google), or rear-door chilling units (LinkedIn).
- Data halls: Wholesale providers have shifted to larger data halls that include between 35,000 to 85,000 share feet, supporting as much as 9 megawatts of critical power.
As for the geography of hyperscale data centers, when the movement had just begun, major cloud computing campuses were often closer to the country than the city, spurring data center building booms in rural areas of Oregon, Iowa and North Carolina, for example.
“Simply put, we are on the cusp of an enormous transformation as computing resource provisioning transitions from expensive and complex to cheap and low-friction.” — Bernard Golden
But the tides are turning — as cloud growth and new workloads push data storage closer to end users. Consequently, large data centers are headed to the suburbs of major American cities, including around “tech-centric population hubs” like Phoenix, Dallas, Chicago, Northern Virginia and similar markets.
Service Providers and Hyperscale Computing
The explosion of hyperscale computing not only has had an impact on data center customers, but data center service providers have also had to largely change the way they approach segmentation within the “service provider universe.”
Wholesale colo providers in the market for most hyperscale dealers are likely working hard on their supply changes and construction operations to deliver to new expectations on cost, speed and scale.
These are just some of the ways hyperscale customers’ demand and related trends is changing the game for service providers and developers:
- Deal size
- Vertical construction
- Land banking
- Speed-to-market
- Deal structures
What’s Next for Hyperscale?
Data Center Frontier believe the next 10 to 15 years will be an “era of continuous advancement,” defined by two overarching themes, according to its latest research on the hyperscale market:
- Innovation on the front end, as technology companies and service providers race to deploy and commercialize new technologies like AI, the Internet of Things, augmented reality, 5G wireless and autonomous vehicles.
- Industrialization on the back end, as new investment streamlines the global supply chain, bringing new levels of speed and efficiency to the delivery of hyperscale capacity.
In the coming years, the edge computing market will continue to grow slowly, then accelerate; M&A activity among cloud giants and data center providers will speed up; and liquid cooling is likely to become more centrally used as a ramp up in power density requires alternative. And these are just a few examples of the changes to come.
One thing is for certain: Relationships and experience will be more important than ever in the coming years. Hyperscale operators are looking for dependability in delivery, and consistency in design and performance. For the hyperscale market, the goal is partners — not vendors.
Explore the Hyperscale Data Center Market further through Data Center Frontier’s special reports and ongoing coverage of the latest in the hyperscale data center movement, the latest of which can be explored below.
Data Center Frontier is edited by Rich Miller, the data center industry’s most experienced journalist. For more than 15 years, Rich has profiled the key role played by data centers in the Internet revolution.