It’s not often that we see unanimous agreement on a question in our Data Center Frontier Executive Roundtable. But in today’s Roundtable on expectations for hyperscale computing, our panel of six experienced data center executives – Ted Behrens of Chatsworth Products, Corey Dyer from Digital Realty, Sabey Data Centers’ Tim Mirick, Phillip Marangella of EdgeConneX, John Hewitt of Vertiv and Steven Lim of RagingWire/NTT Global Data Centers – agree that 2020 is likely to be a strong year.
The conversation is moderated by Rich Miller, the founder and editor of Data Center Frontier.
Data Center Frontier: After several years of robust growth, leasing in the hyperscale data center market moderated in 2019. What do you foresee for the hyperscale market in 2020?
Corey Dyer (Digital Realty): In 2020, I think we’re going to see a bigger hyperscale market worldwide. While the need for hyperscale data centers is greatest in metros like the U.S. and Europe, the rest of the world is catching up quickly. In regions like Asia and Latin America, the data center market has been growing fast over the past couple of years and it will likely continue to grow, due to the data economy.
We’re also seeing a lot of U.S.-based companies taking their business global because of the digital boom happening in cities all across the world and their need to be closer to their global customers. Because of all this development in global regions, there’s a growing dependency in hyperscale data centers facilities, and I think we can expect them to be in demand beyond the US and Europe. According to Synergy, in 2017 there were only 24 companies worldwide that matched the definition of “hyperscale” and they operated at a combined 320 data centers. But for 2020, Synergy reports that there are expected to be over 500 hyperscale data center facilities worldwide. A lot of that has to do with emerging technologies and where businesses are operating.
The amount of data being created is not slowing down, and hybrid cloud solutions are on the rise. As more companies worldwide leverage cloud-support architectures, hyperscale deployments are going to continue to increase.
Steven Lim (RagingWire/NTT): We don’t foresee any significant slowdown in the hyperscale market. Some consultancies such as Synergy Research have tracked what they see as a steady, constant growth in hyperscale deployments. Synergy counted 390 hyperscale data centers worldwide at the end of 2017, and more than 500 today, with another 150+ in construction. More than 70 percent of that current hyperscale footprint is at commercial data center operators.
Some explanations for the perception of a hyperscale slowdown include:
- More competition slows down the deal flow – We didn’t see a modulation in the hyperscale market as much as we saw competition increase as more companies are chasing this attractive market sector. There are now more than a dozen data center providers in many metro areas. With so many data centers for hyperscalers to tour, evaluate and negotiate with, the sales process has become longer than before.
- Hyperscale spending has been inconsistent – Some of the largest hyperscalers have had somewhat unpredictable levels of infrastructure spending, leading to everyone’s favorite term – “lumpiness” – in leasing. The perception of a slowdown all depends on the parameters of the time period you are examining. If you look at a period from several years ago through today, you can still see a steady upward tick in hyperscale spending. But if you stay within a year or even smaller time frames, the data may not show a continuous upward movement.
- Hyperscalers are becoming more selective – More data center clients are interested in leveraging technology to connect with customers in new markets around the world. The best fit for these companies are data center providers with a global presence that support and enable end-to-end solutions. This option also offers flexibility for clients to balance their critical IT load across various locations.
John Hewitt (Vertiv): A plateau was inevitable. We have experienced a massive migration from traditional enterprise data centers to the hyperscale facilities of cloud and colocation providers, but we’re starting to see organizations settle into their preferred computing model. In most cases, that seems to be something of a hybrid, with a reconfigured core acting as the hub for a network that includes third-party and edge resources. We’ll still see growth in those multi-tenant facilities, but likely more moderate and balanced by additional investment in edge computing.
Phillip Marangella (EdgeConneX): While 2019 was a year for absorption of capacity, 2020 will return to hyperscale capacity growth with expansions in many existing markets and extensions to new markets as well. At the same time, the growth and demand for capacity at the edge will continue and accelerate unabated in 2020 and beyond.
Tim Mirick (Sabey): We will see an uptick in leasing from the hyperscale players in the second half of 2020. In 2019 the major players were absorbing newly-leased capacity into their networks and, despite their best efforts to get out ahead of the demand, their businesses continue to accelerate and drive additional requirements.[/caption]
This is going to create additional leasing in the major markets as the hyperscalers work to anticipate demand for existing and new business.
Ted Behrens (Chatsworth Products): While the growth rates of hyperscale leasing have moderated, the total IT spend in this space continues to be robust, with no early indications of a true slow down. We expect a larger number of smaller transactions to augment the core sites as the establishment of edge locations continue to proliferate.
NEXT: Is the data center industry making progress on its staffing crisis?
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