It’s important to be accountable for your predictions and projections. At Data Center Frontier we track our annual forecasts, and report back to our readers about how they turn out.
Last January we identified Eight Themes That Will Shape the Data Center Business in 2021. Many predictions were emphatically on the money (big year for M&A, sustainable finance, and the cloudification of enterprise colo) while several of our takes on innovation proved slightly ahead of their time.
Here’s the scorecard for our 2021 “Eight Trends” forecast, including whether each prediction was a Hit, Miss or Too Early.
Watch for our “Eight Trends That Will Shape the Data Center in 2022″ forecast on Thursday, Jan. 6.
1. The Enterprise Adapts to a Changed IT Landscape
PREDICTION: In 2020, cloud technology enabled society to retool to survive the COVID-19 pandemic. This trend will continue in 2021, as the world slowly defines the contours of the “next normal” in its battle with COVID-19, and digital infrastructure will be central to this transition. The pandemic has placed a premium on flexibility, which will accelerate the ongoing shift to new architectures and software-defined, programmable infrastructures. Organizations that have been studying these opportunities will need to act or risk being left behind.
HIT: As we anticipated, 2021 saw a major shift in enterprise colocation. The largest colo providers – including Equinix, Digital Realty, Cyxtera and Evoque Data Center Solutions – all rolled out new strategies to cloudify their offerings, embracing online ordering, software-defined networking (SDN), application programming interfaces (APIs), orchestration tools and DevOps expertise.
The trend was driven by enterprise end users that want colocation to look more like their favorite cloud platforms. “The nature of digital infrastructure is changing,” said Equinix CEO Charles Meyers. “Make no mistake about it – it’s more distributed, it’s more on-demand, and it’s more ecosystem-connected than ever before. Cloud computing has forever reshaped the expectations of customers.”
Just about every provider we spoke with this year said they were seeing more enterprise IT business, and much of it focused on creating more nimble hybrid cloud architectures. Leading research houses estimated the increase in enterprise IT spending at 10% to 15%, depending upon the market segment. As the COVID-19 pandemic continued into a second year, the Delta and Omicron variants ensured that remote work is a long-term strategy for many workers. That has prompted a broader look at infrastructure that spans on-premises, cloud, colocation and edge. And it’s not all headed to the cloud.
“What we are seeing on the enterprise side now is that some of those companies operating at scale are reassessing their ‘all-in’ cloud strategies and considering a more hybrid approach to IT operations – what the industry has dubbed ‘cloud repatriation,’” said Tim Shaheen, Executive Vice President of Strategy & Development for Aligned Data Centers, in last month’s DCF Roundtable on enterprise spending.
2. Sustainability Takes Center Stage
PREDICTION: When it comes to climate change, it is time for the data center sector to lead. The massive energy footprint of cloud computing enables the data center industry to drive a global shift to renewably-powered business. Customers and stakeholders are demanding accountability on climate impact, creating a compelling business incentive to embrace sustainability. The data center industry is in a unique position to accelerate the adoption of sustainable practices and reduce the damage to our changing climate.
HIT: There’s really no debate on this one. The sustainability imperative was front and center for virtually every leading cloud and data center service provider in 2021. The storms, deep freezes, wildfires and heat waves of 2021 brought a renewed sense of purpose on climate for data center operators, who were already the largest corporate users of renewable energy. That commitment can be seen in a range of recent industry responses, including:
- A flurry of new projects to advance web-scale usage of energy storage, hydrogen fuel cells, biofuels and other alternatives to diesel.
- Enabling royalty-free access to patents for low-carbon technology from leading cloud innovators.
- Deeper sustainability and ESG (environmental, social and governance) commitments that go beyond offsets and carbon neutrality, advancing science-based targets and net-zero goals.
- Broader adoption of recycling and zero-waste strategies to support a “circular economy” for servers and other IT assets.
“Sustainability is becoming stable table stakes for every provider and a mantra for the data center industry as a whole,” said Phillip Marangella, Chief Marketing Officer at EdgeConneX. “More than just carbon or water, it’s thinking about sustainability holistically.”
“Today more than ever before, it is clear that we no longer need to choose between the planet and profit,” said Chris Pennington, Director of Energy and Sustainability at Iron Mountain Data Centers, which is investing $725 million in sustainable tech by buying a controlling stake in ITRenew, which decommissions data centers and recycles IT assets. “Data center customers are driving change within the industry in meaningful ways,” Pennington wrote in a DCF Voices column this month.
3. Creating Data Center Capacity at Internet Speed
PREDICTION: The industrialization of cloud capacity is hardly new, but the combination of the hyperscale boom and the pandemic are showcasing these capabilities as never before. The data center industry has matured rapidly over the past decade, and stands ready to meet the challenges of the accelerating transition to a digital world.
HIT: The industrialization trend can be clearly seen in the move to more massive cloud campuses, like the 2,000-acre Quantum Loophole campus in Maryland and Yondr Group’s plan to deploy 500 megawatts of capacity in Northern Virginia. This trend accelerated in 2021, as investments of $1 billion or more in new projects became commonplace, and campuses of 1 million SF or more were no longer outliers.
Perhaps the best example is the growth at Meta/Facebook. Over the last 18 months, the company has announced new data centers in Illinois and Tennessee, as well as major expansions of existing campuses in Utah, Georgia, Iowa and Prineville, Oregon, where the company is rolling out a multi-story data center design featuring two floors of server rooms to boost capacity.
Another example is the speed and breadth of the expansion initiatives at DigitalBridge, as Vantage Data Centers deployed cloud-scale projects across four continents and DataBank has initiated 10 data center expansion projects over the past six months.
4. Automation and Robotics Lead Pandemic Tech Solutions
PREDICTION: The rapid embrace of data center automation is about to enter a new phase, in which automation and robotics play a larger role in facility management. This is a trend we’ve been tracking for years, including the use of robots to install servers in racks, swap out failed servers, manage disk storage and interconnection, and site security. The pandemic has accelerated the need to make systems less reliant on human intervention. Expect to see these initiatives abound as data center operators prioritize the health of their operations teams and pursue contactless maintenance.
MISS: There was plenty of focus on automation, to be sure, but the robotics revolution continues to be a slow-moving trend in the data center sector. On the software front, there’s lots of progress in automation and programmable infrastructure to boost remote management and staff efficiency. We got that piece right, but I didn’t see signs of meaningful adoption of robotics in data center production environments. There are some initiatives still in the R&D and proof-of-concept stage, but real-world implementations at scale are yet to come.
5. DealFront: The Year of Major Data Center M&A
PREDICTION: This could be a big year for data center mergers and acquisitions. The M&A scene has been active, with most of the major recent deals focused on global players adding capacity in new markets, especially Canada and Europe. Over the past two years we’ve seen new data center platforms backed by global investment giants, who may seek to gain scale through acquisitions. It’s likely that we’ll see active M&A in 2021, including some larger transactions. Don’t be surprised to see deals that span different types of digital infrastructure (data centers, towers, fiber, wireless) or to a bold market entry from outside the current data center sector.
HIT: It was the biggest year yet for data center M&A. 2021 featured the three largest deals in the history of the data center sector: the joint KKR/GIS $15 billion deal for CyrusOne, Blackstone’s $10 billion acquisition of QTS Data Centers, and American Tower’s $10.1 billion purchase of CoreSite, which definitely meets the criteria for “a bold market entry from outside the current data center sector.”
That was just the tip of the iceberg. The Starboard SPAC bought Cyxtera for $3 billion and took it public, Vertiv acquired E&I Engineering in a $2 billion deal, Switch bought Data Foundry, Green Mountain was purchased by Azrieli, Digital 9 bought Verne Global, Equinix acquired MainOne to enter Africa, and Iron Mountain announced plans to buy ITRenew, just to name a few of the many deals.
In short, an unprecedented year of M&A that rewrote our list of the largest data center deals of all time.
6. Edge Computing: The Whales Jump Into the Pool
PREDICTION: As edge computing takes shape, we are approaching the brink of a new phase for global Internet infrastructure. This won’t be the “Big Bang” year for edge computing – that’s probably 2022. But 2021 will be a year in which edge aspirants establish beachheads to gain a strategic foothold, including several of the largest players in digital infrastructure. … As AWS and American Tower get busy, it will generate opportunities and responses from other players in the emerging cloud ecosystem. This will mean partnerships. And yes, there will be M&A in the edge sector.
HIT: As predicted, the whales were extremely busy in edge computing in 2021. Amazon Web Services is adding 30 new Local Zones around the world to extend its edge computing network, along with new ways to connect to the “Internet of Billions of Things.” AWS also demonstrated how it can use its edge infrastructure to target specific vertical markets by creating a Private Local Zone for capital markets inside the NASDAQ data center in Carteret, New Jersey, which will allow NASDAQ to move its exchanges onto the AWS Cloud.
American Tower’s $10 billion acquisition of CoreSite lays the groundwork for an expansive vision for converged computing. “This transaction positions American Tower as a leading player across multiple classes of communications real estate,” said Tom Bartlett, the President and CEO of American Tower, which intends to use CoreSite’s interconnected data centers to “create a hub-and-spoke network originating from the core and extending through the various layers of the edge.”
In other whale-level edge activity, Google said it is extending its infrastructure to the edge, bringing its cloud hardware and software into telecom networks and customer data centers, including on-premises facilities.
7. Energy Storage Enables More Renewables
PREDICTION: Utility-scale energy storage has long been the missing link in the data center industry’s effort to power the cloud with renewable energy. In 2020 both Switch and Google announced projects to begin supporting their data centers with large lithium-ion batteries. These early adopters are forging an important path, and we expect energy storage to quickly become an important tool for hyperscale operators. This process will begin in earnest in 2021.
TOO EARLY: In 2021, the embrace of energy storage continued to expand. Microsoft and French energy company Total established a partnership to assess the long-term feasibility of deploying large batteries as backup power for critical infrastructure, working with Total’s battery specialist subsidiary, Saft. Data center developer Yondr is now working with BritishVolt, a U.K. based manufacturer of lithium-ion batteries, on energy storage options for data centers. And Quantum Loophole says it will include large-scale energy storage in its first campus.
But as for actually enabling more renewable energy use by data centers, it is still too early for meaningful impact. It appears more likely that 2022 and 2023 will see these efforts move beyond R&D and proof-of-concept and enable the adoption of energy storage as an enabler of renewables.
8. Sustainable Finance Boosts Green Data Centers
PREDICTION: Data center customers aren’t the only stakeholders that are focused on sustainability. Investors also will be part of the green energy revolution, as they seek to align their portfolios with climate resilience. This is creating a growth opportunity in sustainable finance that prioritizes ESG criteria (environmental, social and governance) in selecting targets for lending and funding.
HIT: Sustainable finance is a new frontier in addressing climate change, bringing accountability into the business of how companies fund their operations. Aligned, Flexential, Digital Realty and Equinix all used sustainable finance vehicles to raise at least $1 billion in growth capital during 2021.
There will be more green funding deals in the future, driven by investors’ growing appetite for sustainable options. There were 76 new climate-aware funds launched globally in 2020, according to Morningstar.
“Sustainable business is good business,” said Dan Shurey, Vice President of Sustainable Finance at ING. “I think that’s become pretty well recognized across sectors. It’s no longer a nice to have it’s a need to have.”
The Scorecard
So here’s a look at the final score for 2021.
2021 Scorecard: Six hits, one Miss and one “Too Early.”
For comparison, here’s our track record for previous years:
2018 Scorecard: We had five Hits, one Miss and two predictions that qualify as “Too Early.”
2019 Scorecard: Six Hits, one Miss and one “Too Early” score.
2020 Scorecard: Once again, the final tally was six Hits, one Miss and one “Too Early.”
Watch for our “Eight Trends That Will Shape the Data Center in 2022″ forecast on Thursday, Jan. 6. You can also receive updates so you don’t miss our analysis.
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