Rapid Transformation in the Data Center Space
Updated on

Rapid Transformation in the Data Center Space

Data centers are integral part of the IT industry and form the backbone of IT infrastructure for a host of services that are part of our daily life such as energy, telecommunications, internet, banks, etc.

Data centers have their roots in mainframe-housing computer rooms, and have been continuously evolving thanks to the rapid advances in information and telecommunication technology over the last three decades.

Data Center Usage and Dynamics: Emerging trends of Virtualization and Cloud technologies have significant influence on data center dynamics and usage. With a huge shift toward cloud infrastructure, services and applications, the need for computing and processing huge amounts of data and storage has grown at substantial level, resulting in more demand for data center capacity. Also, for the similar reasons, data center usage is undergoing a transformational change. According to Cisco, by 2017, more than two-third  of all data center traffic is expected to be processed in cloud facilities, rather than in ‘traditional’ data centers, while this proportion was only 46% in 20121.

Further, the tremendous increase in the usage of server virtualization to consolidate server assets is reshaping the data center dynamics. Virtualization and server consolidation are resulting in decline of physical data center size, and eliminating the need for many smaller data centers as applications are moved to larger central data centers. For instance, the US Federal Government has closed around 484 data center facilities over the last three years, and planning to close 571 more by September 20142. HP consolidated its 85 data centers into six highly efficient and automated centers, supporting large service providers. Other factors such as increasing internet adoption, use of intelligent devices, and the need for more mobility are resulting in huge data explosion, raising the need for high-density computing, thereby imposing high pressure on data center transformation and more efficient environments.

Data Center Design and Construction: Many of the current data centers are one or two decades old and need to be restructured. There is a trend towards Modular, Low Power Usage and Green data centers. Modular data centers are being designed more in Containerized (fits equipment into a standard shipping container) and Flexible forms (facility with prefabricated components that can be quickly built when required). These data centers are of a Converged Infrastructure approach for gaining economies of scale and for fast deployment, power efficiency and high-density computing at a lower cost and construction time.

Vendors are specifically focusing on low power consumption models, as energy consumption is responsible for a significant part of the data center costs (~30%3). Major data center vendors are taking initiatives in designing chiller-less DCs and immersion cooling techniques that use less energy.  Also, vendors are moving towards ‘free cooling’ by establishing their facilities in cold countries such as Finland, taking advantage of cold climate and cheap geothermal and hydro energies.

Focus on efficiency of infrastructure, rise of hybrid technology, increasing trend of remote access to employees are impacting the data center transformation and are driving the need for modernization of data centers. Also, SDN (Software Defined Networking) evolution is transforming the aspects in data center designs.

Data Center Demographics: Globally there are more than half a million data centers that occupy almost 290 Mn square feet of space4. About 45% of them are located in the US, followed by Western Europe (UK, Ireland, Switzerland, Germany, France, The Netherlands, Italy and Poland) with 25%, and Canada with 3%. While, Latin America (Brazil, Argentina and Chile), India and Australia each has about 3% of this market.

The latest data center locations that are emerging outside the US include Slough, UK that has benefits of dual power supply and comprehensive fiber network connectivity, Lulea (Sweden) for low electricity prices and availability of skills, Iceland for low cost abundant renewable geothermal and fresh air cooling, Singapore for its tax incentives and supply of skilled data center talent.


Global spending* on data centers was around $143 Bn in 2013 and is projected to grow steadily and reach $149 Bn by 2014,5. While, North America accounted for the highest share in the total market, less developed markets in Asia Pacific and Latin America have also contributed significantly for its growth. Data center market in the US is predicted to grow to $78.35 Bn by 20166.

The large data centers of service providers are driving this growth. While the demand for application support, business continuity, cloud solutions, preference for green data centers, expectations on service levels, and cost optimization are leading to investments in data center infrastructure, the need for power, existing business processes, lack of trained staff, huge cost of establishment, economic slowdowns are hindering their growth.

*Spending on data center Servers, external controller-based storage, enterprise networking infrastructure, enterprise communications applications

Kiran Nandavarapu
Kiran has over 12 years of experience in providing research, insights, and advisory services to clients in the technology space. He specializes in Competitive/Market Intelligence...
Read More