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Steve Wallage, Managing Director of BroadGroup Consulting Offers His Forward Perspective of the Data Centre Market in 2008 There are compelling reasons to be positive about the data centre market. New investment and corporate activity will continue in 2008. Investment is not just coming from traditional sources but property investors and REITS (real estate investment trusts) looking for a new home for their money, VC firms more actively entering the market, new investment vehicles such as the Pinder Fry and Benjamin data centre investment fund, funding from government development and investment agencies keen to attract data centres, and pension funds attracted by the long-term leases and reliable cashflows. Corporate activity is on the rise after the successful flotation of TeleCity and IXEurope acquisition by Equinix. Consolidation of the highly fragmented European market is a certainty in 2008, with some of the acquirers likely to be from outside the region, and not solely American. Larger data centre operators have also looked enviously at the TeleCity float, and Interxion has been evaluating its options. As with any market, activity boils down to supply and demand. As we begin 2008, the European data centre market is still a sellers market, with demand outstripping supply. A common mistake however, is to think purely in terms of space and to consider all data centres as equal. Rather, power is the new space, and 2008 will increasingly see a shift to power-based pricing. The data centre value chain goes from shell and core and co-location, to disaster recovery, application hosting and full outsourcing. Data centre business models range from the rack to the floor or an entire building. A modern data centre with a high power specification, can easily earn 20-40% more per rack than an older build. Demand itself is not only coming from traditional sources, most notably banks, systems integrators, managed service providers and so on. Government is increasingly an important area, as the public sector looks to cut costs, outsource and manage its growing data burden. Media, driven by a 60% yearly growth in Internet traffic, is a rapidly growing market. More broadly, large corporates across all verticals are more seriously looking at third party data centres. Historically, outsourced locations were often of a poor quality, and data centre issues were usually considered low priority. Data centre managers can also no longer insist on being close to their offices, and there will be more demand outside city centres and a migration from the major markets to areas such as Central and Eastern Europe, the upcoming North Africa region and India. This year will also finally see the end of green as a meaningless marketing term and will truly impact the data centre market. There will be a raft of initiatives from vendor and standards bodies and user and trade associations, together with regulation and directives from national governments as well as the EU and EPA. This will be good for the third party data centre industry, if it can show users it can help them through the confusion and complexity. After all, outsourcing is often about ‘getting rid of a problem’ and many users would rather blame a third party provider for all that power being used by data centres. A final, more cautionary, note is that the data centre industry is clearly not immune from the credit crunch. Investors are increasingly pushing data centre developers to show ‘proven and real demand’ rather than potential interest. The supply/demand imbalance in data centres has also encouraged some rather speculative and me-too business plans, and these are unlikely to be ever built.
Have you also seen our other consultant articles? Too Much
Greenwash?
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