Based on quarterly reports from CBRE up to the end of Q3 the major European co-location markets of London, Frankfurt, Amsterdam and Paris, 2016 has been a bumper year for data centre operators. Nothing in any of the predictions and trends for 2017 points to a slowing in the appetite for data centre space. But it would be wrong to suggest that there are no pitfalls and challenges to be navigated.
While cloud computing has grabbed the headlines, it is the explosive growth in internet traffic driven by Subscription Video on Demand (SVOD) and other Over the Top (OTT) streaming services that have been a key driver in growth. With Amazon Prime and Netflix locked in a battle for supremacy, don't expect to see this demand falling.
Surveys amongst Gartner's customers, presented at their Data Centre Summit in London in November, pointed to increased demand for hybrid cloud services and backed up CBRE's findings that Enterprise customers were strong contributors to the growth in data centre space take up. It also shows that cloud remains a key driver of growth.
These trends are good news for those data centre operators with global coverage and excellent network and interconnection options. Equinix, Digital Realty and NTT have been strengthening their positions through acquisition and partnerships and we are likely to see further moves as some telcos retreat from owning and operating data centres. Companies with good regional coverage and revenue streams, like Interxion, may well be the target of larger players or investors looking to move into the market.
Much has been made of the potential decline of in-house enterprise data centres. Indeed, Enterprises are making increased use of co-location for new apps and services that require connectivity to public cloud services. But, like mainframes, Enterprise data centres will take a long time to die. The Gartner survey revealed that only 6% of respondents plan to completely retire their in-house data centres in the next 3 years. There will be opportunities for wholesale Enterprise deals, but sunk costs, risk and a desire for control will continue to be a brake on this business for some time to come yet.
Three technologies, data analytics, machine learning and IoT will provide new opportunities for data centre operators in 2017. The sheer volume of data generated by sensor networks will challenge where and how data centres are located and operated. This could be to the advantage of smaller local data centres and operators who have a strong track record in data storage and back up.
Data analytics and machine learning will also generate large amounts of data. But here the focus will be on High Performance Computing (HPC) that requires high power densities. Newer, more agile data centres, built with this need in mind and whose connectivity is "good enough" could be well placed to take advantage of these new opportunities.
Data centre operators have long since moved away from a "build it and they will come" approach. The market leaders have developed very strong propositions for specific market sectors and business challenges. The best ones have also recognised the importance of building close customer relationships and strong reputations. Markets rarely conform to old stereotypes and the data centre market is an unusual mix of maturity and dynamic new opportunities. Failing to understand your customers or clearly define compelling differentiated propositions will condemn you to fight in mature, commoditised segments. Meanwhile others will take advantage of the growth and exciting new opportunities that clearly exist and offer much greater returns.
For further insights and advice on how to take advantage of these opportunities in 2017 please contact me at firstname.lastname@example.org
This post first appeared on the old Cassini Reviews website.