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Aug 18Doug Smith

Data Center Boom, Part 1

Aug 18Doug Smith

I recently attended a seminar sponsored by Bisnow called “Data Center Boom.” There was obviously great interest in the topic, with well over 600 people in attendance.

The movement of applications and data to The Cloud (i.e., hosted and stored in a central facility, accessible by the Internet) has indeed caused a boom in data center investment and construction. There have been other drivers as well, including:

  • A realization that many in-house servers and PCs are not fully utilized. People are paying for capacity they don’t use. Centralized capacity can be utilized more fully.
  • A drive toward virtualization, in which multiple logical servers can be created on one physical device. PC “desktops” can also be virtualized, stored centrally and accessed remotely at office or home. This also drives higher capacity utilization.
  • A desire by organizations to add capacity incrementally, as needed, rather than buying a entire new server or storage device, paying for it at the beginning, and only filling it up over time.
  • Economies of scale making large data centers less costly on a unit basis than small, in-house server closets.

Data centers fall into a two major categories. First, there are the enterprise data centers, used by Fortune 500 companies and by large cloud providers such as Google and Amazon. Then there are data centers focused on retail co-location, meeting the more modest needs of smaller organizations.

With the current softness in the housing and commercial real estate markets, many providers (construction firms, realtors, architects, technology companies) view data centers as the one bright spot – hence the large crowd at the seminar.

Financing of data centers was also a big area of interest among attendees. A number of private equity investors are interested in data centers. There is also a lot of debt financing available to leverage the equity investments. Lenders are willing to lend because many of the services provided from data centers (e.g., cloud storage and processing, video feeds such as Netflix) are based on subscription models with reliable monthly revenues.

In my next blog entry I’ll talk about some of the decision factors surrounding data center location and design.

Dilbert by Scott Adams, Published 7/24/2011

 

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