What will 2023 look like in the data centre sector?

2022 was a year of continued growth and progress for the data centre industry and it’s clear that despite ongoing challenges, from inflation to the digital skills gap, it continues to thrive and grow regardless.

Ongoing, sustained demand, particularly from hyperscalers, demonstrate the critical nature of data centres to our everyday lives. 2023 looks set to be another impressive year for the industry as it seeks to meet demand where it is, whilst continuing to innovate and move the sustainability agenda forward.

European Expansion

Market concerns including unprecedented weather events, global politics and the overall perception of the data centre in society are all influencing and impacting where workloads are located. For example, the moratorium in Amsterdam and Dublin has seen an overflow directed to Belgium, Madrid, and Milan. This has been the case internationally, with Johor and Batam benefitting from the moratorium in Singapore, or Maryland and Pennsylvania benefitting from overflow in Ashburn, Virginia. It’s likely that 2023 could see new markets becoming relevant with increased market share, as cloud seeks to balance economic, environmental and social priorities.

Hyperscale demand is set to remain strong, with capacity requirements continuing to grow. This will encourage development of larger campuses – and in some cases, Mega Campuses – further outside city centres, as they offer easier access to land and power. It will also see an acceleration of growth in secondary European markets, including Madrid and Milan.

The construction methods for delivering this growth will likely focus more on offsite manufacturing for speed and repeatability. The hyperscalers will also drive more efficiency in operation of these facilities which will reduce energy waste and reduce the consumption of valuable resources such as water.

The skills gap

The skills gap across the industry will likely continue to expand, remaining a central issue within the data centre industry despite concerted efforts to plug it. The sector continues to grow on a steeper curve than the advancements made to-date, with recent research from Virgin and Censuswide finding that 55% of all UK organisations are facing skills shortages as the battle for talent intensifies.

It’s so important that the data centre industry continues comes together in a impactful way to address this gap, identifying additional ways to communicate the value and opportunity that this sector provides. We will continue to see more urgency placed around this issue as the industry strives to compete and maintain demand, with many companies widening their net to include recruits in unrelated disciplines who can be trained. I hope we continue to see progress made to ensure apprenticeships and similar schemes are providing genuine value and offer the opportunity for long-term career success.

Sustainability

Sustainability will continue to be a key focus for the industry, with legislation and a standardisation of reporting driving more transparency in the market likely. We are already seeing progress here, with the Climate Neutral Data Centre Pact – including CyrusOne as a founding member – launching an Audit Framework to assess and verify the compliance of data centre operators with the Pact’s Self-Regulatory Initiative (SRI) and make data centres climate neutral by 2030.

24/7 carbon-matching will become a requirement with companies having to track their power usage on an hourly basis and match their usage to a carbon free energy source. This will also result in a move away from carbon offsetting and toward PPAs, directly with green energy generators.

In terms of water consumption across the industry, more definitely needs to be done to increase transparency and ensure accurate recording. The current WUE metric only measuring the water evaporated rather than total consumption; it’s only when the consumption is accurately recorded can measures to reduce it also take place. When building new facilities, water as a resource and accurate measurement techniques should be prioritised and I hope we see progress in this field this year.

Consolidation

We will see significant developments regarding the consolidation of the data centre industry in 2023. While this will present challenges for some, especially smaller players without the ability to scale, this will act as a reset for the industry, after an unpredictable few years, allowing the market to normalise once again.

Cloud companies are realising the benefits of consolidating their operations, with many accelerating their migration to third party providers, viewing digital as mission critical and core spend, and enterprise uptake growing. As market pressures continue in 2023, there will be an increased focus to convert capex to opex driving demand for the public cloud and therefore, data centres.

The data centre industry is always growing and changing. Whilst this brings many challenges, it also encourages innovation and transformation, which makes it a hugely exciting time to be part of this sector. Collaboration within the industry will allow us to navigate these challenges successfully and work together as a collective to identify unique solutions and evolve. This industry continues to prove and demonstrate its sheer creativity and resiliency and 2023 will be no exception.