Skip to content Skip to footer

Remaining static is not an option, but failure is

Image: Adobe Stock / sdecoret

Jon Healy, COO at Keysource, discusses the inrush of available capital in the data centre market, and asks, could the bubble burst?

The inrush of available capital that we have seen enter the data centre market is reflective of its promising returns and the comparative performance of other markets. This is coupled with a relatively low risk, given its resilience through recent years, which is overall very positive for the short- and medium- term of the industry. However, these conditions can quickly change given the influences this sector has from a range of areas such as technology, regulation, energy resources, corporate governance, and a lack of skilled people. Are there troubled waters ahead?

Our annual State of the Industry Report always provides interesting insight into this, as it gathers views from over 250 IT Directors and senior data centre professionals. The 2023 report shows that the data centre and related sectors continue to grow, despite these challenges and the current global unrest, political scepticism, and economic uncertainty. However, it also flags that a number of common challenges still remain, and these are forcing decision makers to operate differently. 

The big three

In addition to the impact of growing demand, there are three main areas that our decision-makers are continuing to juggle. Failure to manage them well could have a highly detrimental effect on the future of the industry. This trilemma is dealing with the competing and compelling challenges of developing and delivering on sustainability targets; the pressure to speed up project delivery to remain competitive; and the continuing supply chain and skills issues. These are all with the backdrop of new EU and imminent UK regulation changes, and the survey results suggest a disparity in the market – with some clearly having a significantly better handle on how they are or intend to address the key industry challenges.

In addition, there is concern over rising costs and feedback from our respondents that their budgets are slightly down from 2022, although it’s fair to say we were starting with a relatively high bar. Overall though, there is no doubt operational overheads are continuing to rise and one of the key questions, is how will this be offset? Will more corners be cut?

Speed vs quality

The pressure to speed up project delivery is perhaps the most concerning finding of the report, especially as a high number of those surveyed have admitted to identifying quality issues as a result. There is a fine line between delivering at speed and making rushed decisions and cutting corners. Certainly, we are seeing some organisations prioritising speed above all else, which is at best risky, especially considering our respondents’ strong concerns about getting the correct advice as the skills shortage continues to bite.

In previous years, these energy and sustainability challenges, like the race to low PUEs, have benefited from there being enough available time for innovation to help. This is now time which the sector or customers arguably don’t have or aren’t willing to give. In reality you can only compress a project so much with risking a costly mistake.

In addition, the lack of progress shown in this survey around sustainability strategy and delivery is both disappointing and unsurprising – and once again, opens the sector up to allegations of greenwashing. For most organisations there is more immediate pressure on other areas and whilst the European Commission’s Energy Efficiency Directive (EED) is looming, it clearly lacks the teeth needed.

Measuring metrics

When asked about the changes in regulation requiring businesses to report on data centre/hosting metrics, a huge 81% said they were confident in their ability to provide this, yet only half of respondents have suitable ways of measuring key metrics. Even more surprising is the fact that 64% of respondents haven’t evaluated the carbon impact of existing data centre services and solutions, and 57% aren’t intending to evaluate the impact of future investments. 

These conflicting facts lead us to believe that the industry really is woefully unprepared for the need to measure and report on its sustainability deliverables. The sustainability landscape remains complicated and confusing, covering a range of issues like overall business strategy, power, renewables and capacity. There is no ‘one size fits all’ and no clarity around the value of reporting. We are seeing clients that are understandably overwhelmed by the task and we believe that expert advice is key throughout.

Looking ahead, it is once again a challenging, exciting and risky time for our sector and there is certainly work to do to balance these priorities. This may simply not be possible for some organisations given the limited resource pool and supply chain issues.

One solution is to look at changing the way projects have been traditionally done with increased collaboration across the supply chain. As an industry, we have proven to be good at adapting and reinventing ourselves to cope with the fast-moving environment we operate in. But this approach would involve getting people to work together in a way they never have before, potentially sharing sensitive information with their competitors. Can we change? I hope so.  Remaining static is not an option, but failure certainly is.

Picture of Jon Healy
Jon Healy
COO at Keysource

You may also like

Stay In The Know

Get the Data Centre Review Newsletter direct to your inbox.