As we continue to respect governments advice, it is no surprise that the demand for internet services has increased dramatically. Netflix has added 16 million new subscribers in the last two months; the Zoom app, loved by some and hated by others, now has 300 million users; Microsoft Teams added 12 million daily users, an increase of almost 40%, in a single week; and the average home is using 38% more bandwidth every day.
A recent UBS Evidence Labs report found that broadband speeds in London had dropped by around 8% since February and the lag time was up by a similar figure. This proves that the increase in demand is having an impact on the overall network and that capacity issues are having to be being managed by the internet service providers.
So how is the datacentre industry coping and what will happen in the future?
Many people outside the data centre industry just assume that the cloud has infinite capacity. However key players, like Microsoft, were already looking to add capacity before the pandemic. In fact, data centre capacity had been increasing over many years in response to demand for cloud-based services. In our survey held last summer, over 90% of developers had already planned to increase capacity over the next 12 months and this was before Covid-19.
Medium term, more capacity will come on-stream. Whilst many construction projects are either on hold or being delivered later than planned due to workplace distancing measures and supply chain issues, the consultancy and design of new facilities is continuing at pace. At BCS we are seeing no let up for this which obviously can be serviced by home working.
The skills shortage will come home to roost
Perhaps of greater concern is the wave of build projects that are currently in the design phase and will be looking to commence construction in the near term. We know that two-thirds of our 2019 survey respondents had concerns about the availability of skilled data centre construction staff and this, combined with the slower build times due to the likelihood of new safety processes being put in place for at least the rest of this year, mean that it is almost certain that demand for extra capacity will outstrip the ability of the market to supply it.
The skills shortage will get worse before it gets better. Many graduate vacancies and apprenticeship schemes, both vital in the ongoing provision of skilled data centre staff, have been put on hold until the future is clear. This delay in recruitment, training and provision of engineers will further slow the development of new capacity.
During the pandemic itself the industry is not compelled to cancel or pause construction as we provide critical infrastructure. For example, we are managing the construction of a data centre in Italy’s red zone with work continuing, albeit not without its challenges! Some construction sites have taken a short pause whilst others continue but at a slower pace. However, we are now seeing disruptions to supply chains for machinery and equipment as more necessary projects such as the work in the NHS understandably take priority coupled with factory closures and logisitics issues.
The supply chain will be affected
It’s not only a shortage of skilled labour, machinery and slower build times that will affect the ‘new normal’ as it is highly likely that the same workplace restrictions will have an impact on the supply of raw materials. Steel and copper from China, and in our case steel supply from the red zone in Lombardy, Italy, will all be restricted and supplies slower than usual for some time to come.
Prices will rise
One thing is certain, demand for additional data centre capacity will increase even more as a result of the Covid-19 lockdown and whenever demand exceeds supply prices inevitably rise. Only the strongest and financially fittest businesses will survive the lockdown period and these businesses, Alphabet, Microsoft and AWS etc. will be in a position to buy up any capacity that does exist. They already have strong business models and a pseudo monopoly position between the three of them. I think we will see their position strengthen even more and that cannot be a good thing for the industry as a whole and for the businesses and consumers that need cloud-based services.
Edge will come into its own
A positive that should come from the current situation is a move to near-shoring or on-shoring of critical services. Clearly, from recent events, healthcare manufacturing, healthcare consumables and pharmaceuticals production will migrate closer to home but what about data? We have seen a trend towards near-shoring data centres as a result of the rise of Edge computing and AI and this is likely to accelerate with the realisation that data, data centres and access to the internet are critical elements of our national infrastructure.
The opportunity is for home grown businesses like ours to play a greater role in designing, constructing and providing the critical infrastructure of the future.
