For years, data center development has been concentrated in a few key U.S. markets, as well as international locations including Singapore, Amsterdam, London and Dublin[1], where tax incentives, power supply, building options and contractors were reliable and accessible. But that’s changing. Demand for new development is shifting into non-traditional markets where there is a less clear path to securing permits, land and power.
Growth Drivers
This unprecedented demand for data center development is driven by consumers, businesses, and regulations. Similar to the way the U.S. cloud computing industry unfolded in the mid-2000s, we can trace the genesis of this spike in demand to businesses recognizing the value of off-premise hosting.
There is a shifting preference internationally from on-premise data centers to colocation centers and cloud providers. The reallocation of enterprise servers between cloud platforms, colocation facilities and on-premises data centers is definitely a growth driver. But the larger drivers of data center growth in non-traditional international markets are performance and regulation.
Performance
Latency is becoming an increasingly important factor. Consumers have higher expectations than ever for rapid data sharing. Netflix alone consumes an incredible 15% of the total downstream volume of data traffic globally. Gamers are facing off in real time from disparate locations. It all takes compute power close to the user.
On the business front, mission-critical business applications depend on high speeds and low latency to function across large organizations in multiple locations. Real-time SaaS applications such as SalesForce or on-demand video require an almost live response, and more people are using these applications than ever.
Virtually any company with a website is impacted by latency. E-commerce sites suffer real negative revenue impacts from low latency. Equation Research found that if a website doesn’t load quickly, 78% of visitors will leave the site; 88% won’t come back at all; and 47% blame the website owner. Performance as it relates to latency is driving a lot of decisions with respect to data management.
Regulation
Most every developed nation across the globe has, by now, adopted data localization or sovereignty laws requiring that a country’s citizens’ data be stored on physical servers within the country’s borders. The EU’s general data protection regulation (GDPR) drew a lot of attention when it was enacted two years ago, and other countries have followed suit.
Data sovereignty also makes sure that a country will not lose control or sovereignty over the processing of personal data that concerns citizens of that country. Layer on top of that industry-specific regulations, say for governments and financial institutions, which dictate that data be stored close to the point of use and companies are scrambling to build or lease space in centers close to their operations.
The Race Is On
Data center development is entering new frontiers the world over. Countless announcements this year alone -- even in the throes of a global pandemic -- prove the urgency with which countries and companies are building data centers.
On the hyperscale front, Microsoft just completed a new cloud region in Germany and recently announced plans for Spain, Poland and Italy next. Google announced plans to step up the deployment of new cloud regions, with an emphasis on the Asia Pacific region. Other areas for development include Indonesia, South Korea, Poland, Northern India, Doha, Melbourne and Toronto.
As we look around the globe, we see governments making a big push for data center development.
Middle East - A report released late last year by the Arab Advisors Group found that Middle East data centers are being built more frequently than in previous years, with a preference toward colocation facilities. Increased government support for the digital economy in the region, the growth in cloud adoption, and migration from on-premise infrastructure to colocation and managed services are expected to drive the data center investment in countries comprising the area..
Africa - Africa’s Data Centres Association (ADCA) recently released its first research paper in which it notes high expectations for data center development. Data Centers are being positioned as a “catalyst for economic transformation” across Africa, with at least 20 new facilities coming online between 2020 and 2021. Data loads on the continent are growing 100% year over year.
Latin America - The high adoption of cloud computing, big data, and IoT services, along with the growth in social networking and demand for online video services, has prompted the need for more compute power and data storage capacity in Latin America. Brazil dominates the big data market, followed by Mexico and Colombia.
Success in New Frontiers
Clearly, hyperscalers have already moved on international growth opportunities. But there is demand beyond cloud services.
Entering a new country takes commitment to doing the hard work of understanding each country’s means and methods of development. Site selection, site acquisition, permitting and zoning are more challenging in new frontiers. Finding the right in-country partner and developing a strategic approach in partnership with in-country experts who are well-equipped to navigate national and local rules and regulations is key.
Developers can throw away all they know about rules, regulations and processes for developing centers in markets like Silicon Valley, Northern Virginia and London and plan for a fresh start. Many of these far-flung and smaller, foreign markets likely won’t have processes and protocols in place for data center development, so there may be some degree of figuring it out as you go.
Success also requires a healthy supply chain that can service your needs beyond the U.S. Builders who lean heavily into building information management for two- and three-dimensional planning will benefit from faster turnaround times and less reliance on in-country expertise. Manufacturers who can provide solutions globally and adapt to meet the needs in multiple regions will allow for faster international deployments.
With a clear model, prefabrication also helps expedite the project delivery timeline as more pieces of the project, from power racks to walls, will be built off-site to accommodate simultaneous assembly of key elements of the final building. Modularization and prefabrication also decrease the time spent navigating labor laws and the hiring of local crews.
Growth Curve Repeating Itself
There is a cascade effect at play here. The data center building boom we’ve seen in the U.S. over the past 10+ years is unfolding in continents far and wide. According to Synergy Research Group, the U.S. is home to almost 40% of the world’s data centers, with the balance distributed among 10 or so countries. Let’s check back in a year, 5 years and 10 years to see that equation balance out as developers dive in to meet the needs of foreign businesses, consumers and governments.
