Data Center Design Must Evolve to Keep Up with Zettabyte Demands, Rising Real Estate Costs

Each time we respond to an email, run an internet search, check Instagram or buy something, a data center somewhere in the world is handling many bytes of traffic to make those exchanges possible.

Insatiable demand for cloud computing and internet-connected devices has driven a surge in data center capacity worldwide in recent decades. Meanwhile, rising costs for real estate, construction and increasingly complex designs are forcing data center operators to rethink ways to make them more efficient and future-proof.

Rental rates for data centers were flat to slightly down in 2018 ($125 to $145 per kilowatt per month), creating an opportunity for tenants who signed leases five to seven years ago that are coming up for renewal, according to CBRE.

While data centers were historically built on large tracts of commercial- or industrial-zoned acreage in suburban areas, higher land costs and competition from space-hungry warehouse and logistics companies have pushed some data centers to migrate to urban locations with smaller footprints such as converted warehouses or office buildings undergoing adaptive reuse.

To accommodate the surge in data traffic and to justify efforts to push up rental rates, data center operators are switching to software-defined infrastructure in which all hardware configurations are maintained with intelligent software systems; deploying more efficient modular power and cooling equipment; and shifting to a consumption-based “as a service” model for pricing.

An estimated 55 percent of enterprises will have to upgrade their existing facilities or deploy new ones in order to keep up with data-hungry next generation apps and surging video traffic, according to IDC.

“Today’s data centers are really out of sync with the equipment that’s inside them. It would be like using the enclosure for a 1984 Macintosh with the current generation of iMac,” Jennifer Cooke, research director for IDC’s data center trends and strategies team, said in a forecast in the company’s Network World trade publication. “It just doesn’t jive very well. The power, cooling and space requirements have all morphed.”

Within three years, global internet use will reach 3.3 zettabytes, which is almost triple the traffic from a couple years ago, according to estimates by Cisco.

A zettabyte equals a trillion gigabytes. For comparison, the latest iPhone X has 256 gigabytes of memory. If each gigabyte were a brick, a zettabyte could build the Great Wall of China 258 times, according to Cisco.

Facebook is planning a new state-of-the-art 970,000-square-foot data center in Huntsville, Alabama, and Amazon Web Services is building another 2 million square feet of data centers in Northern Virginia.

Amazon, a major provider of cloud services to businesses, is known for hyper-customization of its data centers.

The company often asks developers to simply deliver the shell building with power and cooling equipment so that it can install and configure its own custom-designed 50,000 to 80,000 servers at each one, Forbes has reported.

Amazon also designs its own routers, chips, network interface cards (NICs) and runs its own protocol-development team, an Amazon Web Services executive said at an industry event in 2016.

The Handmaid’s Tale

Nearly 400 megawatts (MW) of data centers were under construction in early 2018, according to JLL’s 2018 Data Center Outlook, and 60 percent of that was in North America. One megawatt can power about 4,000 servers.

A big driver of that growth is our penchant for streaming high-resolution movies and hit series shows such as the dystopian drama “The Handmaid’s Tale” on Hulu and the supernatural thriller “Stranger Things” on Netflix.

Cisco estimates that more than 80 percent of global internet traffic will be from videos within a few years.

Three-fourths of it will occur on smartphones and other mobile devices as reliance on desktop computers and laptops diminishes, Cisco says.

‘Data is Literally the New Oil’

Autonomous vehicles are another major user and generator of data.

By 2022, an estimated 320,000 self-driving cars will be shipped, and that figure could almost double three years later, according to projections by data and research service BI Intelligence.

Autonomous cars rely on and generate massive amounts of data to orient themselves on streets and identify and respond to other moving and stationary items.

In an hour and a half of driving, self-driving cars generate a whopping 4 terabytes of data, according to Intel. That’s equivalent to 4,000 gigabytes, or enough to completely fill up the memory on 15 iPhone Xs.

Intel predicts that entirely new industries will pop up to harvest and take advantage of the data gathered from cameras, global positioning systems (GPS), radar, sonar, light detection and ranging (LIDAR) and more.

“Data is literally the new oil,”Brian Krzanich, Intel’s CEO at the time, said in a 2016 prediction about the future of self-driving vehicles. “Data has the potential to radically change the way we think about the driving experience: as consumers, as automakers, as technologists and as citizens of our communities.”

Rising demand for artificial intelligence, augmented and virtual reality, and internet of things (IoT) are some of the other big drivers for new data center design, according to Digital Realty, a real estate investment trust (REIT) specializing in data centers.

Data Center M&A

The flood of investment in data centers in recent years spurred a wave of mergers as operators hunt for efficiencies and economies of scale.

There were an estimated $20 billion worth of data center transactions in 2017, eclipsing the 2016 and 2015 totals combined, according to JLL.

2017’s mega deals included Digital Realty Trust’s purchase of DuPont Fabros for $7.8 billion, and Equinix’s acquisition of Verizon’s data centerportfolio for $3.3 billion.

The M&A boom shows no sign of slowing down.

Virginia-based GTT Communications bought European data center and fiber network Interoute for $2.3 billion in cash last spring.

Equinix purchased Australia’s Metronode for $804 million, shortly after Equinix also announced that it was buying the Infomart data center and interconnection hub in Dallas for $800 million.

CyrusOne is buying Europe’s Zenium hyperscale data centersfor $442 million, and Digital Realty is in talks to buy Brazil’s Ascenty to expand in Latin America, Bloomberg has reported.

In Summary

Surging demand for data-hungry apps, streaming videos, self-driving cars, artificial intelligence and other emerging businesses are spurring companies to rethink data center design. Rising land and real estate costs, coupled with flattening rents, are also encouraging data center owners to hunt for efficiencies.

More data centers are configuring and maintaining hardware with intelligent software systems, using modular power and cooling equipment to boost efficiencies and switching to “as a service” pricing based on consumption in an effort to future-proof their offerings.

Some innovative leaders, such as Amazon Web Services, are investing in custom designs of all of their own equipment, from servers to chips to routers and more.