Half of 2024 is already in the history books. And now is a good time to see how the data center industry is faring for the first half of the year. There’s a lot to cover, as we are definitely in a very dynamic era for data centers.
These facilities are undergoing several massive changes all at once. Artificial intelligence (AI) is increasing demand for computing and power resources, which in turn increases the need for even more data center projects – especially since the cloud, storage, colocation, and other classic data center uses are still around and need resources.
There are multiple interesting trends forming in the data center industry. We have tried to gather the key ones from several sources, and they give us a good idea of how the sector is performing, and also, what to expect. So, let’s explore.
Latest data at a glance
The 2024 State of the Data Center report by CoreSite gives us a glimpse of the major events and trends in the industry. It has been made with the feedback of 300 CIOs, CTOs and other IT decision-makers. Additionally, there have been interviews with seven senior technology executives from key industries like financial services, healthcare, retail and SaaS organizations. The report shows us how the major organizations and data center operators are adapting their infrastructure to meet the fast pace of changes that are coming and happening in all areas of data centers.
As such we find out that 98% of organizations already have adopted or are planning to adopt a hybrid IT model. What is hybrid IT? It’s another name for using both cloud and on premise IT infrastructure. 60% of organizations are already using a hybrid model – an increase from 55% in 2022.
Additionally, 95% of respondents say having native, direct connections to the major cloud providers is important, and 91% are considering moving their generative AI applications from the public cloud to colocation centers. And a key insight for service providers – only 31% of respondents say their current colocation provider offers interconnection to various cloud providers.
“The most surprising insight was that despite cloud interconnection being the top reason for using colocation for nearly half of the 22 workloads included in the survey, only 31% of respondents said their current colocation provider offers interconnection to a variety of cloud providers,” Juan Font, CoreSite president and CEO and American Tower senior vice president, told Data Center Knowledge.
The public cloud is changing
As mentioned, a very notable trend is the interest of organizations to move some workloads from the public cloud to colocation data centers. “Historically, public cloud was viewed as the quick and easy answer to replacing legacy technology, adding capabilities, or improving agility and flexibility. As workloads mature, organizations often find that keeping them in the public cloud is overly expensive. This is propelling a shift back to colocation, which offers cost predictability and data and broadband savings as well as better physical security, reliability, scalability, and the performance and speed needed for a competitive edge”, Font says.
He adds that in 2024 organizations are employing a “cloud smart” approach. In it they rely more on cloud and colocation and less on on-premises setups. The report also finds that public cloud usage is going down for all workloads. It’s especially visible for generative AI, business intelligence, data analytics and IoT connectivity and management. It doesn’t mean that the public cloud is going away. It just shows that organizations are now starting to spread their workloads among more platforms in a true hybrid IT fashion.
AI is driving colocation surge
Completely unsurprisingly AI is turning out to be the driving force of several key trends and changes. One of them is the surge of colocation adoption. Organizations are increasing their investments in AI and machine learning and as such they are starting to realize just how expensive computing resources for AI can be. So, they are reconsidering all areas in order to find the best combination of costs and performance for their needs and budgets.
In many cases, organizations are finding out that colocation is a good solution for their AI needs. It’s a good balance of keeping the data secure and private, but also having the much-needed quality infrastructure in order to get the most out of the algorithms. The report finds out that AI specific workloads are shifting from on-premises and public cloud setups to colocation data centers. 91% of respondents are doing that for their generative AI applications, 81% for their chatbots and 79% – for their predictive analytics.
AI is accelerating Hybrid IT
“IT executives have more options than ever for locating computing resources, and the CoreSite 2024 State of the Data Center Report demonstrates how highly customized hybrid environments that include colocation are becoming the option of choice for organizations that must remain highly competitive while continually managing cost predictably. These often-competing pressures only will become more salient with AI’s explosive growth in the coming years. Adopting an ecosystem – and regularly optimizing that ecosystem – with a mix of colocation, private cloud and public cloud capabilities is a trend that likely will continue to remain dominant in the coming years,” says John Gallant, Enterprise Consulting Director at CIO in a release.
As mentioned above, there’s a rise in the number of organizations already using a hybrid IT setup. This trend will continue as companies are finding the best solutions for their needs and are discovering the benefits of using multiple platforms.
AI is motivating the data center boom
In a separate analysis, the investment heavyweight BlackRock says to DataCenterKnowledge, that AI is a key reason for the rapid growth of data centers – in usage, leasing, building, etc. “If we look at the growth of AI data center, it is expected to increase on an annual basis somewhere between 60 to 80% in the coming years,” Wei Li, BlackRock global chief investment strategist, commented during a press briefing.
There are also a lot of positive opportunities ahead. Jean Boivin, head of the BlackRock Investment Institute, says many different things need to happen to enable the AI revolution and the potential productivity gains that might come as a result, DCK adds. For example, BlackRock sees there’s a healthy increase in interest for data center construction which opens a lot of investment opportunities for them.
And analysts at Omdia say there’s a “data center construction frenzy” which is “well underway.” “The pandemic was a significant catalyst to driving up digital infrastructure demand, and new demand from AI has come along and ramped up data center demand once again,” says Alan Howard from Omdia.
The eternal pursuit of sustainability
Of course, data center operators are still working hard to lower their emissions. This requires work in all areas of the data center – improving cooling and hardware performance, securing green energy supplies and optimizing costs.
“The industry’s growth, driven by increased demand for AI-infused systems and enterprise digitisation, is prompting a shift towards more renewable energy solutions, with data centres adopting renewable energy sources, energy-efficient cooling systems, and designs aimed at lower power usage effectiveness (PUE). Additionally, there is stronger focus on hybrid and multi-cloud solutions, as companies seek to build more flexibility and resilience against the managing of intensive distributed workloads,” says Matt Pullen, EVP managing director Europe at CyrusOne to DataCentreMagazine.
“To meet these demands, data centres will need advancements in several critical areas. The substantial heat generated by dense AI infrastructures will necessitate efficient cooling solutions such as liquid-to-chip cooling and closed-loop chillers, ensuring effective heat management without excessive water use,” Pullen adds.
Cooling improvements
Speaking of cooling, of course, it’s a big trend. Data centers are exploring a plethora of cooling solutions while searching for the best choice for them. Estimates show that in 2022, all of the data centers around the globe consumed 450TWh or about 1.75% of the total annual global electricity supply. Around 40% of that energy was needed not for data processing, but for the cooling of the servers. So, everyone is working hard on optimizing that energy usage and lowering it. The best way is to improve cooling by combining more than one method. For example, more liquid and immersive cooling setups are being adopted. And OEM vendors are making hardware that can work at slightly higher temperatures. Even a couple of degrees can make a huge difference in the cooling bills.
Edge colocation data centers are a new thing
Another trend is edge colocation data centers. They are small facilities which are placed closer to the source of the data, for example, a colocation data center for an industrial park. It would allow businesses at that park to pool their hardware and split the costs to have a proper data center experience with the related infrastructure. It’s also a good solution for IoT setups, data processing, including big data analytics and more.
According to a forecast by DataCenterKnowledge, the edge data center industry will reach $14 billion by the end of 2024, and it will continue to rise at CAGR of 20%. So, by 2036 it would have a global market valuation of more than $36 billion. It’s a great additional service for a hybrid IT setup and gives even more options for organizations to choose from.
Data centers are expanding into more regions
Finally, data centers are becoming more important and needed everywhere. Operators can’t keep up with the demand for them and can’t even build them fast enough. The constant hunger for data centers is also driving new projects to more and more regions.
Historically, data centers werebuilt in the best location for resources with as good as possible climate conditions to lower the cooling needs. Now though, with land at these locations becoming more and more expensive and just because the needs often mean the data centers have to be closer to the main users, they are coming closer to the cities, inside them and everywhere.
This is a trend that will only continue. According to a Linklaters report, just in the first five months of 2024, about $22 billion was invested globally for new data centers. Depending on how things develop, the growth of capacity over the next few years can be from 70% to 200%. It means the building trend is accelerating and it’s already surpassing the estimates from just two years ago.