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The Data Center Industry Is Booming

Thanks to the Internet of Things, data centers are in high demand.

In this age of data, there are currently about seven billion Internet-connected devices, and that number continues to grow. Many of these generate large masses of data that must be captured, routed, stored, evaluated, and retrieved. With the rise of the Internet of Things (IoT) and Industry 4.0, manufacturers are relying on big data and data analytics to enhance the efficiency, productivity, security, and cost-effectiveness of their operations.


However, it is increasingly difficult, time-consuming, and expensive to manage data in-house. Even large companies like Cisco are considering shutting down some of their own internal data centers to save energy and infrastructure costs.


The solution? Outsource data management.


More companies are outsourcing their data operations to third-party providers that specialize in data center operations. Colocation data centers are especially popular because they provide physical space, power, and cooling systems for servers and connections to local communication networks. Large colocation providers include QTS, Equinix, Digital Realty, Compass Data Centers, and Cologix, which provide rentable space up to 100,000 square feet or more.


Digital Realty’s 365 Main data center in San Francisco, CA. Digital Realty Trust is the world’s largest wholesale data center provider.

According to a recent report from Research and Markets, the global data center market is expected to grow at a compound annual growth rate of over 2% during the period 2019-2025. In the U.S. alone, the data center market is expected to reach revenues of over $69 billion by 2024. The greatest investments in data centers are from colocation service providers and hyperscale data centers (owned and operated by the company it supports, such as Apple or Google). In the U.S., the strongest growth is occurring in the Southeast and Pacific Northwest.


Key Drivers of Growth


The insatiable desire for data to improve business performance is driving the growth of the data center industry. Key factors include:


  • Internet of Things—the U.S. is one of the leading markets for industrial IoT-driven technologies, including artificial intelligence, data and analytics, security, and communication
  • Cloud storage—the use of cloud computing services and applications continues to grow rapidly in the U.S., thereby leading to the establishment of large colocation cloud-based data centers
  • Submarine cable projects along the east coast—these bring extremely high-speed data from Europe and South America to the east coast, where it is routed to data centers where they come ashore (for example, Virginia Beach)
  • Tax incentives—in recent years, data center growth has been concentrated in regions that provide tax incentives, including state and local governments that provide investment incentives (often energy-based)


Steady Investment


To meet these growing data needs, more data centers are being constructed—ranging from Tier 1 facilities (least complex and secure) to Tier 4 (very complex with high IT/security requirements), which are typically hyperscale centers. Favorable locations have low energy costs and top-notch communications infrastructure.


Colocation and managed services are in high demand—for example, over 300 colocation projects have been built in recent years, which include both new and expanded facilities. Major hyperscale projects are also being developed in China, Australia, Hong Kong, and India.


As companies move away from owning and operating their own data centers, they often leave behind abandoned space that can be upgraded into modern data centers. When these operations are well-located, with good supporting infrastructure and low energy costs, colocation service providers may purchase them. For example, California-based Equinix, one of the world’s biggest data-center colocation providers, recently purchased 24 data-center sites from Verizon Communications for $3.6 billion.


Map courtesy of


Meeting Future Storage Needs


Data-center providers cannot build enough new capacity to meet demand. As new applications for technologies such as artificial intelligence and machine learning continue to grow, so do the needs for next-generation strategies and technologies to transform how we store, manage, and move data. For example, machine-to-machine technologies continue to generate enormous volumes of data, which are expensive to transmit. One solution being considered is integrated colocation and/or cloud partner ecosystems, where data centers are interconnected and collaboratively support each other and share assets, creating larger-scale data center districts or corridors.


Data-center efficiencies can also be improved through automation, where a single administrator can manage thousands of servers. This effort of automation is being led by advanced IT equipment and data center infrastructure management software providers. Some solutions even include robotics—for example, TMGcore has created a robot-managed immersion bath that can swap out a failed server and replace it with a fresh server.


“There is growing expectation that we are nearing an inflection point for change in how we manage data,” said Scott Noteboom, CTO of Submer, an immersion cooling provider. “We have begun to hit the wall in terms of machines working well in a human environment. It is now time for Version 2 of the data center, which will be an environment that is optimized for machines.”

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