Welcome to Midweek Brief 4: 4 Brief 4 Furious
On Wednesdays, we like run through some of the big stories we’re noodling here at DCT.
I’m not going to touch on current global politics, other than to say that current events will greatly impact data center and cloud market dynamics. We’re increasingly connected virtually while an isolationist streak rules/hijacks public debate. It’s an interesting dichotomy, with technology at the very core of what’s happening.
It’s hard to assess the impact current events will have on the industry, but I like to focus on the positive.
Usually, we take a rapid-fire run-through of several stories in the Midweek Brief, but this week’s focus is two bright spots – one in Europe and one in North America. Let’s examine the explosive growth in the Amsterdam data center market and continued investment in North American colocation markets outside of traditional core hubs.
Amsterdam : Incredibly Well-Positioned To Continue Its Hot Streak
The Dutch Data Center Association (DDCA) said nearly two million square feet of floor space will be added to Amsterdam in the coming years, doubling the area’s current capacity.
Over 70% of the Netherland’s 5.8M gross square feet of data center space is located within a 50km radius around the capital. The market has grown at an 18% compound annual growth rate (CAGR) for the last seven years. A double-digit CAGR for the better part of a decade is impressive.
The DDCA counts 100 data centers in the area, split roughly 50/50 between single and multi-tenant facilities.
In terms of Europe’s big 4 data center markets (London, Amsterdam, Frankfurt and Paris), Amsterdam is now the second biggest, overtaking Frankfurt for the 2 seed. London is the biggest market; its size is comparable to Ashburn, the biggest market in the U.S. I highly recommend CBRE’s quarterly report for those looking to benchmark FLAP metros.
Amsterdam has greatly benefited from its connectivity and status as a pretty chill country. It’s a popular landing point for North American companies first entering Europe as well as for European companies in general.
While Brexit brought a lot of uncertainty (traditional thinking is companies like to delay technology investments until the dust settles), it didn’t impede Amsterdam’s emergence as a major hyperscale data center market. Major cloud providers are in a race to open new regions across Europe, necessitated by in-country data needs and personal data laws. Amsterdam’s business environment and chillness make it an early, attractive candidate in the push.
There are major projects underway, with one undisclosed provider planning a hyperscale data center on 173 acres of land. Very interesting. Coincidentally, Google acquired 173 acres of land in the Netherlands as it continues its major European expansion. DCT recently wrote about a planned Zurich region.
Switch Datacenters (not to be confused with US-based Switch) is expanding its AMS1 campus, with plans for an 18,300 square foot data center with 8,600 square feet of office space. AMS1 currently consists of 89,500 square feet, while the AM2 campus consisting of 59,200 square feet.
German-based e-shelter announced plans earlier this year to open its first Amsterdam data center in early 2019. It’s near the Schphol airport. It will consist of four phases of 43,000 square feet of floor space. e-shelter is under the NTT Com banner, along with Ragingwire in the U.S. The subsidiaries act as independent operational entities but cross-sell into one another.
Dutch provider EvoSwitch was recently acquired by Iron Mountain for $235M. It is expanding its Amsterdam footprint as well, adding an additional 7.5MW to its current 15MW.
DC Blox Announces Alabama Data Center
Atlanta data center provider DC Blox is refurbishing a former Trinity Steel site in downtown Birmingham, Alabama. DC Blox serves the southeastern US, with data centers in Atlanta and Chattanooga, Tennessee.
The company claims potential investment in the site could reach $785M over the next 10 years, depending on customer success. Basically, if space sells necessitating expansion, they’ll keep growing the campus.
While that figure gives us a good gauge of the site’s potential, it doesn’t really indicate actual investment. This is a common gambit in the tech industry: mention the crazy large investment figure for the best-case scenario. I’m not trying to single out DC Blox: RagingWire and Digital Realty Trust both said they would invest $1B on respective campuses in Garland, Texas (over time). Vantage is investing $1B on its Ashburn campus (over time). I have the potential to make upwards of eleventy billion dollars. Some of us will achieve these goals.
The bottom line is DC Blox is making a significant investment at the acquired 27-acre site, and this investment will be a boon to Birmingham. In a release, Alabama Governor Kay Ivey touted benefits the data center will bring, such as high paying jobs and it further nurturing the technology scene.
A month ago, we looked at a planned $750M Facebook data center in Huntsville, Alabama, hypothesizing that hyperscale investments usually prompt further data center activity in the vicinity. Birmingham is 100 miles from Huntsville (2 hours away, depending on traffic).
Emerging/Secondary/Edge Markets in NAM Seeing a Lot of Activity – What’s Going on?
Distributed computing capabilities and edge computing infrastructure are making non-traditional colo markets increasingly feasible and attractive, for providers and customers alike.
There’s increasing activity on the part of multi-tenant providers and hyperscale cloud providers, with DC Blox just one example. Data center providers are investing serious CapEx in markets formerly known as having low and local-only potential.
What changed? Across the technology landscape, providers are focused on enabling distributed computing. Innovation up and down the stack is enabling and nurturing emergence of new markets.
Managing massive, distributed architectures from a single point is getting easier with things like Apache Mesos (and the wealth of proprietary offerings built atop Mesos).
Technology giants like Microsoft are focusing on “Intelligent Edge”. Intelligent Edge basically means shifting more AI and processing onto end user devices, which report back with the Azure mothership from time to time.
Intel recently said it would invest $4B on edge computing, illustrating its R&D priorities.
The Topology Is Shifting From Hub and Spoke To A Giant Mesh – How Will This Impact the Current Landscape?
The North American colocation industry is historically defined by a handful of core metros (Silicon Valley, New York, Chicago, Dallas, Ashburn are the big 5). These core metros acted as prime intersections for those initially moving off-premises, with rich connectivity and interconnectivity often providing the initial impetus to outsource.
The customer need was for few, big deployments with maximized reach. Distributed deployments optimized for last-mile delivery were a pipe dream for all but the largest of companies. Serving population centers at the last mile to get a true performance boost was previously economically and operationally unfeasible.
Those mature, core markets were not only the right option – they were they only real option. There was a lack of supporting infrastructure, tools, and talent to make edge possible (outside of using Content Delivery Networks).
Most of what was available in secondary and tertiary edge markets was legacy telco space – if you were lucky. I’ve heard customer horror stories about being shown colo space next to (or in) janitor closets, with a mop sitting in plain sight of racks. Small local providers focused on local businesses; even then, markets like Maryland (and even further out) struggled as customers often chose to colocate in the nearest core market – in this case, Ashburn.
The infrastructure, tools, and talent are all falling into place. The legacy hub and spoke topology was formed out of necessity; that necessity is going away.
Technology on the whole is evolving to support increasingly distributed deployments. Whether you’re talking about facilities, middleware, software or the network, I guarantee there’s a provider working on fixing any given pain point. Personnel are getting better at architecting and managing distributed computing and apps. Something something machine learning.
I’m going into theoretical/prediction mode here. Only fellow hardcore nerds should stay – the rest of you are free to leave.
We’re evolving towards a mesh-like topology consisting of hyper-distributed infrastructure and end-user devices themselves. This evolution will shake up incumbents, forcing them to evolve in order to serve the new breed of customer needs.
The topology shift isn’t going to kill off core data center hubs. Core hubs will continue to grow at typical mature market rates. Wholesale will outperform retail in traditionally retail-centric metros. Smaller, retail-sized deployments will push out to the edge. Edge compute and wholesale and/or hyperscale cloud regions will complement one another.
Rise Of The Intermesh
The technology industry on the whole is enabling the intermesh (CAN I COPYRIGHT THAT?). Up and down the stack, at every point of the delivery chain, tech companies are working on making distributed, performance-optimized infrastructure easier and cost effective. Data center providers are committing CapEx figures previously reserved for the Ashburns and Silicon Valleys in secondary and tertiary cities. And in the current environment, these investments make complete sense.
The workforce is shifting in kind. Tech talent isn’t limited to Silicon Valley; places like Alabama have skilled tech workers. Data centers give them a local foundation nurturing further tech scene growth. Talented workers no longer have to move to Silicon Valley to spend over $100 on a two-pizza delivery.
Seriously – is the dough infused with angel tears?
Remember: there’s a Silicon Valley brain drain going on. I prefer to think of it as brain distribution.
If you look at the forest for the trees, the edge compute story is being supported with innovation and investment across the stack.