The G7 Summit sparked a lot of debate. While the flow of physical goods and commodities is the focus of trade talks, it’s easy to forget or underestimate the data economy. The bottom line is an increasing portion of the world’s economy is comprised of intangible goods: data.
A recent Digital Realty Trust study attempts to peg data’s contribution to the global economy. Findings show data contributes $1.7 trillion annually to G7 countries – taken alone, G7’s data would represent the world’s 10th largest economy. Data makes a $1 trillion contribution to the United States alone.
The study also finds that the value of data hasn’t been fully unlocked: the UK (the study finds data contributes $105B annually) is extracting 58% of its potential data value while Germany (data’s contribution pegged at $126B ) extracts 55%.
It’s possible–and even likely–that these percentages are generous. Artificial Intelligence and Internet of Things are unlocking new value all along the supply chain. Analytics vendors argue an even smaller fraction of data’s value has been unlocked today, citing percentages in the single digits.
The key takeaways are that data is big business, it’s only going to grow, and it’s prompting big investment. Infrastructure investments are like fertilizer for a data garden. The Digital Realty study finds each new data center in the UK adds $582 million of value to its economy each year, as one example.
“We weren’t surprised [the G7 data economy] was big, but we were surprised by how big it was,” said Digital Realty Managing Director EMEA Rob Coupland. “It triggered a lot of really good debate, and an awful lot of discussion on data privacy.”
General Data Protection Regulation is driving investments in EU
Infrastructure investments are at least partially being guided by the data privacy debate. In Europe, General Data Protection Regulation (GDPR) is a key part of data center expansion strategies.
GDPR is a regulation in EU law on data protection and privacy for individuals within the European Union. It also addresses the export of personal data outside the EU.
“It’s important to get this right with your customers,” said Coupland. “A much richer discussion is a good thing; it’s important to develop best practices, build understanding and make investments in cyber-security. Having good and clear guidelines is important for the industry as a whole.”
In short, GDPR is causing a lot of (necessary) headaches. Since cloud and data center infrastructure providers are in the business of fixing those headaches, GDPR compliance also presents an opportunity.
To capture the opportunity, cloud and data center providers are racing to build infrastructure. Public cloud providers spent more than $11B on infrastructure globally in the first quarter of 2018 alone, according to Synergy Research. Spending on hardware and software powering public cloud increased 32% in Q1 2018 compared to the same quarter 2017.
There’s a ton of anecdotal evidence that supports the thesis that GDPR is heavily driving infrastructure investment strategies.
AWS, Microsoft, Google, and IBM are all currently battling to open the most in-country availability zones across the continent. Serving the continent out of one or two zones is no longer feasible.
IBM recently noted its new Frankfurt availability zone helped it comply with GDPR.
Google continues to be active in the EU. We recently noted it was building a Zurich cloud region. It also recently acquired 173 acres of land in the Netherlands, along with investing $500M euros to expand its existing data center in Eemshaven.
Cloud providers aren’t the only ones investing in infrastructure. A new Digital Realty facility came online in Amsterdam 18 months ago. The company has a lot of investment going on in London at the moment as well.
Enabling the digital economy to grow and thrive will require more than just infrastructure. “Digital transformation requires a transformation in talent,” said Coupland. While massive investments in data centers and fiber will ensure the foundation is in place, the workforce needs to realign for the data economy.