Why are data centers growing?

It’s a foregone conclusion that the world has changed dramatically over the past year, and that it’s going to keep changing for a while. Data centers are no exception.

In early March 2020, Research and Markets estimated that the global data center market would experience a compound annual growth rate (CAGR) of 6.79% by 2025. At the same time, more and more large companies were considering shutting down their in-house data centers — and outsourcing to third party providers — in order to save energy and to save money on infrastructure.

But that was before…everything…changed.

March 2020 seems like eons ago. It can’t possibly have only been eight months in the past.

At the time, Research and Markets reported that data centers were experiencing massive growth “due to an increase in demand for servers, computers, networking equipment like routers or switches, security components like a firewall or biometric security sensor, storage capacity, and data center management software and applications,” as well as increasing numbers of colocation and data centers throughout the world, cloud networking, and the “ever-growing volume of data generated” every day.

And the same is true now, but on a more significant scale.

Earlier this month, investment bankers met at the HCTS 2020 Conference, and estimated that hyperscale cloud service providers “will have deployed 2.1 million new IT racks between now and 2025, which translates to roughly $62 billion in capital spend on data center infrastructure,” (as reported by Data Center Knowledge) and if you remember, we’ve only been talking seriously about hyperscale data centers for a year.

While there’s an acknowledgment that data center customers and tenants are moving slower to do startup and migration activities, it’s not actually slowing down the growth of the market or the demand for services. The Conference revealed that the majority of the growth is actually coming from existing customers who are trying to meet demands from their own existing customers. Consider huge public-facing organizations like Facebook, and the increased demand as more people began using Facebook all day, and more people joined Facebook to find a connection to their loved ones during separation.

The current political, health and socioeconomic climates also didn’t stop mergers and acquisitions. Conference conversations unveiled early fears from March and April that M&A would tank, but by June, it was clear that M&A was on the growth track. According to Data Center Knowledge, “the volume of deals this year was boosted by lots of small managed services firms being acquired as service providers look to expand their portfolios.”

The last few months of growth haven’t been easy for data centers, and that’s no secret. Data center managers, operators, and service providers from on-site data centers to small regional data centers, to large colocation facilities and even hyperscale facilities, have all felt the pain of unexpected growth. But data centers are nimble. Incorporating better schedules, installing structured cabling, better management of cooling and environments, and even outsourcing some operations are all tactics being deployed by data centers to keep things moving without fail while working on more permanent solutions for growth.

While investment bankers haven’t yet figured out the new projected CAGR for the period between now and 2025, the past six months indicate it will cause a significant spike…and I won’t be surprised if it turns out to be double the estimate in March.

Originally published at https://www.linkedin.com.