The good old data center has undergone a dramatic transformation in its speed, purpose, and energy consumption. But the market is witnessing a transformation too
By Pratima Harigunani
The way data centers are shrinking in size, metal, hardware, space-needs, and power-hunger is nothing short of a delight. It seems a lot like that newspaper party-dance game in which the partners have to keep dancing as the paper gets folded and folded and folded with every next round.
That explains why the monolithic and beastly iron-creature of the last decade is seldom visible anymore. In its place is its post-diet cousin – this data center is more software than hardware; this data center takes up less space and this data center is designed around applications. And, do you know the best part? This data center has been folded into new limits of being lean and thin. It’s surviving on salad; uses less space, less energy, and is more agile. So does that mean the story of the data center changes from here?
New characters: Workloads, edge, and power
If we take a walk down the memory lane or a corridor of the museum for data centers, we would recall that just a couple of years back, a data center was created to last 20 to 25 years.
But as Ovum experts have rightly pointed out, enterprise IT started to slowly move towards a new imperative for workloads. The need for regional data sovereignty added a big wheel to this shift. Speed and agility became paramount. This led to modularisation, distributed IT, and a low-latency strategy for data centers. So that’s why the data center space forked into two segments – the mega-big, a multi-megawatt category where hyper-scalers reigned, and the dedicated and lean category.
The arrival of multi-core processors and virtualisation, followed by containerisation, gave a new shape to the typical data center. Now the data center had to be closer to the source of where the data is generated. In some recent estimates shared by Dell, over USD 700 billion in Capex is expected to be spent within the decade on edge infrastructure. While 10% of data is processed outside of the data center today, 75% of data will be processed outside of a traditional data center or cloud by 2025 – as per these edge-oriented projections.
The data centre sector uses around 1% of the world’s electricity and this level could hit double-digits by 2030, adding more carbon emissions.
Pravin Advani, Co-Founder & Managing Partner at SA Global Advisors outlines the massive shift in data centers. “Back when data centers were built using large rooms of computers in the 1990s, to now with their virtual replacement with cloud-based technologies, data centers have gone through multiple quantum leaps. With the explosion of data through various digital devices and cloud-based applications, the data center in the future will look significantly different from today. The rise of Infrastructure as a Service (IaaS) from cloud providers has given companies an option to build a virtual data center in the cloud using just a few mouse clicks. Nevertheless, it will take time for the local on-premises data center to completely fade away. In fact, many companies including Amazon are still investing in building their next-generation data centers and so are a few other global players in India.”
And there are not one but many factors that explain this transformation – from virtualisation, to hyper-converged infrastructure (HCI), to power-efficiency metrics, and a lot more. Here is what the new face of the data center looks like – without all the flab. And here’s why.
A lot of the transformation of the data center can be put on the shoulders of the cloud, and the muscles of HCI and virtualisation.
The cloud twist
Enterprise spending on data center hardware and software dropped by 6% to under USD 90 billion. The COVID-19 has also come in the way of pushing a new direction on worldwide IT operations. If we look at the last decade, the average annual spending growth for data centers has been 2%, while for cloud services (IaaS, PaaS, and hosted private cloud) it was 52%. Fresh data from Synergy Research Group also shows that enterprise spending on cloud infrastructure services continued to ramp up aggressively in 2020, and has been growing by 35% to reach almost USD 130 billion.
The 2020 worldwide spending on enterprise data center hardware and software number stood at USD 89 billion. The key segments with the highest growth rates over the decade have been virtualisation software, Ethernet switches, and network security. It is interesting to note that the server share of the total data center market has stayed unperturbed, but the storage’s share has dropped.
It is not a scenario of redundancy of data centers. In fact, if anything, the data paradigm has exploded in the last few years – in every stripe of technology disruption, be it artificial intelligence (AI), the internet of things (IoT), or last-mile applications. They all need higher computer capabilities and lead to a high quantum of data being generated and processed. This translates into a bigger need for data center capacity. What could be happening though is that 60% of the servers that are now being sold are going into cloud providers’ backyards.
Even if we contrast them to cloud alternatives, the data centres of today will still be picked as the more cost-friendly option by some industry experts.
As Naveen Mishra, Senior Director Analyst, Gartner, explains, “The Indian public cloud market is poised to cross USD 12.0 billion with a CAGR of almost 30% during 2020 through 2025. Indian enterprises have accelerated their digital journey and cloud is becoming an important component of this journey. In the last 12 months, based on user surveys/interactions, cloud deployments are primarily supporting five outcomes: IT modernisation, improved efficiency, improved productivity, increased agility and innovation and, finally, enablement of digital business strategy.”
Shahin Khan, veteran technology analyst and founding partner at OrionX, avers that data centres have substantially caught up with virtualisation where possible and bare metal where necessary. “The prevailing model is scalable in capability with a cloud consumption model, hardware configurations that ensure quality of service, and advanced development tools that ensure developer productivity.”
He also reminds us of the predictions of the data centre’s wipe-out with the advent of cloud. That never happened. Data centres also became not the boring one-stroke painting that some people expected. Instead, data centres have embraced co-existence with cloud and heterogeneity, Khan underlines.
Mishra translates how the new usage scenario will shape into an impact on data centres. “India is seeing a sudden surge in creation of data centre capacity primary driven by traditional data centre services companies, which are investing into this to serve the accelerated hyper-scale demand, over the next three-five years. Gartner does not expect rapid increase in the on-premise/enterprise data centre footprint. Enterprises are considering optimising their existing data centre footprint with all possible options available including public cloud, colocation and on-premise facilities. Increasing Edge footprints adds another layer of complexity to manage their hybrid infrastructure.”
The HCI page-turner
And how can we forget about HCI while talking of the leaner version of yesteryear’s data centre! HCI or hyper converged infrastructure covers a unified, software-defined system. It envelopes all traditional data centre areas from storage and computation to networking and management. It leverages data centre hardware using locally attached storage resources and spins up flexible building blocks that can replace legacy infrastructure.
The HCI market size was estimated to be at USD 3.84 billion in 2018 and is projected to hit USD 33.16 billion by 2026, according to a Valuates Report. There is staggering growth in this space because it gives enterprises all the advantages of a data center, albeit at lower capital spending, operating expenditure, and better disaster recovery capability. It is a composite of integrated stack systems, integrated infrastructure systems, and integrated reference architectures.
Valuates projections explain why HCI is showing a fast adoption pace – due to a reduction in costs of infrastructure by combining or incorporating commodity hardware with a common operating model. But HCI is also facing issues like vendor lock-in and less elasticity. Often, one needs huge costs to add a new resource to the existing HCI.
Radhika Ramesh, EVP – Global Delivery Center Head, Cloud Infrastructure Services (CIS), Capgemini, reckons the implications of latency, HCI, SSD, and Lithium-ion, etc. on the modern shape of the data center. “First, low-latency apps require to compute close to the user. Edge by definition will be closer to the user, and the Lithium-ion UPS allows us to protect hardware with a smaller form factor and in situations both inside and outside of a traditional DC. Also, HCI, SSD, multicore processing OCP, and again Lithium-ion UPS all drive solutions to a smaller standardised footprint with the greater power density and higher reliability.”
She explains that coupled with the availability of software-defined components (storage, network), this will give us great flexibility and will reduce the requirement for traditional data center space in the center. “However, center DCs will still be required to host legacy workloads, and DCs are much more energy-efficient when full, so there will still be pressure for organisations to centralise workloads where possible.” In her guess, these competing drivers will lead to consolidation of DC space, and will also push organisations, which will end up with empty space in their central DCs to move to co-location services run by system integrators or dedicated DC hosting companies.
Time to chill down, literally
But with all these new turning points comes a done-and-dusted question too. The modern data center cannot afford to be an energy-guzzler anymore. The International Energy Agency has estimated that the sector uses around 1% of the world’s electricity and this level could hit double-digits by 2030, adding more emissions. If we look at Power Usage Effectiveness (PUE), the measure of energy efficiency in data centers, the theoretical ideal stands at 1. This is where 100% of electricity consumption goes toward useful computation. But data centers are generating an awful lot of heat as they expand further.
This is an important aspect that will define the future of the data center to a large extent. Khan suggests that in addition to improvements in ‘results/watt’, we also see a move to renewable sources of energy and carbon-neutral facilities.
Sunil Gupta, CEO, and Co-founder, Yotta Infrastructure, underlines the trend. “With the increased importance of data storage in the past couple of years, companies are taking new approaches that include edge data centers, hybrid cloud, distributed IT, etc. While power remains a significant part of operating a data center, identifying various methods of power conservation, such as alternative energy source and liquid cooling technology, has always been an important objective for R&D departments.”
Data center companies, across the globe, face the same challenge of designing and operating their facilities to reduce environmental impact without sacrificing performance or reliability, points out Jeremy Deutsch, President, Equinix Asia-Pacific. “Increasingly, data centers are incorporating circular economy strategies in construction and operations to reduce climate and environmental impacts.”
Ramesh counts this issue as a major change. “There is a requirement now to run data centers as efficiently as possible. We at Capgemini now run all our facilities on 100% green electricity and consider PUE as a critical measure for our facilities. Modular solutions like blade rooms allow for much more efficient operation, often using natural cooling rather than air-conditioning. The use of sealed hot and cold aisles and managing airflow around the facility is also important.” She noted that moves by enterprises to get to net-zero carbon dioxide make power efficiency a factor that will continue to increase in importance. “DCS is increasingly only financially viable at a larger scale, which makes space and availability of cheap power incredibly important.”
Power and cooling still remain the most critical challenge, affirm Vijay Kumar Mahalingam, Vice President – Technical Services at Rahi Systems. “Low availability of adequate power, sometimes, leads to deferred expansion and impacts and new DC deployments,” he adds.
Advani dissects the scenario in specific needs. “With estimates of over 175 zettabytes of data expected by 2025, companies are now looking for extremely cost-effective and more sustainable ways of storing data, which will be, increasingly, driven by global climate change and ESG imperatives. In the quest to achieve a near-zero carbon footprint, businesses in many countries are placing their data centers near cheap power sources to make them more affordable and energy-efficient over the long term. Connectivity to fiber networks, regulatory and data security are some basic considerations while building a data center. Small, distributed data centers, called edge data centers, are being deployed to reduce the load on data center networking bandwidth from the continuous rise of IoT, 5G, and mobile computing.”
Another popular approach cited here is that of large data centers, called mega data centers. “While these mega data centers are expensive to build, the lease cost per square foot in a shared infrastructure model is far lower than that of an average data center. With mass storage devices such as PCIe SSDs and SMR HDD, there is a number of emerging storage technologies that promise greater storage capacity per unit, while pushing the limits on the use of power. Our conversations over the past quarter, with entrepreneurs and investors who are focused on the cloud and data center space, clearly show that the enormous amount of data being generated is driving higher demand for hyper-scale facilities, along with the demand to support the platforms of the worldwide web, social media, streaming, cloud gaming, AI, machine learning, and, inevitably, hyper-scale cloud providers too. In addition, we see the need for hosted AI solutions for a new data-centric infrastructure architecture that puts data at the center of the architecture to localise data aggregation, staging, analytics, streaming, and management at global points of business presence.”
The ending – still a cliffhanger
No, the erstwhile data center is not going to be passed to the obit page anytime soon. Even if we contrast them to cloud alternatives, the data centers of today will still be picked as the more cost-friendly option by some industry experts. The need for processing the data, using the computing power, and ferrying them in and out of the cloud, pushes up the costs in the long term. This is unlike the fixed and predictable nature of expenses in a data center. And there are no costs for moving data in and out of them.
Plus, the needs for data localisation, strict compliance, and regulations also make a strong case for data centers. We will not throw them away in the junkyard soon – that’s for sure. Their face and DNA are changing well to survive the battles of the modern world.
Global investment in data centers is estimated to rise from USD 244.74 billion in 2019 to USD 432.14 billion in 2025 at a CAGR of 9.9%, as per the estimates of ResearchandMarkets. It has been augured that enterprise data centers will account for an increasingly high proportion of data center investment. This would be followed by cloud, which will overtake enterprise data centers in investment by 2025.
HCI gives enterprises all the advantages of a data centre, albeit at lower capital spending, operating expenditure, and better disaster recovery capability.
As the digitisation and data wave gets stronger and stronger across the globe; there will be a pressing need for processing and storing data. This means the need for the construction of both large and small data centers. This trend would get accentuated with the progress on 4G and 5G networks, edge applications, and the deployment of Industry 4.0 technologies. Asia-Pacific (APAC) and North America would be witnessing robust growth as companies in these regions invest in hyper-scale and edge data centers.
There might also be a trend to move data processing closer to customers. This will drive the adoption of edge data centers. Speaking of the Indian market, there is a significant investment spike coming from colocation service providers thanks to high demand from BFSI, logistics, transportation, e-commerce, and government agencies. This has been spurred by the outbreak of the pandemic. ResearchandMarkets expects that the demand for high-capacity systems with 2N redundant configuration would increase over the next few years.
In the reckoning of Mordor Intelligence, the India data center market is expected to grow at a CAGR of 8% over 2021-26. Drivers would include rapid adoption of cloud-based business and increased proliferation of online shopping due to the availability of user-friendly interfaces, high-speed internet, and smart devices. Also, initiatives by state governments to attract the construction of data centers in their states for economic growth would shape into a massive opportunity. With more than 669 million internet users presently and the aim to become a USD 5 trillion economy by 2024, it is expected that India will embrace massive data at explosive rates in the coming years. The market could also gain from new restrictions and limits on locations of data centers – as seen in major data center hubs in Asia, like Singapore.
Over the last few years, the conversations around data and data centers have taken center stage, as Gupta encapsulates it: “The favorable government support in the form of the ‘Digital India’ program, data localisation, and tax incentives have played a critical role in accelerating data explosion and spurt in data center industry. However, the pandemic has been an inflection point, as businesses went ‘digital and remote’ overnight and enterprises have had to shift away from traditional ways of doing business.”
Gupta illustrates how so many businesses are now adopting new IT infrastructure – including the move from traditional on-premises data centers to hyper-scale third-party data centers, hybrid IT, edge computing, distributed IT, and micro data centers. “Sectors such as BFSI, logistics, transportation, e-commerce, and government agencies are witnessing high demand for colocation services. Global enterprises involved in establishing a physical presence in the Indian market are co-locating facilities in the country. In other words, we are witnessing an increased investment from global colocation service providers fuelling the growth of the industry.” Alternatively, as he surmises, several small-scale businesses today prefer managed hosting or cloud services rather than co-location, accelerating India’s cloud journey.
“Cloud services have become a necessity for organisations to operate, with employees needing access to data from remote locations. Hence, work-from-anywhere cloud services such as Desktop-as-a-Service and Network-as-a-Service became must-have services amid the COVID-19 crisis.”
Plus, there is AI waiting as a surprise entry that will change the plot a lot. Khan reasons that without question, the major driver of data centers today is the arrival of AI workloads. “AI applications are enabled by a virtuous cycle. It is cheap to collect massive amounts of data, there is hardware and algorithms that can make sense of that data and need massive amounts of it, and there are economically viable uses for the resulting insights and automation.”
AI and data-intensive applications, as Gupta echoes, are being tested as a solution to the data tonnage challenge with respect to the distribution and concentration of data. “Companies are strategizing to keep data as close to its source as possible for better latency as well as data sovereignty. These promising infrastructure changes also hold potential risks of data loss. Hence, it is critical to store data in fault-tolerant data centers that offer two parallel power and cooling systems with no single point of failure. In terms of changing customer needs, companies no longer want to deal with maintaining and operating a captive data center due to heavy upgrading costs and security concerns.”
He points out the emergence of XaaS or Anything-as-a-Service by explaining how migrating to highly scalable colocation data centers is emerging as a popular customer preference. “Additionally, customers are not just looking for rack spaces but a complete solution provider who can take care of all their IT needs such as cloud, network, and security.”
The way forward for data centers is to adapt even more and be more relevant than ever. Ivo Ivanov, CEO International at DE-CIX, assesses that according to the latest Gartner forecast, end-user spending on public cloud services in India will total USD 4.4 billion in 2021, which is a plus of 31.4% compared to 2020. “The accelerated pace of the digitalisation of enterprises will become one of the key factors for future economic growth – and will have a lasting impact on the fast-developing data center market. Therefore, data centers need to ensure that they are part of a wider and flourishing digital ecosystem, including ISPs, CSPs, content networks, CDNs, and enterprise networks – something they can achieve by getting connected to an Internet Exchange (IX) with state-of-the-art interconnection services, like DE-CIX. We can then support them to create their own interconnection story.”
Technology development is accelerating, advancements such as AI, ML, and autonomous vehicles will continue to drive growth in compute requirements, reminds Ramesh. “IoT and 5G will lead to more requirements that we don’t yet fully understand. Development by the hyper-scalers and the realisation of edge networks will continue to drive change. We can be certain there is a requirement for data centers in the foreseeable future, but we can also be certain that the DC of 10 years’ time will look very different to the ones we manage today.”
Well, the day is not far when there would be no paper on the floor to be folded anymore, and when the partners would be levitating. That’s what true chemistry between technology and users would culminate into. That’s how the party should go on and will go on.
The contours of India
The India data center market, by investment, is expected to grow at a CAGR of 12% during 2020-26.
- April 2020: Google announced an investment of around USD 400 million in the deployment of Blue-Raman cable. This one connects India with Israel and Italy.
- August 2020: Equinix entered India with the acquisition of GPX Global Systems in Mumbai, a deal likely to close by Q2 2021.
- December 2020: Adani Group announced to set up a hyper-scale data center facility that will entail an investment of USD 340 million in Chennai. It has inked a partnership with EdgeConneX, to build and operate 1 GW of data center campuses across the country. Incidentally, they could be powered by renewable energy power plants in India.
- Investment in self-built facilities: National Payments Corporation of India, State Bank of India, National Payments Corporation of India, and Information Technology Department Tamil Nadu Colt DCS have been developing the largest data center in Mumbai, reportedly with a total power capacity of over 100 MW.