Scroll Top

Data centre outlook for 2023 

Data centre outlook for 2023


Ciaran Forde, Data Centre Segment Leader, Eaton


A disruptive year

To say that 2022 has been a disruptive year is an understatement. Much of last year’s outlook for the data centre sector was concerned with balancing the growth in digitalisation with more sustainable practices. But we had no way of knowing about the impact that the ongoing massive disruption to the geopolitical landscape would have – not least that we’d be facing a severe energy crisis. 

The current situation brings a sharper focus on the importance of addressing the issues raised last year, as well as highlighting new challenges. It’s not all doom and gloom, though – ongoing digitalisation, for example, represents new opportunities for the sector. 

Here, then, are some of the developments – for good or ill – that we can expect to see in the data centre sector during 2023 and beyond.


Energy uncertainty

The biggest issue we face right now is the extraordinarily high price of energy. The cost has skyrocketed to the point where it becomes a real concern for large energy users, such as data centre owners. Can they pass these costs on to their customers? Will the prices continue to rise? Do they have the cashflow to manage this in their business model? While the argument for a renewable generation strategy has always been around sustainability and the environment, today we need in-region renewables to protect supplies for European countries primarily for reasons of energy security and cost. Microsoft, for example, is taking a step in this direction. Its Dublin data centre features banks of lithium-ion batteries approved for connection to the grid to help grid operators provide uninterrupted power should renewable sources such as wind, sun and sea be insufficient to meet demand.

This need to accelerate the generation of renewable energy is, effectively, an extension of last year’s outlook. But it’s much more acute now. It should serve as a wake-up call to governments across EMEA that they can no longer rely on traditional energy sources. 


Broken supply chains

Covid-19 had a tremendous impact on global supply chains across many sectors. However, once the pandemic receded, businesses everywhere were lulled into something of a false sense of security, believing they’d been through the worst. 

No one was expecting a second body blow, a geopolitical crisis that’s proven to be even more disruptive to some supply chains – particularly the semiconductors and base metals vital to data centre construction – than Covid. As a high-growth market, the data centre industry is highly sensitive to supply chain disruption, especially at a time when it’s looking to scale up. 

The industry as a whole is still struggling with supply chain disruption. And the current geopolitical landscape means this is only likely to continue. 


Tackling growing complexity

The requirement for digital growth has reached an unprecedented level. Every possible avenue has been explored to fulfil that need more simply, more cost-effectively, and in the shortest possible time. 

But doing so can be contradictory to the nature of many highly complex, mission-critical environments. A data centre is home to a wealth of different technologies – from HVAC systems to mechanical and structural engineering, IT and compute. The challenge is trying to accelerate such highly complex, interdependent types of environments to maintain the current trends for digitalisation. 

To this end, data centre designers, operators and vendors are fashioning systems that will reduce this complexity while respecting an application’s mission-critical nature. The industrialisation, or modulisation, of data centres, where prefabricated, pre-engineered, and pre-integrated units are delivered to the site, is one way of making the design and construction of a data centre less complex while ensuring faster time-to-market. 


Moving beyond traditional clusters

Until now, London, Dublin, Frankfurt, Amsterdam and Paris have been the traditional data centre clusters, either because companies are headquartered in these cities, or because they are natural economic clusters with a wealth of telecom connectivity and ideal client profiles. 

To provide quality of service and to be in closer proximity to centres of population and economic activity, it’s becoming more favourable to build data centres in the secondary cities of the main economic nations and in the capitals of smaller economic nations. Competition among the data centre providers is strong, therefore many of these Tier II cities and nations provide for growth for existing operators or a low point of entry for new operators. For this reason, you will see increased activity in cities like Warsaw, Vienna, Istanbul, Nairobi, Lagos and Dubai.  

But this expansion is not without its challenges. For instance, considerations around the availability of appropriate sites, power, and engineering labour all add complexity to an organisation’s overall operations. And many of those countries may not have a lot of experience or personnel to help with the design, construction and operation of a new data centre. 

Overcoming such challenges will require data centre owners to relearn the industry each time they move into a new geography. Regardless of such challenges though, new markets continue to open up, with many operators trying to achieve first-mover advantage in developing secondary markets. In fact, many jurisdictions are welcoming data centre operators with open arms, with some even offering incentives and subsidies to entice them. 

One thing last year has proved is that we can’t be certain about anything. The after-effects of Covid, and the current geopolitical system have left the sector facing a series of unprecedented challenges. But growth opportunities exist. Trends would indicate that more forward-looking operators will be able to weather the storm, to face whatever the future holds. 


Related Posts

Privacy Preferences
When you visit our website, it may store information through your browser from specific services, usually in form of cookies. Here you can change your privacy preferences. Please note that blocking some types of cookies may impact your experience on our website and the services we offer.