It’s important to be accountable for your predictions and projections. At Data Center Frontier we track our annual forecasts, and report back to our readers about how they turn out.
Last January we identified Eight Themes That Will Shape the Data Center Business in 2022. Some were on the money (big year for site selection, second-tier markets and community controversies) while a couple were either off base or slightly ahead of their time.
Here’s the scorecard for our 2022 forecast, including whether each prediction was a Hit, Miss or Too Early.
Watch for our “Eight Trends That Will Shape the Data Center in 2023″ forecast on Thursday, Jan. 5.
1. Climate Change Shapes Site Selection
PREDICTION: The real estate mantra of “location, location, location” will be more important than ever in 2022 and beyond. Choosing the right location for a data center campus has never been simple. But site selection is becoming a strategic priority as cloud builders seek larger chunks of real estate while balancing a multitude of tensions. A key issue is climate change, which is altering the status quo in both real estate and energy sourcing. Some of the most important data center markets will need to address concerns about water scarcity and their supply of renewable energy.
HIT: As we anticipated, site selection became one of the most important themes in 2022, with water impact becoming a major point of discussion between data center projects and the communities where they hope to operate. Climate considerations were one of the many factors that made location a primary concern. By mid-year it became clear that several major markets were experiencing constraints on power delivery - not just whether operators could procure renewable energy, but whether there would be any energy available in their timetable.
In July power constraints gripped the world's largest data center market, as Dominion Energy told data center companies that power for some new facilities in Eastern Loudoun County will be delayed for years - perhaps until 2026. The major European cloud hub in Dublin experienced similar constraints, as EirGrid delayed any new grid connections for data center in some areas, perhaps until 2028.
Meanwhile, the U.S Interior Department placed restrictions on water use from Lake Mead, requiring cuts that will reduce water supplies to Arizona by 21 percent, and Nevada by 8 percent. Data center water use is already under intense scrutiny in Phoenix, which has emerged as a key growth market for cloud computing infrastructure.
2. Resiliency and Uptime Take Center Stage
PREDICTION: Uptime is always job one for the data center industry. As more companies embrace hybrid infrastructure, uptime is becoming more complex, requiring backup and failover strategies that span cloud, colo, on-premise facilities and edge infrastructure. In 2021, a series of major cloud reliability incidents hobbled Internet services, including a May outage for CDN provider Fastly, October downtime for all Facebook sites, and a lengthy December outage for Amazon Web Services. On an operational level, many users will optimize their IT architectures to better withstand third-party outages – at either the cloud, the core, or the edge.
HIT: The reliability concerns of 2021 led to 2022 becoming a big year for "multicloud" strategies for enterprise IT users. While there are many motivations for working with multiple cloud providers, resiliency remains the leading motivation for many users considering multicloud architectures.
But high-profile outages continued, with consequences in the executive suite. The CEO of South Korean provider Kakao Corp resigned after a fire at one of its data centers halted widely-used banking and messaging services. Lengthy downtime for Alibaba Cloud led to executive changes. Data centers in the UK and California suffered outages during a July heat wave, including Google's London data center. On the security front, a ransomware attack at Rackspace has taken its Hosted Exchange service offline for more than a month. During the Christmas season, Twitter suffered widespread performance issues, reportedly after shutting some operations in Sacramento.
3. M&A Shifts to the Data Center Supply Chain
PREDICTION: Supply chain pressures are very real for the data center industry. In a business environment facing delays and cost hikes, how does a company improve its position? M&A can be an important tool. Data center operators and their financial backers have access to enormous financial resources, as seen in the M&A binge in 2021. Expect to see some players wield that financial strength to secure control of critical components in their data center deployments, either through acquisitions or creative joint ventures or partnerships.
MISS: This trend never materialized in a significant way. There was M&A within the supply chain, to be sure, but not the kind of deal we predicted in which data center and cloud platforms buy key equipment suppliers. It's a clear miss.
4. Investment Accelerates in Regional Markets and Edge
PREDICTION: An influx of global capital has propelled the growth of digital infrastructure, as well as the wave of M&A activity that has transformed the data center industry. Much of this investment has been focused on adding capacity in the largest global markets, like Ashburn, Frankfurt, London and Dublin. In 2022, the capital infusion will extend to regional markets and service providers specializing in “second-tier” cities and edge computing. There were clear signs of this in 2021, and we’ll see even more significant growth and investment in 2022, along with a high probability of acquisitions.
HIT: This was a huge year for development in second-tier markets, as the hyperscale ecosystem expanded into places like Minneapolis, Austin and Salt Lake City, as we reported in an October update on demand trends that noted how our prediction is being borne out in a surge of both leasing and construction outside the primary markets. “New data center supply will be impeded by the availability of land and power in many major markets, driving expansion outside the traditional hubs,” JLL noted. Power constraints in key markets, along with record low vacancy rates, will ensure that this trend continues in 2023 and beyond.
5. Liquid Cooling Gains Wider Adoption
PREDICTION: It appears the data center industry is finally poised for broader adoption of liquid cooling, and we will see significant strides in this direction in 2022. Several factors are prompting a reassessment of cooling, including powerful new hardware for AI workloads, growing pressure to eliminate water use in cooling servers, and major progress in enabling liquid cooling from cloud and colocation providers, as well as server and chip vendors. The biggest nudge is coming from Microsoft, which has begun using immersion-cooled servers in production, and believes two-phase immersion promises major gains in density and efficiency.
HIT: This prediction was verified in the shift by Meta, which announced a roadmap for a gradual shift to a water-cooled AI infrastructure. The company plans to use cold plates to provide direct-to-chip cooling for AI workloads on its GPU servers, and is preparing several designs for managing the temperature of supply water as rack power densities increase. Meanwhile, NVIDIA unveiled liquid-cooled GPUs, with colocation giant Equinix signing on as an early adopter. We also began seeing new data center projects designed for liquid cooling at scale, such as the Wyoming Hyperscale Data Center.
In October, Intel said it expects to see greater adoption of liquid cooling, and is working with the Open Compute Project (OCP) and cooling vendors to put forward standards to make the technology more accessible. “It’s always that thing we’re going to do in the future," said Zane Ball, Intel’s Corporate VP and General Manager Datacenter Engineering and Architecture. "We believe we’ve reached a time where liquid cooling has to play a much bigger role in the data center."
6. Data Centers Confront Community Resistance
PREDICTION: There’s a growing narrative that data centers are undesirable neighbors, and if this sentiment continues to build, it could slow growth in key markets. Community resistance is becoming a real challenge in some of the most important data center markets. That includes Northern Virginia, where data center development is creating heated debate in Prince William County, an important expansion market. New projects are meeting resistance in Loudoun County as developers seek to build data centers on sites bordering residential developments. This is an industry problem. Data center operators need to be good neighbors, and explain why their giant cloud campuses will be a benefit to the community, and not a noise problem, eyesore or drain on precious resources.
HIT: This prediction was fully realized, as data center projects began encountering community resistance in many locations, none more than Prince William County, where the approval of a huge data center development become the dominant political issue and prompted a 14-hour supervisors meeting to allow 300 residents to share comments.
Although Prince William is the most volatile area for data center controversies, it is hardly alone. Loudoun County in Northern Virginia and Chandler in the Phoenix market passed regulations for where data centers can be built and what they should look like. This trend shows no sign of expiring soon.
7. Data and Energy Forge Deeper Connections
PREDICTION: It’s been 10 years since the data center team at Microsoft laid out a vision for “data plants” that integrate computing and renewable electricity in new ways. We first highlighted this trend in our Eight Trends for 2020, just prior to Microsoft’s initiative to eliminate diesel fuel and experiments with hydrogen fuel cells , and plans by Switch and Google to adopt utility-scale energy storage into their operations. As we enter 2022, the intersection of data center energy will enter a new phase, driven by demand for renewably powered data centers and the deep pockets of global investors.
HIT: Perhaps the clearest sign of the growing integration of energy and data was Microsoft's plan to will integrate a microgrid at a new data center in San Jose, Calif., which will use renewable natural gas (RNG) instead of diesel fuel to power its emergency backup generators. Microsoft also successfully tested a 3-megawatt generator using hydrogen fuel cells, proving that the technology can work at data center scale, while Equinix created a research project in Singapore to test hydrogen fuel cells. Meanwhile, Aligned acquired ODATA, which plans to develop green energy projects to support its data centers in Latin America.
8. Making Sense of The Metaverse Movement
PREDICTION: Will metaverse platforms turn out to be incremental improvements upon current virtual reality games and services? Or will metaverse aspirants deliver fully-immersive VR and AR worlds that users love and use? Put another way: What type of server, storage and network infrastructure will be needed to make this work?
TOO EARLY: The real-world impact of metaverse technologies remains years away. It was overly optimistic to think that we would begin to have clarity about its impact on digital infrastructure anytime in 2022. It's notable that Meta, the leading proponent of the disruptive potential of immersive VR, has paused its data center buildout as it rethinks its infrastructure to optimize for AI. The company has yet to share a timeline for a new design, but when it arrives, we may begin to see the outlines of what the infrastructure for the metaverse.
So here’s a look at the final score for 2021. We wound up with 6 Hits, one Miss, and one prediction that we classify as Too Early.
For comparison, here’s our track record for previous years:
2018 Scorecard: We had five Hits, one Miss and two predictions that qualify as “Too Early.”
2019 Scorecard: Six Hits, one Miss and one “Too Early” score.
2020 Scorecard: Once again, the final tally was six Hits, one Miss and one “Too Early.”
2021 Scorecard: Six hits, one Miss and one “Too Early.”
Watch for our “Eight Trends That Will Shape the Data Center in 2023″ forecast on Thursday, Jan. 5. You can also receive updates so you don’t miss our analysis.