The Shifting Strategy of the Critical Facilities Industry in 2024

We've seen that some companies that were once extremely successful have suddenly stalled, while others are experiencing rapid growth. What sets them apart? There have been a few factors. For example, companies that relied heavily on just one or two hyperscale clients faced challenges especially when there was a major industry design shift towards AI, which significantly altered the design and operations of mega data centers, causing a pause in building data centers like it had in 2023. With this transition, projects got canceled, went on hold, and reduced revenue projections (temporarily). In contrast, companies that cater to a diverse customer base - not just a single hyperscale client - were able to adapt and expand their market share. Companies that were attending conferences, following the tech trends with how to design around NVIDIA chip, have been reaping the benefits. This highlights the importance of diversifying your client portfolio and staying on top of the trends as they can turn on a dime. 

We're also seeing a trend toward more enterprise customers building their own data centers to keep AI projects in-house. Keep an eye on this development, as it could signal shifts in the data center enterprise landscape. Meanwhile, the financial sector appears to be staying flat this year with limited hiring. The hyperscale firms continue to dominate our industry, and the major push toward AI is likely to keep things buzzing for some time! 

Recently, there have been a lot of rookie moves at the executive level, with decisions being made by those who don't fully understand the direction the critical facilities industry is headed - especially given the rise of AI and the uncertainty about which tech solutions will gain traction and which will become obsolete. There are new companies trying to get more involved in the data center industry. In order to successfully gain entrance into the data center industry, companies must have the following mindset: effective change management, executive buy-in, and healthy budget dollars are absolutely necessary. These resources are needed to hire a skilled team, conduct effective marketing, and take part in industry conferences such as Datacenter Dynamics (DCD), National Data Center Investment Expo & Conference (DICE / Bisnow), AFCOM, iMasons, DC/AC and 7x24 Exchange, both local chapter events and the national event. However, even with an excellent product, success doesn't happen overnight. Patience and perseverance are key as Data Center Companies work with both companies and people they trust as this industry is extremely risk adverse.  

Hiring and RIFs 

Back in 2022, it was known as the “Great Resignation” and there was no limit in comp packages. 2023, in my opinion, was the “Great Humbling” as salaries being offered by companies were lower than what candidates expected while candidates thought that the salaries should be higher, so not a lot of hiring took place in early 2023. It took about 6 months to level out and I’m sure a lot of bank accounts shrunk during that timeframe. Unfortunately, a lot of these candidates were holding out for similar high paying jobs, however if they were caught up in Reduction in Force, clearly that comp was unsustainable even for Hyperscale Companies. The new reality for those candidates was that you might have to go back to work at an actual office vs working purely remote; RSU’s aren’t offered at every company; you might have to take a salary reduction; and traveling was now back on the table. Fast forward to 2024, “The Year of AI” has arrived. Salaries are going back up; inflation is in full swing; and it’s a mad dash again to find candidates. While in 2024 Q1, hiring was ok, but it was nothing to write home about as the economy was slow to get out of the gate with a GDP of 1.3% in Q1 of 2024. This changed after spring break at the onset of Q2. Companies are hiring in droves depending on how “on the ball” they have been with tracking industry trends in the data center industry.

Strategy for hiring in today’s climate 

So, what does this all mean when hiring candidates in 2024? Companies need to continue to fully vet candidates, however the hiring process needs to go faster, or you will lose that candidate to your competition as candidates are getting multiple offers. Hyperscale Companies are using their vendors by hiring vendor’s employees in Staff Aug capacities. Depending on Company trends, as described earlier, it will determine if hiring is rampant in that organization, if hiring is flat, or if there are upcoming layoffs. As a hiring manager, you must be open to all candidates in a limited candidate pool. Based on this limited candidate pool, as a manager, you will want to make sure you hire correctly by being as transparent as possible with your new hire as to laying out expectations and goals during the interview process, in the offer letter and throughout employment. For example, if you're hiring for a job with extensive travel (around 75%), it's better to be upfront and even exaggerate the travel requirements during the interview (e.g., 75-100% travel) rather than downplay them (like 50-75%). This helps avoid candidates feeling overwhelmed by the reality and quitting for jobs with less travel, since many positions in our industry require travel to remote locations, shift work, and working on nights and weekends. 

There are a lot of rewards working in our industry where the pay can be awesome at times, a degree is not always necessary - unless you are an RA / Registered Architect or a PE / Professional Engineer. 

The important thing is to properly align the needs of the company with the needs of the candidate. With the increase of jobs, companies need to get these opportunities in front of as many people they can. As such, consider partnering with a recruiting firm to reach outside your usual scope. 

Summary outlook for remaining Q3 / Q4 for 2024 

Overall, things are looking up for the whole data center industry and that translates into a bevy of new projects, and as such, more jobs. Plan accordingly as our data center market is riding the AI wave. Since AI development is being driven by Hyperscale Companies, and they have an obscene amount of cash, the impact from inflation and interest rates might not be as apparent especially when the prospects for an extremely high ROI (Return on Investment) for AI provides a shining light for even better economic times to come, hence the AI frenzy! While the interest rates remain high (based on rates we had in past 5 years), it's an election year which is why team Biden will try his best to lower rates as they plan on releasing fuel from our US Strategic Reserves around July 4th weekend. With the push for AI, I don't think the fuel release will be enough to reverse or slow down inflation, especially with the hiring push (bad for inflation) as seen in Q2.