Follow These Data Center Trends in 2016

Here it is, our obligatory end-of-year look in the crystal ball (hey, at least give us credit for not using a picture of an actual crystal ball to accompany it).

Data centers may stand still, but the data center industry never stops morphing. We will doubtlessly see more big trends emerge next year in addition to the five listed below, but these five are the ones we think are the big ones that will get even bigger over the course of 2016.

If you disagree or have other big trends you think we should add to the list, don’t hesitate to post a comment below or on our social media channels: Twitter, Facebook, LinkedIn, Google+.

More Colo Firms Will Invest in Renewable Energy

We saw unprecedented investment in renewable energy by colocation providers this year. Equinix, the world’s largest retail colo provider, contracted to buy enough renewable energy to offset the power consumption of its entire North American footprint.

Switch, the operator of a giant SuperNap data center campus in Las Vegas that is on an expansion roll, building in Nevada, Michigan, and Italy, and seriously considering a move into Asia, has committed to powering all of its footprint with renewables and invested in building a 100 MW solar plant in Nevada.

Save for a few exceptions (such as QTS’s massive solar farm in New Jersey), colocation providers generally have not been interested in spending money on renewables, saying there was little demand for it from their customers.

A giant like Equinix and a provider like Switch – which is much smaller than Equinix but houses infrastructure for some of the largest internet and cloud players – making serious commitments to renewables signals that interest in renewable energy among colocation customers is on the rise, so expect to see more multitenant data center providers to invest in clean energy.

Enterprises Will Come to Colo for Their Cloud Needs

There’s less and less doubt now that even the most traditional enterprises have a lot to gain from using public cloud services. However, many of them don’t want to rely on the public internet to access cloud services, because of concerns with security, performance, or both.

Enterprises will increasingly use highly connected colocation data centers to access cloud services privately, over direct network links. Expect data center providers to strike more and more deals with cloud service providers to make their services accessible from the colos to attract those enterprise users.

Add access to cloud services to the list of most important factors to consider when evaluating a colocation facility – on par with network connectivity, power costs, room for expansion, and tax breaks.

Data Center Construction Spike in Europe

The killing of Safe Harbor by the European Court of Justice threw a curve ball to the cloud services industry, especially since the regulators didn’t really propose an alternative to the legal framework companies used since 2000 to ensure they weren’t breaking any laws by storing their European users’ data in data centers overseas.

While many of the cloud providers turned to legal workarounds to address the vacuum left by the annulment of Safe Harbor – Microsoft handing the custody of its European customers’ data to Deutsche Telekom, a direct competitor in the European cloud market, being the most creative workaround – those who could afford it started building.

Expect a spike in data center construction in Europe as a result of the regulators’ move. The writing’s on the wall: after Edward Snowden’s leaks, physical location of data matters, and it will continue to matter. The decision’s clear beneficiaries are data center providers with capacity in Europe, who will be glad to absorb increasing demand for data stored locally.

Construction in Edge Data Center Markets Will Continue

The trends of streaming services eating into the traditional TV market and companies replacing software licenses (or entire data centers) with cloud services will continue to accelerate. That means more and more data center capacity will be needed in places where in the past demand for data centers was low.

Expect to see more data center construction in places like Philadelphia, Denver, Minneapolis, Boston, and Kansas City. Digital content and cloud providers want to make sure customers in those markets get high-quality service, and the way to do it is to store content they use closer to them, partnering with local internet service providers to deliver it.

New companies like EdgeConneX and vXchnge will continue expanding in those and other markets, but their older and bigger competitors, the likes of Equinix or CoreSite, will also see demand driven by the need to move the edge of the internet further out from primary data center markets like Silicon Valley, Northern Virginia, and New York.

One or Two Big Telcos Will Offload Data Centers

The telco cloud frenzy of the last five years or so has been replaced by a lot of doubt, as Amazon Web Services has reasserted its lead in the infrastructure cloud market, and as Microsoft Azure has invested billions to try and catch up to AWS.

With the cloud giants’ race to lower the prices of their services, their scale, and their rapid releases of new features, it has become nearly impossible to compete in the space, and operating a global data center fleet is expensive business. We’ve already seen both Dell and HP try and quit.

If AT&T and Verizon are only rumored to be considering selling off their massive data center portfolios, built out to chase the enterprise cloud market, CenturyLink said publicly it was considering alternatives to data center ownership, while Windstream – a much smaller telco – already sold its data center business to TierPoint this year.

Expect to see some hard decisions from CenturyLink about its underperforming data center business in 2016, and perhaps one of the other two giants will make a big move as well. So far, AT&T has handed over its managed hosting business to IBM.