Data Centre 2023 Predictions: What’s Next?

2022 was another year of incredible growth and progress for the data centre industry, with hyperscale demand in Europe doubling from where it was in 2021. Growth was primarily driven by London and Frankfurt, with London headline signings surpassing 100MW for the first time within the first half of the year alone, according to JLL.

Though the sector continues to grapple with supply chain challenges, rising inflation and the ongoing data skills shortage, it’s clear that it has managed to successfully navigate these external factors, with ongoing demand demonstrating the critical nature of data centres to the way we live and work. 2023 will be another landmark year for the data centre industry as it seeks to meet this demand, while continuing to innovate and prioritise sustainability efforts.

Further Expansion of Data Center Footprint in 2023

Hyperscale demand will remain strong and, as a result, capacity requirements will continue to grow in the coming year. This will encourage development of larger campuses - and in some cases, Mega Campuses - further outside city centres, with easier access to land and power. It will also see an acceleration of growth in secondary European markets, including Madrid, Milan and Portugal.

Market concerns including extreme weather events, geopolitics impacting energy moratoriums and what data centres represent in societies are influencing where workloads are located. For example, the moratorium in Amsterdam and Dublin has seen an overflow directed to Belgium, Madrid, and Milan. This has been the case internationally, with Johor and Batam benefitting from the moratorium in Singapore, or Maryland and Pennsylvania benefitting from overflow in Ashburn, Virginia. Therefore, 2023 could see new markets become relevant with increased market share, as cloud seeks to balance economic, environmental and social priorities.

The construction methods for delivering this growth will focus more on offsite manufacturing for speed and repeatability. The hyperscalers will also drive more efficiency in operation of these facilities which will reduce energy waste and reduce the consumption of valuable resources such as water.

Digital Skills Gap Will Continue to Widen 

The digital skills gap will continue to expand, remaining a central issue within the data centre industry, hampering its long-term development and growth. While notable progress has been made in recent years, the sector continues to grow on a steeper curve than the advancements made to-date, with AND Digital’s Nature of the UK’s Digital Skills Gap report finding 81% of UK managing directors agree that a lack of digital skills is negatively affecting their company.

It’s imperative that the data centre industry comes together in a meaningful way to address this gap, identifying additional ways to communicate the value and opportunity that this sector provides and educating on its broader societal impact. This year, we will continue to see more urgency placed around this issue as the industry strives to compete and maintain demand, with many companies widening their net to include recruits in unrelated disciplines who can be trained. It is also vital that efforts are made to implement apprenticeships and similar schemes that provide value and offer the opportunity for long-term career success. 

Increased Transparency in Sustainability Reporting 

Sustainability will undoubtedly remain a key focus for the industry, with legislation and a standardisation of auditable reporting driving more transparency in the market in the coming year. We are already seeing developments of this in the past month, with signatories of the Climate Neutral Data Centre Pact - including CyrusOne as a founding member - launching an Audit Framework to assess and verify the compliance of data centre operators with the Pact’s Self-Regulatory Initiative (SRI) and make data centres climate neutral by 2030.

Consequently, 24/7 carbon-matching will become a requirement with companies having to track their power usage on an hourly basis and match their usage to a carbon free energy source. This will also result in a move away from carbon offsetting and toward PPAs, directly with green energy generators.

Consolidation within the Data Centre Industry

We will begin to see significant developments regarding the consolidation of the data centre industry in 2023. While this will present challenges for some, especially smaller players without the ability to scale, this will act as a reset for the industry, allowing the market to normalise once again. 

Enterprise uptake is growing as businesses and cloud companies realise the benefits of consolidating their operations, with many accelerating their migration to third party providers, viewing digital as mission critical and core spend. As market pressures continue in 2023, there will be an increased focus to convert capex to opex driving demand for the public cloud and therefore, data centres.

The data centre industry is always growing and changing. This brings many challenges and 2023 will be no exception. However, this also encourages innovation and transformation, which makes it a hugely exciting time to be part of this sector. Collaboration within the industry will allow us to navigate these challenges successfully and work together as a collective to identify unique solutions and evolve. This industry has demonstrated its creativity and resiliency and 2023 will be no exception. We look forward to what’s next.