02/28/20 Wall Street Journal Knowledge

Cloud Demand Drives Data Center Market to New Records

Screen shot 2020 02 29 at 4.07.14 pm

Even as public cloud use grows, many companies aren't ready to shut down their own systems

U.S. businesses last year paid for a record-high 396.4 megawatts of power in the country’s largest data-center markets, up 33% from 2018 amid soaring demand for cloud services, according to a report released Wednesday by real estate services firm CBRE Group Inc. Inc., Microsoft Corp. and other large cloud services provided the bulk of that demand, but many companies reluctant to shift all of their data to external systems also ran their own data centers, either in-house or in warehouse-sized spaces leased by third-party data-center facilities that are known as colocation services.

“Insurance, financial services and health-care companies, among others, are the most likely to keep using their own purpose-built facilities,” said Pat Lynch, senior managing director of CBRE’s data center division.

Colocation services rent physical space for companies to store their servers and other data center hardware. The facilities typically house racks of servers and other hardware, which can be costly and inefficient for companies to manage themselves.

By contrast, cloud services operate their own data centers, renting computing capacity to businesses on a pay-as-you-go basis.

In North Virginia, the world’s largest data-center market, cloud services last year accounted for roughly 200 megawatts of total data-center demand, compared with nearly 50 megawatts by colocation services or in-house systems.

Other areas with large data-center markets include Silicon Valley, the Dallas-Fort Worth region, and New York, New Jersey and Connecticut.

Over the past five years, cloud services have supplied a growing share of data-center use, while the supply by colocation or in-house systems has remained roughly steady by comparison, according to the report.

Technology research firm International Data Corp. estimates the global number of data centers owned and operated by cloud service providers, colocation services or other technology firms rose to roughly 9,100 last year, up from 7,500 in 2018. International Data expects that number to top 10,000 this year.

There were also about 28,500 data centers last year owned by companies outside the technology sector used for running information-technology systems, down from 35,900 in 2018, IDC said.

Rather than shut down their data centers altogether, most companies have adopted a hybrid approach to cloud computing by using multiple cloud providers in addition to their own internal systems. That way they can avoid getting locked into any one outside vendor as prices and capabilities shift across the cloud-services market, IT research firm Gartner Inc. says.

Many companies also remain wary of turning over sensitive data to outside services, especially firms in highly regulated industries such as finance or health care, Gartner says.

As demand for hybrid capabilities grows, many of the market’s largest cloud-service providers have unveiled tools aimed at helping companies run systems in the cloud and in their own data centers.

In November, Microsoft introduced Azure Arc, a system that allows companies to run many of its cloud-based database applications in their own data centers, among other hybrid-friendly applications. Amazon’s cloud service announced AWS Outposts, a similar product, later in the year.

Both moves followed International Business Machines Corp. ’s $34 billion acquisition of Red Hat Inc., a developer of open-source software that enables chief information officers and other enterprise IT managers to run applications in competing cloud services, as well as on their own systems.

Red Hat Chief Executive Jim Whitehurst in August told CIO Journal that hybrid strategies can reduce IT costs while allowing a “greater pace of innovation to occur, because you’re not hamstrung by all these incompatible vertical stacks.”

By Angus Loten, February 27, Wall Street Journal

All Research Tags

$DFT $DRT 2021 Data Center acquisitions 2024 Data Centers 2103 data center acquisition report 350 E Cermak AI AI Data Center AI Data Center Boom AI Data Center Consulting AI Data Center Growth AI Data Center Site Selection AI Data Centers AI Growth AI M&A AI Real Estate AT&T AWS AWS Cloud AWS Columbus AWS Data Centers AWS data center Amazon Cloud Amazon data center Artificial Intelligence Data Centers Ashburn Data Center Market Atlanta Data Center Leasing Atlanta Data Center Market Azure BC Partners buying Centurylink data centers Barron's Data Center Real Estate Bitcoin Mining North Carolina Bitcoin Mining Power Rates Bitcoin Mining Washington Blockchain Business Continuity Buys Data Center Buys Data Center 2018 Buys Data Center 2019 Buys Data Center 2020 C7 Data Center CIO CIO Insight CIOForum CONE CONE REIT Sale CONE Sale COR CTO Carter Validus REIT Carter Validus sells data centers Centurylink Data Centers Centurylink buys Level 3 Centurylink data center business Centurylink selling data centers Chanos Cloud Cloud Computing Cloud Data Centers Cloud Spending Colocation Columbus Data Center Market CoreSite Coresite Covid-19 Cryptocurrency Mining Power Cryptocurrency mining space CyrusOne CyrusOne Acquisition CyrusOne Atlanta data center CyrusOne Bidder CyrusOne Data Center Atlanta Cyxtera Technologies DCRE DLR DLR buys DFT DRT Dallas Data Center Activity Dallas data center Data Center Data Center AI Data Center Absorption Data Center Absorption 2021 Data Center Acquisitions Data Center Acquisitions 2019 Data Center Acquisitions Report 2018 Data Center Activity 2018 Data Center Broker Data Center Brokerage Data Center Cloud Demand Data Center Consolidation Data Center Construction Columbus Data Center Consulting Data Center Covid Data Center Development Data Center Growth Data Center Investment Data Center Investments Data Center Investments 2020 Data Center Land Data Center Leasing Data Center M&A Data Center Market Data Center Market 2021 Data Center Market Research Data Center Mergers & Acquisitions Data Center Multiple Data Center News Data Center Power Data Center Purchase Data Center REITs Data Center Real Estate Data Center Real Estate Investing Data Center Rent Data Center Report Data Center Research Data Center Tax Incentives Georgia Data Center investing Data Center leasing report Data Centers Data Centers 2019 Data Centers 2020 Data Centers For Sale Data center absorption 2018 Data centers DataBank DataCenters# Databank DevOps Digital Bridge Digital Realty Digital Realty Trust Digital Realty Trust Atlanta Digital Realty Trust Chicago Digital Realty Trust Dallas Digital Realty Trust acquires Dupont Fabros Digital Realty Trust merger Digital Realty buys Chicago data center Digital Realty buys Dupont Fabros. Dupont Fabros Dupont Fabros merger Durham Data Center EQIX Enterprise Data Centers Equinix Equinix Dallas Equinix buys Infomart Equinix buys Verizon Data Centers F5 Networks Facebook Atlanta Data Center Facebook Data Center Ft. Worth Data Center GI Partners GOOGL Gartner Georgia Data Center Legislation Global Switch Google Google Cloud Google Data Centers HPC Data Centers High Performance Computing Data Centers Hyperscale Hyperscale Data Centers Hyperscale data center locations Hyperscale data centers Hyperscale growth IBM IBM data centers IPFS IRM data center expansion Infomart Infomart Dallas Iron Mountain Iron Mountain Data Centers Iron Mountain buys Fortrust Iron Mountain buys IO Data Centers KKR Level 3 MapleTree buys data centers Meta Columbus Microsoft Microsoft Cloud Microsoft Data Center Microsoft data center NOVA Data Center market NOVA Hyperscale Data Centers NXTVn New Chicago Data Center New Jersey Data Center Northern Virginia Absorption Northern Virginia Hyperscale Data Centers Nvidia Nvidia AI Data Centers Oracle Cloud Oracle data center Peak 10 Private Equity Data Centers Private equity data centers Public Cloud QTS QTS Data Center Atlanta QTS data center Redhat data center cloud Santa Clara Data Center Secondary Data Center Markets Sells Data Center Sells Data Center 2019 Sentinel Shaw Communications Switch Switch Data Center Atlanta Switch data center Atlanta T5 Data Center Atlanta Telefonica TierPoint TierPoint# Time Dotcom US Low Cost Power States US Power Grab US data center market report 2018 Vantage Vantage Data Centers Verizon ViaWest Virginia Beach Cable Landing Station Virginia Beach Data Center Park Virginia data center park Wall Street Journal Windstream Zayo ata center blockchain big data blockchain data center blockchain data storage blockchain file storage buys data center and colocation business buys data centers cloud data center cloud data centers data center data center acquisitions data center advisory data center broker data center consultant data center consulting data center for lease data center for sale data center investments data center leasing data center market data center market research data center news data center outage data center real estate data center sale leaseback data center sales data center tax incentives data center trends data centers data centers for sale delta data center delta outage dropbox data center emerging data center trends hybrid cloud north carolina data centers