Click to learn more about author Frank Nash.
Today, we’re in the hyperscale data center era. In Q1 2018, Synergy Research Group data shows the capex of hyperscale operators jumped to $27 billion, which is a great leap forward from all spending in previous quarters.
But to understand how we’ve reached this level of growth, it’s important to step back and consider where we started. For example, from 2000 to 2005, the data center industry approached growth with a “build it and they will come” mentality, and as a result, enterprise and retail colocation data centers prevailed due to the requirements for reliability, speed to market, and consolidation. In 2010, data center size increased to 10MW, enterprise and retail colocation data centers continued to experience growth, and the wholesale real estate market began to rise. And during this decade, customers continued to prioritize reliability and speed, but cost became a much stronger factor given the economic recession. In 2015, while cloud had been a topic for many years, it heated up significantly with a major shift away from individual companies building data centers. Speed and cost became a priority, and companies needed scale and standardization as well.
Today, as we find ourselves in the hyperscale era, there’s a rise in cloud, edge and wholesale deployments, and increased standardization, scale, and speed to market are brought to bear at lower costs. And the dynamic between customers and providers has changed dramatically.
The Role of the Value Chain
As we reflect on how these changes in the data center industry took place in the last nearly 20 years, it’s impossible to consider the evolution without the value chain – design engineers, construction managers, electrical contractors, manufacturers and end users – and the chain’s influence on the model, customer requirements, and purchasing behavior. Specifically, suppliers, contractors, manufacturers, and end users must work side by side from the start of a deployment to achieve the desired outcomes of standardization, scale, and speed. In fact, the faster the market, the closer these stakeholders must be, because the scale of data involved in these deployments is unprecedented. This represents a culture shift among the different people components of the value chain as well; cooperation must equal openness and without it, growth will stall. Considering how we’ve all typically operated in the past, collaboration of this type is a big leap of faith.
How Collaboration Fosters Speed
From the perspective of cloud and colocation providers, the traditional bid buy process is no longer relevant. These processes took anywhere from seven to 21 days – a lifetime in the context of hyperscale. Today, tools can help to automate the process, and other tools can help with project modeling as well as enhanced coordination with end users, trade partners, construction managers, and more. Prefabrication also helps to expedite the process. But none of these components can take place without collaboration across the value chain. Perhaps most critically, when partnerships are formed it can lead to standardization – as we’ve covered, this is a critical and given element of hyperscale.
In fact, many in the industry refer to a new paradigm where vendors no longer exist, and partners in the trenches have taken their place, indicating a great deal of communication and high levels of trust. In practice, when the customer meets with representatives from design, engineering, supplier, contractor, etc., the customer should not realize they’re from different companies. The value chain collaborates and acts as one entity to provide a deep level of service to the customer. This dynamic – what the industry has experienced and worked to perfection in only the last few years – can often produce a speedy, standardized, cost-efficient 3-6 month pipeline.
The Takeaway: Collaboration is Key
Think of collaboration in the value chain as a customer-first strategy. Without collaboration, customers would be in a longer and more complex buying cycle, ultimately slowing growth. In fact, there is a labor shortage that’s becoming a bigger obstacle, which makes planning more important than ever, both for chronological tasks as well as what can be done outside of the field. With the condensed build time, hyperscale is turning out to be so lucrative for contractors, many are making enough money to only work 10 months of the year. Every construction market is busy right now, and projections show a deficit of six million trade laborers by 2024.
To meet the demands of a healthy 3-6 month pipeline, it’s now necessary to ramp up labor forces and collaborate with trade unions well ahead of the project start, and create a seamless, customer-centric working strategy that can enable further growth and scale.