12 March 2020
Today’s world is dependent on data, and that dependency is growing. By 2025, the International Data Corporation (IDC) projects that the global need for data will skyrocket to 163 zettabytes. From our banking infrastructure to our smart homes, technology and information play an increasingly crucial role in every aspect of our daily lives. This demand will continue to propel the data centre market, which has changed dramatically since the 1940s, when large computer rooms like the Electronic Numerical Integrator and Computer (ENIAC) became the predecessors of modern data centres. From 2019 to 2023, the global data centre market size is expected to grow by US$284 billion, at a compound annual growth rate (CAGR) of more than 17%. But with the accelerated pace of innovation calling for facilities that are built faster, on tighter budgets and to evolving specifications, the construction industry must first understand the new challenges impacting the market. By bringing improved construction management methods like cost management, procurement and supply chain management, the industry can address the new challenges related to cost and time to market.
The adoption of cloud infrastructure has heavily influenced the requirements of modern data centres. With the advent of cloud-based software platforms, the organisation of resources has shifted to hybrid cloud systems, which pools off-premises and on-premises resources to optimise digital processes. Another shift in workflows that affects the market is the rise of edge computing. More Internet of Things (IoT) devices, and the increased need for real-time data analytics and interactions, have pushed the demand for applications to have their computing processes closer to end users, which is usually at the edge of a network. By 2025, it is projected that 75% of enterprise-generated data will originate and be processed outside of traditional data centres or clouds. This restructuring of digital resources has caused many enterprises to begin shifting from owning or operating their own data centres to incorporating colocation and managed hosting services. Businesses are now spending more on cloud infrastructure services than on data centre hardware and software: from 2009 to 2019, spending on cloud infrastructure services has grown by 56% annually to nearly US$100 billion, while annual enterprise spending on data centre hardware and software grew by only 4% on average.
Hyperscale and colocation
This substantial change in how digital resources and infrastructures are managed has boosted the hyperscale market, but also shortened project timelines. More than half of data centre hardware and software spending now comes from cloud providers’ hyperscale facilities.This massive demand for more capacity means that previously acceptable project durations are no longer sustainable. Providers must explore other options to reduce their construction schedules, which can include changing designs, land banking, developing cold shells and applying pressure to the construction market to match the speed of data centre growth.
The added demand has a domino effect. If hyperscale facilities and their supply chains cannot meet the need for more capacity, enterprises can lease more space from colocation providers to handle changing workload requirements.
Another way in which data centre demands can be met is by adopting a modular construction approach. By applying modular techniques, speed to market can be addressed with an efficient supply chain. Modules can be manufactured offsite and tested for compliance, while the shell and core are built on location.Once the modules are ready, they can be shipped to the site and installed quickly. The simultaneous progress of all elements of the build shortens schedules significantly, with a 25-30% reduction in the time needed to build and commission a modular project. There is also the added benefit of cost efficiency when adopting a modular approach. This is achieved by standardising certain building materials and designs. The modular method also employs economies of scale, where building materials that are mass-produced can be made at a lower cost.
While modular construction methods may help in preventing delays and cost overruns, supply chain and procurement management processes are also extremely important tools that can be used to drive down costs and control project schedules. With market growth comes stress on the pool of available equipment manufacturers and suppliers, and if there are delays to equipment deliveries, then there will be interruptions in the overall project schedule.Equipment is a critical part of the project and can have a direct impact on a provider’s ability to complete builds on time. By having an established supply chain with robust contracts, providers can take proactive steps to protect themselves.
Vendor Managed Inventory (VMI) is another key element. With the market moving towards more cost effective and consistent oversight of large equipment, VMI provides suppliers or the supply chain with more certainty around the construction project pipeline. This in turn helps them to be more economical and flexible to align with their customers’ demands. VMI also enables owners and data centre providers to reduce their overall lead time. Collaboration and information sharing between clients and suppliers are essential to drive these results.
By implementing supply chain and procurement management processes, and working closely with suppliers, project costs can be reduced and delays can be minimised.
The changing requirements of data centre builds and the growing demand for capacity highlights the need for a solution that can bring projects to market quickly and within a reasonable budget. Providers must now look beyond traditional construction techniques to meet market demands by employing a developed approach to procurement and supply chain management in navigating the new age of data centre construction.