The rise of hyperscale – how cloud is changing data centre economics

Data centre providers have seen an increasing demand for capacity from cloud providers, driven by larger enterprises embarking on a partial or full migration to cloud services. New research suggests that half of all data centre demand could be from hyperscale customers by the early 2020s.

While the cloud was introduced more than a decade ago, its adoption has been mostly limited to smaller enterprises or start-ups. But now the rise of the cloud as a compelling alternative for larger enterprises of all verticals to manage their IT workloads is changing the data centre industry. In the face of ever-growing data needs, cloud providers are looking for data centres that can meet their high-density power needs, scale quickly on demand, and service agility. Large enterprises are expected to change their cloud usage from only using software-as-a-service (SaaS) to also using infrastructure-as-a-service (IaaS), moving some or all core IT workloads into the cloud.

Responding to these needs, cloud providers are expected to adopt a mix of centralised and decentralised data centre approaches. As demand for rich media and subsequently virtual reality applications flourishes, edge data centres for content delivery may become necessary to reduce latencies experienced by end users, according to Analysys Mason.

“As data sovereignty and security issues come to the fore, governments will require companies to keep data within their jurisdiction. Collectively, this will lead to a need for a decentralised approach, using both domestic and edge data centres to meet requirements. However, given the scale of the demand, even the domestic data centres required could be larger than the existing data centres,” said Lim Chuan Wei in a research note.

Analysys Mason also believes data centre providers will build more ‘hyperscale’ data centres to meet cloud providers’ needs. In this hyperscale data centre world, the traditional metrics of floor space and the tier certification based on expected availability are no longer valid. Instead, IT workload is the new metric. Their primary concerns are not about availability but about security and expansion capacity.

“As demand for data centre co-location space shifts towards the hyperscale segment, especially as larger enterprises shift their core workload onto the cloud and away from in-house data centres, we can expect data centre providers to move their focus away from the traditional segment and towards the hyperscale segment. New data centres are expected to increasingly cater for hyperscale only. We can expect that up to half, if not more, of the data centre demand could be from hyperscale customers by 2020/2021,” said Wei.

The rise of hyperscale customers will also produce a generational shift in the size and type of requirements for data centres. Specialist data centre providers that cater only to hyperscale customers have arisen, such as AirTrunk in Singapore, Australia and Hong Kong.

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