Data Center Business
Change is the hallmark of any thriving industry. The data center business is no different, wholesale and retail have morphed into hyper-scale and the edge; Building Management Systems ceded ground to DCIM and – depending on what your read – large-scale implementations of SDN and SDDC are just around the corner. But wait, there’s one more change going on within the world of data centers that is proceeding with little fanfare despite its significance: it’s transitioning to a commodity marketplace.
Architectural Shift in Data Centers
The rise of the cloud, social media, continually improving network equipment, and the wealth of new applications that continue to emerge has lent an air of ubiquity to data centers. To keep pace with demand, the ability to “customize” facilities – within wholesale data centers specifically – has lessened in importance relative to the speed of delivery. The ability to complete sites of 100,000 square feet and upwards of 5MW in time frames measured in half a year or less has led some providers to develop “streamlined” designs to accommodate compressed schedule requirements. This architectural shift has eroded a number of the last vestiges of product differentiation, leaving a market characterized by a focused customer interest on which provider has the appropriate amount of available space in a desired physical location or can deliver it there in the lowest amount of time relative to other competitors.
Using the term “commoditized” to describe a particular business or market often carries a negative connotation. Visions of generic versions of the same product quickly come to mind; this isn’t the case with data centers, where “commodity” serves as another term for intense demand. Many different phrases like, “data centers are the modern railroads,” have been used to describe the function they serve in our knowledge-based society. While concise, a more compelling argument can be made to explain the present-day data center landscape. Think utilities. Our societal reliance on the immediate access to everything from the Gross National Product of Lichtenstein to a better recipe for meatloaf is analogous, for example, to electricity. We have become so dependent on the availability of power whenever we flip a switch or plug a cord into a wall socket that its value is only apparent when it’s not available. So it is with all things that are data center resident.
The impact of artificial utility status on data centers will require many, if not all, providers to make substantial changes to their current mode of operation. Since substantive differences between the physical facilities themselves are eroding, the market has responded by effectively placing a ceiling on the price/MW that providers can charge within any given geographic location. The primary challenge facing today’s data center companies is to drive down their internal costs to maintain both margins, and if necessary, competitive maneuverability in pricing.
Naturally, the modifications and changes required to effect substantial cost reductions, vary from provider to provider. In general, however, the achievement of these cost contraction efforts will be a function of refinements in product design, personnel, and processes.
Universal Parts for Data Center Construction
Achieving the design goal of rapid construction and deliverability requires minimizing, or eliminating, the number of activities physically performed on-site. In many instances, achieving this goal has been accomplished through the adoption of a standard design, or designs (to accommodate various size requirements), which incorporate substantial off-site component prefabrication and assembly to enable as many on-site activities to be performed in parallel as possible to compress the delivery timeline. For example, pre-cast concrete exterior walls, pre-configured components, and power centers are produced remotely and then shipped to a site for assembly and integration. Using this mode of operation makes it possible for a provider to build anything from a single to multi-megawatt data center from a universal “kit of parts.”
Maximizing the cost-reducing effects of standardized design and componentry necessitates the development of detailed, and documented, processes and procedures that are transportable from project to project. Reductions in delivery schedules demand that all project drawings, documentation, and tracking methodologies are easy to use and can be consistently applied regardless of contractor or sub-contractors working on any particular job site.
A Holistic Approach to Enhanced Performance
The third major element in these market-driven cost reduction efforts is personnel related. The efficiency of operation and the elimination of errors from every level of the supply chain to the final handover of the data center is essential. Achieving these objectives requires more than just catchy slogans and the establishment and implementation of objective performance metrics. These activities are the endpoints in a more holistic approach to enhanced performance. The Japanese phrase, “Poka Yoke,” describes a corporate philosophy under which all forms of documentation and instruction have the single goal of ensuring that their simplicity promotes both replicability and the elimination of human error. To effectively compete in today’s commodity market will require providers to adopt similar philosophies to govern their operations, whether they be in design and construction or corporate headquarters.
The Evolution of Micro and Macro-Economic Perspectives
Commoditization, as it relates to data centers isn’t a pejorative term. The need for their proliferation has elevated them to “pseudo-utility” status. This level of economic importance necessitates that providers re-examine every aspect of their businesses to drive costs if they are to remain competitive. The role of data centers from both a micro- and macro-economic perspective continues to evolve, thereby necessitating operational changes to off-set diminishing opportunities for clear value-added differentiation. Rather than being a sign of a market in decline, however, these exercises in inner corporate re-evaluation reflect a need for providers to position themselves to capitalize on a market where demand will continue to exceed supply for the foreseeable future.