Data Centers Expecting Growth

We recently ran across this article from TechServe Alliance, highlighting growth in data centers. We thought it might be of interest to our clients and consultants.

According to Cisco Systems, Inc., internet traffic is expected to grow four times in the next five years. Due to this predicted growth, more companies are expected to outsource their data storage, increasing the demand for data-center space.

The Campos research reported positive news for the U.S. domestic data center market, finding that the U.S. leads in proposed expansion plans (92 percent in 2011 and 85 percent in 2012). Of those surveyed, a little more than three-quarters (77 percent) of those surveyed will be seeking a new location. New York City is preferred by 56 percent for those expanding an existing data center or looking for a new site in 2011. Los Angeles is next (44 percent) followed by Chicago (41 percent), and the San Francisco Bay area (39 percent).

Other research conducted by Campos Research & Analysis early this year for Digital Realty Trust, which develops data centers, found that 36 percent of companies surveyed have definite plans to expand data center space in 2011 and 49 percent "probably" will expand.  Plans for 2012 varied little with 39 percent responding "definitely" in terms of expanding and 45 percent responding that they would "probably" expand data center space.

In terms of budgets, 72 percent are increasing their data center budget in 2011 with an average increase of 7.7 percent, which is slightly less than the 8.3 percent budget increase in 2010 but more than the 6.9 percent increase in 2009. With this expected data center growth, it can also be expected that data centers will see increased revenue. WSJ.com references Tier1 Research, which focuses its coverage on the movement of services to the Internet and part of technology analyst 451 Group, says that revenue for data center providers will be $8.1 billion in 2011, compared to $5.7 billion in 2009.

However, a recent The Wall Street Journal story reported that rates have dropped 20 percent in some areas due to an explosion of capacity. The trend of data center rates dropping by as much as 20 percent is not occurring or expected to take place throughout much of the country. Still, more companies are now building their own data centers and this mitigates the need for outside providers and possibly driving the costs down, according to WSJ.com.