By Christian Belady
General Manager, Data Center Research, Global Foundation Services
As the demand for cloud services continues to grow, there are many companies in the datacenter industry (particularly start-ups) that have met with me to discuss their businesses. Their proposals usually included huge expectations on what they think can be generated from revenue opportunities in constructing datacenters. It seems that most of the time, these vendors assume that their niche business projections will have great impact, when in reality they are relatively small to the actual market opportunity. Having worked in the datacenter industry for a long time, I generally do my best to try to help them understand that they are over estimating the market opportunity, but when they pressed for the numbers to back up that claim, I didn’t have any.
Figure 8. Year-over-year datacenter construction market size
My responses in the past were based off my professional observations, that even though we have seen the datacenter power footprint double every five years, to me it didn’t necessarily mean that the datacenter construction business would follow that same trajectory. Datacenter designs are emerging today that drive cost per megawatt to half of what was traditionally expected. As a result, one would expect that the actual market size (in dollars) may in fact not be growing as fast as we think.
As usual, my curiosity got the best of me and I tried to find some research that may have done on the topic: How big is the annual construction opportunity for datacenters?
Since I could not find anything, I decided to try to estimate the annual new datacenter construction market size using existing data already available in the industry. My calculations resulted in a projection out to 2020 that I believe is fairly representative of what we can expect. In addition, I also made the assumption that the industry will likely move from an average construction cost of $15 million per megawatt to something more like $6 million per megawatt in five years resulting in a flattening of year-over-year growth. The resulting white paper is titled Projecting Annual New Datacenter Construction Market Size. It also shares the steps I took to generate these projections and estimates that the United States and global datacenter markets will grow 50 percent or so by 2020 to $18 billion and $78 billion, respectively. These estimates were derived by combining my own data with the great work of my good friend Jonathon Koomey, and some of the initial Uptime Institute’s work on datacenter costs.
Figure 8 (inserted above) captures the conclusion of the paper, however I would urge you to read the work to understand all of the underlying assumptions and how I ended up with these results.
It is my hope that this paper will serve as an aid for industry businesses and venture capital firms to better understand and calculate the approximate size of the datacenter construction business that they can realistically capture. In addition, it is important to note, that this is a “first order estimate.” The purpose of the paper will also hopefully seed our industry for a dynamic debate and discussion to further inform in this area. Please send your thoughts and feedback on the paper and as always, I look forward to the dynamic discussion with my industry friends!