How big is the market for data center construction? How much is it going to grow? These questions are often asked, but good answers are hard to find. Industry veteran Christian Belady of Microsoft has done an analysis, and projects that annual global spending on data center construction will increase from about $50 billion today to about $78 billion by 2020. The U.S. market for data center construction, currently about $15 billion a year, will likely grow to about $18 billion.
That’s more growth than you might suspect, since Belady is assuming that the average cost of building a data center will shrink to $6 million per megawatt of critical power, down sharply from the current average of about $15 million a megawatt. At current economics, annual data center construction spending would soar to $50 billion a year in the U.S. and $218 billion globally.
But Belady firmly believes that the shift to cloud infrastructures is driving innovation in data center design that will drive construction costs dramatically lower. “These designs leverage their scale and application redundancy, as opposed to hardware redundancy to drive down cost,” he writes. “In addition, these designs use aggressive economizations that employ either liquid or air to help drive down cost and substantially improve efficiency. These data centers today are characterized by costs on the order of $6 million per MW and will continue to go lower in the future.”
Koomey, Uptime Data Cited
Belady based his projections on data from Jonathan Koomey of Stanford, the U.S. Environmental Protection Agency and The Uptime Institute. Koomey has done landmark research on energy use by data centers, while Uptime has developed models to estimate the cost of data center construction based on the redundancy of a facility’s infrastructure.
Belady said his research was motivated by discussions with new companies in the cloud computing and data center industries, who typically invoke estimates of a huge market opportunity. “Having worked in the data center 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,” Belady writes.
“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,” he added. “The purpose of the paper will also hopefully seed our industry for a dynamic debate and discussion to further inform in this area.”