How Big is the Data Center Construction Market?

A study by Christian Belady of Microsoft projects global data center construction will reach $78 billion a year by 2020.

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.”

Belady, the General Manager of Data Center Research at Microsoft Global Foundation Services, has summarized his findings in a blog post and white paper.

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.”

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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  1. What is included and not included in the definition of data center construction? I assume it excludes servers, but what about other hardware that is more integral to the building functionality, such as raised floor? Or server cabinet and/or containment aisle? UPS or PDU? Generator?

  2. In response to Ian Seaton... You are right, these do not include IT costs. However, pretty much everything else as specified by the Uptime institute paper that is referenced is included. Thanks for your comment.

  3. State of the art analog addressable fire detection and alarm, clean agent fire suppression and very early warning aspirating smoke detection systems are critical components of data center infrastructure. Companies like Gamewell-FCI, Janus Fire Systems, Xtralis and System Sensor contribute a great deal to our effort when adding and upgrading such systems in data centers throughout the MD-DC-VA area. Considering the mission-critical nature of these facilities, it's encouraging to see so much redundancy in many important data center systems (emergency power; AC units; security, etc.). Proactive owner/operators apply a similar "belt and suspenders" approach to fire detection and fire suppression systems. Given the potential damage from fire and smoke, it's a best practice to include these systems in the plans for the well-equipped data center.

  4. I think that the most under-served and over-looked segment is the Containerized Solutions Market. Currently, modular is capable of delivering comparable solutions at 60% of the cost of traditional DC builds. This is in concert with the projections in the article, albeit not associated with energy costs. Not to mention, that the scalability of modular DC's!!! I think the savings can be exponential when these factors are considered. Check out our guide on Container/Modular Datacenters: Procurement Guide