Data Center Boom 2.0 and the Railroad Analogy

Ron Hughes lays out the case for a second data center boom. Is this the realization of the railroad analogy?

Rich Miller

January 11, 2006

1 Min Read
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Over at Data Center Journal, facility designer Ron Hughes examines the growing demand for data center services in an article titled The Next Data Center Boom. He's particularly upbeat about the colocation market, which just a couple years back was perceived by many (although not us, of course) as a low-margin, old-school product. "The market for data center services and particularly collocation data center services has changed dramatically in the last two years," Hughes writes, and then goes on to offer a litany of trends that contributing to demand:

Recently however, the growth of wireless technology, Voice over IP services, video on demand, music download sites, on line auctions and simply the large increases in the number of broadband and DSL users has caused demand for these services to skyrocket. Financial institutions are trying to comply with Check 21 and are digitizing every check. Healthcare providers are digitizing patient information and creating the virtual hospital. Everybody wants to be connected and everybody wants it to be high speed. Broadband connectivity in the US for example has increased from 5.3 million households in 2000 to 42.8 million in 2005. Online sales have increased from 11 Billion is 2001 to an estimated 80 billion in 2005. The content the dot com data centers were hoping for in 1999 is now a reality.

I'm reminded of the railroad analogy. In the darkest depths of the data center meltdown, a number of buy-and-hold players noted similarities to the early days of the U.S. railroad industry, in which the early market entrants went broke building the infrastructure, only to have second-generation companies come along, buy the distressed assets cheap, and reap the financial dividends. Were they right?

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