Data Centers in 2023: New Year, New Predictions

Data Center Knowledge contributing editor Bill Kleyman reveals his top five data center predictions for 2023, along with a surprising bonus prediction.

Bill Kleyman

January 26, 2023

7 Min Read
Dictionary definition of the word predictions. including key descriptive words.
Feng Yu / Alamy Stock Photo

I just got back from PTC in Hawaii. And I'll be honest, I miss it quite a bit. That’s mainly because I'm returning from Hawaii to Chicago … in January. I can always look forward to next year! On that note, if you missed PTC or want to stay up-to-date, check out my latest roundup from the conference released just a few days ago here on Data Center Knowledge. I'll sprinkle in some findings here during my predictions. 

Bill Kleyman, Data Center Knowledge contributing editor, and Data Center World program chair 

Bill Kleyman, Data Center Knowledge contributing editor, and Data Center World program chair

It has been a fascinating year for the digital infrastructure community. Demand is outstripping supply, and data centers can't build fast enough. Let me give you an example. In a recent DataCenterHawk report, we saw the North American primary market vacancy now averaging 4.4%, its lowest point ever. In Northern Virginia, that vacancy rate is closer to 1%. This is the first time the average dropped below 5%. While a few markets with decent capacity are available to meet the demand, most are supply constrained, with data center operators looking at ways to proliferate. We'll touch on what leaders in digital infrastructure are doing to keep up.

Bill's Top 5 Predictions for 2023 

One more quick note before we jump in: We will be referencing the all-new AFCOM State of the Data Center report. No, it's not out yet. But I have the findings, and I'm excited to offer our readers a sneak peek at the data from the report in the predictions below. If you want to hear more about our results, check out Data Center World 2023 in Austin, coming up (quickly) in May.  

Related:How Artificial Intelligence Will Evolve in 2023

1. Not enough space? Time to improve density.  

Our AFCOM State of the Data Center report saw the highest average rack density jump over previous years; the increase was about 20%. Furthermore, most respondents (60%) expected rack density to rise over the next 12-36 months. Now, the way you increase rack density is relative. Some are improving airflow, some are investing in converged infrastructure systems, and others are working with changes in design to allow for higher rack density levels. I'm pretty confident that we'll eventually catch up to demand. But for now, I'm predicting that those data center leaders that are going to get a competitive edge are the ones that can figure out the highest and most efficient density equation. 

2. Security. Physical Security will be a much more talked about topic.  

I wanted to put this as the first prediction, but I didn't want to scare everyone into not reading further. Physical security against malicious threats is an uncomfortable topic. I get it. But we need to spend a minute talking about this. We have recently seen direct threats and attacks against physical infrastructure, resulting in severe damage and long-term power outages. Data centers are critical infrastructures. And data centers are a target. For the first time, we saw physical security rank as the number one priority for DCIM and data center management implementation planning. What’s more, 80% of respondents either have or will be integrating security into DCIM. 

Related:Top 5 Data Center Security Risks for 2023

Similarly, human threats (outside and inside) made the Top 5 List of Primary Security and Infrastructure Threats. This is the first time both threat vectors have entered the top five. Security conversations don't need to happen in the shadows. I predict that we will have more open and productive security conversations to ensure the secure operations of our critical systems.  

3. Time-to-market creativity.  

Data center leaders are thinking outside the box when it comes to data center design and deployment. Everything from envelope permitting to pre-purchase environmental studies is on the table. Anything that will help the data center leaders go to market faster. We see innovation in construction, government relationships, and sourcing critical materials. We're still seeing some serious supply chain challenges on that last point.

While some analysts predict that our supply chain is on the mend, it's still very fragile and may take a hit if there is another shock to the system. According to our AFCOM report, 94% have experienced challenges with their supply chains. While that may not be surprising, we saw a significant increase in system outages experienced because of outages. When the report comes out, we'll dive deeper into which systems are impacted the most. For now, I'm predicting that data center leaders will continue to find wants to go into key markets as quickly as possible creatively.  

4. The Great Cloud Rebalancing continues.  

When I called this cloud repatriation, I received some pushback. OK, maybe that was a harsh term. Let's call it Cloud Rebalancing. According to our AFCOM report, a clear majority of respondents (83%) are seeing a repatriation of workloads from cloud computing back to on-premise data centers or colocations. In speaking with some OMDIA analysts, their reports also see a majority shifting, although not with relatively as high a percentage.

Businesses of all sizes are taking the time to quantify the value and cost of the cloud. In our report, we asked which systems are being rebalanced into the data center, and you'll be surprised to see what's on the list. We have ERP systems, custom applications, and commercially licensed databases. Before I lay down my prediction, I want to be clear: cloud services are not going anywhere. However, leaders will pay closer attention to how budgets are being spent. Just because something started in the cloud doesn't mean it has to live there forever.  

5. Investors are in the driver's seat.  

This felt like it was front-and-center at PTC. I would honestly say that about half of my meetings at PTC were with an investor or private equity firm. The good news? The conversations with these individuals showed an evident passion for our connected industry's growth, expansion, and health. I was inspired to hear the ideas coming from private equity firms that now own some of our industry's most extensive digital infrastructure facilities. Besides investing a few dollars, private equity leaders understand that clear direction from a market perspective means either falling behind or gaining a clear competitive advantage. The last five significant acquisitions totaled over $50B. With the top three being KKR and Global Infrastructure Partners acquiring CyrusOne for $15 billion, DigitalBridge and infrastructure investor IFM bought Switch for $11 billion and took the company private. American Tower Corporation bought data center developer CoreSite for $10.1 billion. With investors taking an even more active role in the data center industry, I'm predicting rapid expansion with new markets coming online very soon.  

Bonus: Protecting our scarce resources, all eyes are on the water.  

It would be silly not to put something about sustainability in my predictions. However, it is crucial to narrow down the conversation. At PTC and other recent conferences, the conversation around water conservation was a key topic. In our AFCOM report, a clear majority of respondent organizations (81%) consider implementing water conservation solutions in their data centers or report that their customer is implementing some such solutions. I predict we'll see more water solutions impacting how we dissipate heat from critical mechanical systems. It'll be fun to watch new, creative solutions around effluent and gray water, work with new treatment solutions, and engage new water conservation partners.  

I wish I could keep going. There's so much to discuss, including new power sources, 5G as part of a distributed edge strategy, and hiring challenges and predictions. For the time being, we know there is no slowing down in our industry. M&A activity will continue, our facilities will continue to grow in importance, and the digital infrastructure industry's growth will increase.  

One thing to keep an eye on will be how mainstream people and media learn and understand our industry further. It'll be up to all of us to help people see how important we are as a community. It's also important to educate others that we care about sustainability, equality, and a better world.  

So many predictions. So much to look forward to. Let me know if I missed something.  

About the Author(s)

Bill Kleyman

Bill Kleyman has more than 15 years of experience in enterprise technology. He also enjoys writing, blogging, and educating colleagues about tech. His published and referenced work can be found on Data Center Knowledge, AFCOM, ITPro Today, InformationWeek, NetworkComputing, TechTarget, DarkReading, Forbes, CBS Interactive, Slashdot, and more.

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