'Hyperscalers Are The New Utility Players': Cloud Wars Drive Global Data Center Boom

Competition between Amazon, Microsoft, Google and others for cloud dominance is driving a sustained data center boom and a need for developers to get creative to meet demand.

Hyperscalers — the tech giants that offer large-scale cloud computing — make up a growing share of the data center industry and work closely with developers to spin up new sites in the U.S. and elsewhere, raising new challenges and opportunities for planners and builders.

According to Synergy Research Group, Microsoft, Amazon and Google account for more than half of the world’s 597 hyperscale data centers. The number of hyperscale data centers has more than doubled since 2015, according to Synergy, and there were another 219 in various stages of planning or building as of January 2021.

What those companies have in common, other than their immense size and resources, are lucrative cloud computing platforms that play host to the cloud services we know as consumers, everything from Netflix and gaming to Zoom and Dropbox. AWS, the largest cloud computing platform by market share, is Amazon’s most profitable division. Google is plowing money into Google Cloud, and said on a recent earnings call that cloud revenue grew nearly 50% last quarter. Likewise, Microsoft’s Azure grew sales 50% last quarter.

“It’s not stopping. It’s not getting stale,” said Jose Ruiz, senior technical director of Equinix’s hyperscale business, at a recent Bisnow event. “If you pay attention to the hyperscalers, listen to the earnings calls and read between the lines, Amazon, Microsoft, Oracle and the like are getting ready for this explosive growth. It’s very important we stay tuned to our customers, how they’re growing, what they’re doing and where they’re going, so we’re ready when they need to deploy."

For developers, the seemingly inexhaustible demand for data centers, and the scale and complexity of larger projects, is complicated by a looming labor shortage in the business.

“In the construction world, at least in the U.S., there is a labor challenge — a war for talent,” said Chris Teddy, vice president in JE Dunn Construction’s mission critical group. “There’s a demand for construction blowing up that needs a labor force everywhere. We also have an older labor force that’s starting to retire.”

A recent report by the Uptime Institute estimated that total data center staffing needs, including development, construction and ongoing management, will reach 2.3 million by 2025, up from 2 million in 2019. Shortages of qualified labor may be particularly acute in hyperscale builds in rural areas.

Developers are embracing off-site manufacturing of data center components. Perfecting that process “will be a game-changer,” Teddy said. Off-site manufacturing can also potentially translate into lower labor costs, shorter timelines and better safety standards if work is done in a controlled environment.

Complex hyperscale developments, many of which are taking place abroad in regions like Asia and Australia, are requiring data center developers to think outside the box to get the job done more efficiently

“We looked at other industries that were doing this prefabrication in other parts of the world. We started off in Australia, which has a huge mining industry. They prefabricate everything,” Digital Realty Senior Vice President of Global Construction Anthony Caracino said. “We took that same philosophy and used that in our builds in Sydney. Then we went a step further, and we did it in Singapore in our latest build, prefabricating the electrical and mechanical rooms in-country with labor from Malaysia.”

“It can be done outside of the U.S. You have to look for strong partners, and you might have to look at industries that aren’t traditional data center industries to make it work,” Caracino added.

Responding to demand from hyperscalers, major data center developers are expecting continued steady growth in North America, along with a surge in Asia-Pacific, India, South Africa and other parts of the world.

According to a recent analysis by Frost & Sullivan, investments in the data center market are poised to top $432B by 2025, with Asia-Pacific overtaking North America as the largest data center region by that time.

The explosive growth in hyperscalers shows that the data center industry, once considered a niche, is as critical as any other utility.

“The hyperscalers are the new utility players,” Stack Infrastructure Senior Vice President of Engineering and Client Services Donough Roche said. “You’ve got your electrical utility, your gas utility, your telco carrier, and you’ve got your compute utility — Microsoft, AWS or whatever else.”