Data centers are the backbone of the future; our reliance on them increases exponentially as we demand more and more connectivity and throughput from more and more devices.
Shifts in the technological landscape—hyper-growth in the global amount of data to be processed, growing user intolerance for latency, and the need to rapidly relocate processing operations to follow customers—are causing data centers to eschew the traditional centralized processing hub in favor of local processing at the data source.
This presents a major opportunity for the AEC industry. We are ideally positioned to help data center clients future-proof their facilities by anticipating how this new strategy translates into the built environment. In other words, we can help future-proof the future.
Traditional Data Center vs. Data Center as a Service (DCaaS)
Leading data center owners are moving towards a strategy called Data-Center-as-a-Service or DCaaS. Traditionally, companies sign term leases to create a data center they operate, an expensive model that limits their ability to scale up and down or move their operation. Under the DCaaS model, companies instead use a pay-as-you-go model to rent scalable infrastructure managed by the DCaaS brand at geographically distributed data centers. Most importantly, this model encourages companies to consolidate their space needs within a single DCaaS brand. In short, this is a solid customer-centric strategy which could provide transformative benefit for a significant portion of the user base.
The DCaaS model relies on three pillars: reducing latency, substitution of premises, and standardized facilities. A hyper-connected world coupled with extremely low tolerance for latency means that any data transmission delays represent significant lost value in terms of company reputation and real currency. Further, the aggregate amount of IoT data to be processed will grow geometrically as the overall use of IoT devices quadruples in the next five years. Because IoT devices produce data from geographically dispersed sources, and the cost of transferring mountains of IoT data is high, the traditional model of centralized processing hubs is no longer tenable. In its place, processing “on the edge” (near the data source) is taking hold. Edge processing will give significant advantage to global data center operators active in many geographic markets, such as Digital Realty and Equinix.
Substitution of Premises
Shifts in the point of data origination, such as dispersed IoT sensors, will lead landlords with global footprints to replace fixed term leases tied to one location with more nimble “service agreements”. Such agreements will allow tenants to relocate to another facility owned by the same operator. Imagine one day closing an operation in Virginia and opening a replicated environment the following day in Amsterdam. To achieve this, leading data center operators will assist with relocations by offering technical service teams on both ends to assure transitions are successful with minimal customer downtime.
Movement between premises means that we will see more front-end investment in the standardization of facility components and specifications. Power, racking and aisle spacing, cooling systems, UPS, and others will be able to be substituted across data center location irrespective of geography. Leading data center operators will combine building techniques such as modularization, “kit-of-parts” components and containerization to support interchangeability. What works in one center will work in another, letting the user remain adaptable as customer bases shift.
The role of architects, engineers, and contractors in building data centers
AEC players need to be more proactive thinkers at the enterprise level, contributing more effective construction strategies to support the above pillars. This begins with a collaboration with the data center owner to future-proof their standardized designs, anticipating how changes in processor technology will affect the building and adjusting the design to reduce down the road expenditures. The virtual design and industrialized construction tools are already available to address this. What we need is to build strategic partnerships that let us look toward the future together.
From your professional perspective, what is your take on this challenge? Send me a personal message.
About the Author
Gregg Young is a Managing Director of Stanfield Partners, an investment company targeting four verticals in CRE Tech: Construction, Blockchain Transactions, Smart Buildings and Market Data / Analytics. He serves on the Board of Advisors of VIATechnik, a consulting and implementation firm offering technology-assisted solutions in design, construction, and building operations to large contractors and owners. Most recently, Gregg served as Chief Investment Officer and Chief Operating Officer at Karney Properties - a 60-year-old privately owned real estate investment company in Los Angeles. Gregg began his real estate career as a partner in the Dallas office building division of Trammell Crow Company, as a principal on the investment and development team responsible for developing 7 MSF of new office buildings. He was later asked by the TCC Board to found Trammell Crow Corporate Services to provide TCC’s management, transactional, and development services to corporate owners of real estate. After leaving TCC, he co-founded Essex Capital, a private real estate investment firm with Stanford professor Joel Peterson, overseeing a 3 MSF portfolio with properties in 13 states. Gregg earned a bachelor's degree from Dartmouth College and an MBA degree from Stanford.
VIATechnik is the global leader in virtual design and construction, with nearly 200 digital experts in nine global offices. We are on a mission to transform the analog world of design and construction into a digital platform, enabling efficient design, industrialized construction, and a digital real estate service model. Through this transformation, we believe we can solve the world’s housing and infrastructure challenges, deliver spaces that nurture life, commerce, and relationships.
About Stanfield Partners
Stanfield Partners excels its focus in real estate technology capital formation, strategic partnership, and investments in portfolio companies. We are focused on four CRE Tech verticals: Construction, Smart Buildings, Market Data and Analytics, and Blockchain. Stanfield works with companies using all forms of technology in the broad real estate industry including helping arrange appropriate capital raising and, particularly, partnerships with strategic investors.