The market in Europe is expected to be worth US$18.53 billion in 2023. Between 2023 and 2033, a 13.1% CAGR is predicted for growth. The market is driven by the high demand for data centre transformation from hyperscale data centre customers including large Internet businesses and suppliers of public cloud services.
The introduction of disruptive technologies like autonomous cars, the Internet of Things (IoT), cloud computing and sophisticated robotics has increased the need for Edge Computing solutions in developed countries like the UK, Germany and France.
Thanks to the development of 5G, which is driving the market’s expansion, the data centre transformation providers now have the opportunity to deliver these services in distant areas of Europe with greater connection.
The global data centre transformation market size is estimated at US$10.5 billion in 2023. In 2033, the size of the world market would be US$35.65 billion.
Data centres are under pressure due to the ongoing adoption of cutting-edge technologies by various enterprises, including Big Data analytics, cloud computing and IoT, as part of their plans for Digital Transformation.
This in turn increases demand for data centre transformation on a worldwide scale. It is anticipated that the sector would benefit greatly from the increased need for software-optimised data centres on a global scale.
Stumbling blocks in the market
A shortage of skilled labour and problems with regulatory and portability compliance are impeding the data centre transformation market expansion. The management of utilities, physical security, building upkeep and other physical components are not subject to customs control because colours are managed by a different organisation.
Despite having no control over the location, the supplier completely manages their data centres using the public cloud, taking care of equipment maintenance and upgrades. Thus, all of these constraints are restricting the market for data centre transformation.
Key takeaways
- With 44.9% of the data centre transformation market share in 2023, North America led the way and during the forecast period, it is anticipated to rise at a CAGR of more than 13%.
- During the forecast period, the Asia-Pacific data centre transformation market is anticipated to exhibit a considerable CAGR of over 14%.
- With a maximum revenue share of 36.2%, the consolidation services segment led all service segments during the projected period and is anticipated to continue to lead.
- In the end-user category, the cloud service providers segment had a key revenue share of 46.2% and is expected to increase at the maximum CAGR of almost 13% over the projection period.
- By 2033, the verticals section’s IT and telecommunication segment generated US$8176.48 million in revenue and it is anticipated that this segment would expand at a CAGR of 12% over the forecast period.
Competitive landscape
Due to the numerous competitors operating both in the domestic and international markets, the data centre transformation market is very competitive. With the top competitors pursuing tactics like product and design innovation, the market seems to be moderately concentrated.
Among others, Dell EMC, Cisco Systems and IBM Corporation are some of the market’s significant players in data centre transformation.
Industry experts offer their input on the factors driving data centre transformation across Europe…
Mitch Fonseca, Chief Development Officer, Cyxtera
There are two primary factors driving demand.
First – many organisations are reevaluating their workload placement. Companies that moved to the cloud in droves to support remote work during the pandemic are now facing escalating costs from inefficient workloads, scalability challenges and high egress fees.
Public cloud is great for many things – like early experimentation, DevOps and seasonal workloads that burst up or down. But it’s not ideal for steady-state, resource-intensive workloads and can be very expensive for these use cases.
Several analyst firms are predicting a slowdown in cloud spending growth. A recent study indicates that 81% of IT leaders say their C-suite has directed them to reduce or take on no additional cloud spending. Many companies are starting to move workloads into data centres that can provide the agility and flexibility they are used to in the cloud with greater cost-predictability, performance and control.
The second major driving factor is market fragmentation. Many regions in Europe – for example, London and Amsterdam – have transmission infrastructures that need upgrades (which are expensive and time-consuming) and as such, can’t support large-scale data centre expansions. While upgrades are on the horizon, we won’t see material changes in these markets until 2025 or 2026. In addition, in many regions, power costs have risen substantially, in some cases up to 18-20 cents/kwH.
Given these challenges, we’re seeing data centre interest in second-tier markets, like the Nordics, where power is less expensive and the grid has capacity for build-out. In these markets, data centre operators can often negotiate low-cost, long-term energy contracts, which make them an attractive venue for expansion.
Matthew Farnell, EMEA Director, EkkoSense
Data centre operations have never been busier. Analyst projections suggest that workload levels are only set to keep growing over the next five years – with analyst firm, Technavio, projecting compound annual growth rates of as much as 21% through 2025.
This should hardly come as a surprise, with data centre facilities hard at work supporting all the ‘essential’ technology services that we now insist on to support our personal and professional lives. Driven by trends that show no sign of slowing down, such as increased data usage associated with streaming services and 5G adoption, these escalating IT loads are clearly having an impact on data centre electrical loads.
At the same time, critical facilities such as data centres are under intense pressure to reduce their energy use. Finding ways to cut carbon usage in data centres is challenging when the broader business insists on ever-increasing workloads. Despite this, data centre operations teams need to find answers to this challenge – particularly as the reality of corporate ESG programmes and net zero commitments start to bite.
Traditional data centre approaches are struggling to meet these two often conflicting goals. Given that the average data centre operates for over 20 years, this shouldn’t really be a surprise. Efficiency is invariably tied to a facility’s original design and frequently based on expected IT loads that have long been overtaken. At the same time change is a constant factor, with platforms, equipment design, topologies, power density requirements and cooling demands all evolving with the continued drive for new applications. The result is a global data centre infrastructure that regularly finds it hard to match current and planned IT loads to their critical infrastructure. This will only be exacerbated as data centre demands increase.
That’s why it’s essential that data centre operators do everything they can to improve visibility across their operations. It’s surprising just how many data centre teams have little or no visibility of their assets, capacity and operating efficiency – or if they do then the data is buried deep in legacy systems such as older BMS or EPMS platforms. Subsequently at EkkoSense we’re focused on creating powerful live 3D views that capture an organisation’s entire data centre space utilisation, power usage and cooling capacity – either on a room-by-room basis or across an entire estate.
Standing still is clearly not an option for data centre teams. While replacing M&E infrastructure with more efficient equipment is a long-accepted method for gradually improving DC efficiency, payback periods of capital projects are invariably longer and tied to the project implementation timeline.
Very few performance optimisation approaches can help data centre teams address workload throughput, risk reduction and sustainability at the same time. However, EkkoSense – with our unique software-driven, AI-enabled EkkoSoft Critical thermal optimisation solution – is able to deliver results within weeks and RoI in less than a year.
John Booth, MD Carbon 3IT & Chair DCA Energy Efficiency SIG
There will be three main factors that accelerate data centre transformation in Europe. The first is legislation.
The current Taxonomy Climate Delated Act (TCDA) require investors in data centres to commission and independently audit every three years to either the EU Code of Conduct for Data Centres (Energy Efficiency), Assessment Framework for Data Centres in the Context of Activity 8.1 in the Taxonomy Climate Delegated Act or CLC/TR EN50600-99-1 criteria. The Corporate Sustainable Reporting Directive (CSRD) requires data centre operators and customers to report GHG emissions and energy use. This will have a big impact as very few data centre operators are able to provide this data for themselves or their customers. The final piece of legislation is the impending revision to the Energy Efficiency Directive, which will require operators to provide total energy consumption, the amount derived from renewable energy, water and any waste heat reuse to either a central EU-wide repository, or in-country repositories, although the scope of this proposed legislation is under discussion and may be pared down.
The second is energy costs, the cost of energy affects all businesses and consumers, and this could lead to inflationary pressures and a desire to find alternate sources of energy. This will lead to transformation in the data centre power train and could accelerate the use of on-site renewables, microgrids and renewable energy powered Edge data centres equipped with Battery Energy Storage Systems or BESS.
The final factor will be people power. We’ve already seen negative media reports and demonstrations by Extinction Rebellion and others in various countries specifically targeted at data centres. Comments on planning applications from people who don’t want their views affected by ‘featureless, humming energy-guzzling concrete boxes scattered across the their back yard’, seem oblivious to the fact that they use the services that these provide to watch TV, do their banking, post on social media, organise protests and even comment on the planning application.
One thing is sure, it’s going to get interesting. We need to join with the entire world to meet our net zero and carbon reduction goals. We cannot tinker around the edges of this with free cooling, the use of diesel substitutes, or accreditations to building schemes such as BREEAM or LEED etc. We need to carry out a fundamental and radical review of all things data centre. Continuing as we always have done is not going to cut it.
John Booth provides advice as a consultant to the EUCOC
Fredrik Jansson, Chief Strategy Officer at atNorth
The digital data explosion and increasing sustainability pressures are driving businesses to carefully consider how and where they’re housing their large datasets. This demand is driving data centre transformation in Europe.
- The digital data explosion will fuel the need for high-density data centres
Companies are increasingly adopting emerging technology solutions like AI or automation solutions in every part of their business. These types of high-performance computing applications are powerful and becoming essential to create and maintain a competitive advantage. Yet, most in-house IT infrastructure (or indeed many legacy data centres) cannot cope with data processing speed and demand.
Newer data centres are built with high-density, high-performance applications in mind, with some data centre providers like atNorth even offering High Performance Computing as-a-Service (HPCaaS). This way, as business requirements change and demand fluctuates, the necessary infrastructure can be scaled accordingly.
For example, the weather and climate security platform, Tomorrow.io, provides data intelligence to help predict the business impacts of weather and solve climate security challenges. Tomorrow.io historically used the public cloud to host the high-performance computing (HPC) used to run its numerical weather prediction models. But, as the team and its operations scaled, so did the associated costs. By taking advantage of atNorth’s efficient data centre hosting facilities and HPC services, Tomorrow.io is able to scale and run complex calculations over extensive geographical areas in real time and has reduced its HPC costs by more than 60%.
- Sustainability pressures will drive workloads to the Nordics
In 2020, digitalisation generated 4% of global greenhouse gas emissions. Digital Transformation and the increasing demand for HPC continues to accelerate and with this comes the need to store and process an exponential quantity of data. The resulting storage specifications are becoming bigger and more complex, and unsurprisingly, data centres now have a huge and growing impact on the environment.
Choosing a data centre is a long-term investment and businesses navigating a digital explosion in the current economic uncertainty are having to make careful decisions. To assess the environmental and energy footprint of its data, a company first has to uncover where its data is located. A company’s data can reside on-prem or in the ‘cloud’, be outsourced to a managed service provider or with a colocation partner.
The second step is to assess the digital environmental footprint by calculating the associated CO2 emissions and Power Usage Effectiveness (PUE). This is necessary to establish what your current footprint looks like and find a data centre that can offer a decarbonisation solution.
A company that recently went through this exercise is BNP Paribas CIB. By moving a portion of its data centre footprint to an atNorth data centre in Iceland, BNP Paribas CIB achieved a reduction in energy consumption of more than 50%, an 85% decrease in CO2 output and transitioned to using 100% renewable energy.
The most successful businesses will be mining the digital data explosion to gain competitive advantage. And, by utilising Nordic high density data centres as a decarbonisation platform, more compute at a lower environmental footprint can be achieved. The looming recession will accelerate this trend as businesses also realise the financial impact of using less energy – going green is cheaper!
Massimo Bandinelli, Marketing Manager at Aruba Enterprise
Having the right IT infrastructure strategy lives at the heart of data centre transformation. Given the huge shift to digital operations that Europe has seen since the pandemic, IT infrastructure matters more now than it ever has. Today, we’re living in an era that encourages innovation and technological advancement, in order to remain strong as a business. Therefore, data centre providers are having to try to keep up with rising demand and competition, meaning what constitutes the ‘right’ IT infrastructure is inevitably evolving too. So, what are the key trends driving this change across the continent?
Firstly, the rise in data breaches and ransomware attacks that we’ve seen since the pandemic is undoubtedly giving data centre providers a nudge towards updating and strengthening their IT infrastructure. To help safeguard their systems from these growing threats, data centres will need to adopt digital and physical security measures to ensure that all data is protected and secure. Particularly with the rise of remote working, systems will need to be secure enough to accommodate the flow of company data to and from various geographical locations. The bottom line? If you aren’t constantly reviewing and updating your data centre security, now is the time or risk losing out on security-obsessed clients.
Secondly, it’s no secret that energy costs are continuing to surge across Europe. This period of economic uncertainty means that budgets across most (if not all) businesses will be tightening, and as a result, providers will need to re-evaluate their offerings and consider how they can set themselves apart from the competition. One thing is clear here – in today’s volatile market, the rising demand for flexibility – especially over digital assets – is taking over and isn’t stopping anytime soon. So, essentially, the more unstable the economy is, the more businesses will look to diversify and be both flexible and agile. To respond to this need for flexibility, data centre operators will need to adopt the right technologies that offer this agility and customisation to customers, such as having the infrastructure in place that can best support growing cloud trends such as hybrid or multi-cloud solutions.
While there are a handful of factors driving the demand for data centre Digital Transformation today, such as those already mentioned, the most crucial shared objective for operators in 2023 will likely be the environmental impact of operations. Not only is this arguably a moral obligation, but as clients start scrutinising their own sustainability more closely, they’ll find out that data centre emissions fall under their own scope of emissions under the greenhouse gas protocol (GHGP). So even though they occur outside the four walls of their own business, companies will have to start opting for a ‘greener’ data centre partner in order to reduce their own environmental impact.
For this reason, we can expect sustainability goals to be a huge influence over how data centres will transform in the years to come. In fact, ecological decisions are already coming thick and fast for data centres – especially in the planning and design of new data centres. For example, some providers are even factoring this into data centre location, innovating their data centres with hydroelectric plants that harness the power of flowing water in nearby and as a result, are able to generate sustainable energy while keeping costs low. Reducing the transport path by producing and distributing energy in the same location is another way of ensuring both green and cost efficiency. From The Climate Neutral Data Centre Pact that pledges to make Europe’s data centres climate neutral by 2030, it is evident that the industry is committed to ensuring long-term sustainability and will continue to evolve.
After a successful period of growth throughout the pandemic, overcoming the volatility of the market, the data centre industry is already starting to face a series of new hurdles. Those with adequate adaptability to best improve energy efficiency and the innovative thinking to match that of bad cyber actors will be best placed to meet the growing challenges.
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