Data Centre Investment…Don’t Jump to Conclusions.

As an investor or a data centre operator considering building new facilities, or a CIO weighing up build or buy arguments to manage an expanding workload, the latest CBRE European Data Centre Report for Q1 2015 could throw you some misleading signals if you’re not careful.

At a simple level you wouldn’t plan on building in and around London for a while, but a CIO might conclude that he could drive a good bargain on renting data centre space. Conversely you might very well decide to invest in building in Amsterdam but worry, as a CIO, that you could be paying a premium to rent there. Look more deeply and you will see that the reality is much more nuanced, with different drivers and imperatives that call for a much more granular view of what is going on.

The continued growth in demand for low latency, globally interconnected capacity has benefited London, Amsterdam and Frankfurt. If you are a wholesale co-location provider in London you may well be experiencing weak demand and price pressures, but there is no sign of a price war or a let up in the provision of new capacity for those network hungry applications.

The drive for interconnectivity is also providing a fillip to potential gateways into new emerging markets, like Marseille for North Africa or South Eastern Europe for different routes into the Middle East and beyond. Cool destinations (I mean chilly, not hip!) are also in demand as energy costs and green pressure make the Nordics, Iceland and Ireland increasingly attractive in terms of data centre operation.

The reverse of the coin is showing that places that are neither particularly cool, nor sitting on top of strategic interconnectivity points and where the local economy is sluggish like Paris, Madrid and Milan are seeing much lower levels of demand.

Now add in government tax incentives, concerns about power availability, and susceptibility to the impact of global warming and, the as yet unknown impact of the Internet of Things, the whole issue of where to tie up your capital for the next 15 years or place your workloads becomes very complex.

In our last article we suggested that Data Centres should no longer be on the CIO’s dashboard because in most enterprise data centres today there is a tendency to trade-off demand management needs against service delivery realities. Take that a stage further and we now suggest that the separation of demand from production should lead to an unfettered projection of demand, in all its workload forms and the development of a market in data centre space and capability.

Ask anyone trading in oil or financial futures. They wouldn’t invest without a very clear understanding of all the variables and forecasts. It seems to us that financing, developing and running data centres in an open market needs that same sort of deep analytical capability. I just hope that those still planning to build in London, or who for some reason aren’t building in Amsterdam have made their decisions on something more than gut-feel or a good tax incentive.

This post first appeared on the old Cassini Reviews website.