Western European Data Center Market Heats Up: Top Tips for Building Global Strategy
October 05, 2017
By Bob West
In recent years, American technology providers have begun looking outside the country’s borders, expanding their brand to foreign nations. This not only boosts service for clients outside the U.S., but also extends the reach of the organization.
This strategy is having an impact on foreign data center marketplaces. Recently, researchers studied the data center market in Western Europe and found it was poised for considerable expansion as more companies build in the area.
However, when establishing a global data center strategy, there are a few considerations and best practices that should be observed. These help ensure the success of the first foreign build, laying the foundation for further expansion.
Today, we’ll take a closer look at the growing Western European data center market, as well as the factors service providers should keep in mind when creating their global strategy.
Western European Data Center Market Growth
According to an October 2015 study from ResearchMoz and Technavio, the data center market in Western Europe has been growing as of late, and this trend will continue in the coming years. Technavio researchers predicted that this market will expand at a compound annual growth rate of 8.47 percent through the next four years.
A number of factors are spurring this growth, including the increasing utilization of the Internet of Things, cloud services and rising data analytics needs.
“Increased data volumes have created huge IP traffic, resulting in a slowdown of business processes,” the report stated. “Traditional data centers consume considerable power and the cooling process is very slow. This has led to the expansion of data centers and prompted enterprises to renovate and construct data centers in Western Europe.”
In fact, within the last year, several big names have launched data center construction initiatives in Western Europe, including Google and DigitalOcean.
Google to Construct New Ireland Data Center
In September 2015, Google announced that it had begun construction on its newest facility, an Ireland data center located in West Dublin’s Profile Park.
This isn’t Google’s first build in the country. Its new facility is being constructed next to its existing Ireland data center, which opened in 2012, Global Construction reported. Google also purchased an additional 31 acres in the region, which could signal plans for further expansion.
Once completed, the data center will be a two-story facility and will cost Google approximately $230 million to build. In addition to being built on its existing data center campus, the new structure will also take advantage of Ireland’s free air cooling potential.
“The company says the data center will rank among the ‘most energy efficient in the world,'” Global Construction contributor Abigail Phillips wrote. “Part of the reason it opened a data center here was down to Ireland’s climate, the cool weather makes it easier to keep the buildings cool.”
Currently, Google is on track to have the first phase of construction completed before the end of 2015.
DigitalOcean Expands in Germany
Cloud service provider DigitalOcean also announced data center construction in Western Europe earlier this year. In April, the company opened a German facility in Frankfurt that would help support the expanding IT industry in the region.
This marks the third European data center for DigitalOcean, including its facilities in Amsterdam and London. In addition to capitalizing on the growing technology market in the area, the company also noted that government data residency regulations make it difficult to transmit information outside the country. This new German data center will help meet local needs while complying with data residency guidelines.
“By having a local data center, we can now play a much bigger role supporting the startup ecosystem in Germany,” Mitch Wainer, DigitalOcean co-founder and CMO said.
Building a Global Data Center Strategy: Top Considerations
While Western Europe is seeing the bulk of data center expansion initiatives lately, experts note that other foreign regions will also become increasingly popular for facility builds as well. In fact, Scott Noteboom, industry expert and former data center executive at Apple and Yahoo, predicted that the vast majority of data center growth will take place outside the U.S. over the next 15 years.
However, there are considerable challenges data center operators must face when they elect to build in foreign countries.
“[International expansion is] more expensive, more complicated, and there’s more babysitting,” Noteboom said.
At the same time, the strategy does have its payoffs. Gillis S. Cashman, M/C Partners investment group managing partner, has seen the trend toward a global data center approach growing.
“It’s about getting [enterprise] applications closer to the edge where they interact with the end users,” Cashman said.
When it comes to establishing a global data center strategy, what should companies consider? Data Center Knowledge contributor Julius Neudorfer recommended keeping the following factors in mind:
- Geographical and geopolitical risk: It’s essential to examine the geography of the area where the country plans to build for any risk factors. For instance, is the region prone to inclement weather that could damage the facility? It’s also important to do research about the country’s current political conditions. “The political stability of the country and region should be considered,” Neudorfer wrote. “In some cases, the nationality or type of organization of the owner or tenant may make it a target for local political factions.”
- Access to and cost of utilities: Operators should also ensure that critical resources like power and water are available and cost effective for the company. Energy costs in particular can widely fluctuate depending upon the region and type of power available. For instance, more sustainable source of energy like hydro, wind or solar may come with a different price tag when compared to energy taken from the local grid. In addition, some regions offer tax incentives that could help lower costs. “International energy costs are higher and can vary widely,” Neudorfer noted. “It is important to check local rates and look for utility and energy incentives.”
- Local laws and regulations: Another consideration to make concerns the local laws or rules that might impact data center operations. For instance, DigitalOcean noted that Germany’s data residency laws would affect how it treats local clients’ information. It’s imperative to ensure that the facility and processes are aligned with these rules. Neudorfer suggested hiring a local consultant to help with this process. Someone with regional knowledge could prove invaluable to an international project, and can help speed and streamline the approval process.
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As global data center strategies are increasingly deployed by IT service providers and data center operators, it is critical that decision-makers know how to ensure their success. Making these considerations is only the beginning of the international journey. However, the effort put in here will surely pay off for the company in the end.