What is happening in the state of the mission critical industry? In this ongoing feature, we ask industry leaders their thoughts on where the industry is headed and what will happen along the way. This issue we talk to Herb Villa, systems consultant data center solutions at Rittal, Carrie Goetz, D.MCO, a global IT executive, keynote speaker, consultant, and Jake Ring, CEO of GIGA Data Centers.
MC: The mission critical industry has been growing rapidly the last few years and is expected to continue strong for the foreseeable future. To what do you attribute that growth to and how long can it continue?
Villa: The growth of the industry I can sum up with two simple acronyms: IoT and IIoT, the Internet of Things and the Industrial Internet of Things where endusers and companies are developing new applications for merely optimizing what the internet is capable of doing, whether it’s social media, whether it’s controls, or whether it’s monitoring. It is the explosive growth of the IoT in the hospitality, health care, financial industries. The other thing we see is the shift away from the traditional enduser data systems that we built years ago. The demand is still there for the compute power, but these companies, whether they be Fortune 500 or small mom and pop shops, realize they are not in the business of IoT and that there are providers that can manage that IoT better for them.
Goetz: Data is driving much of the growth. Where IT used to be considered a necessary evil, today we know that companies use it to gain a great competitive advantage. Of course, the more data we have, the more we want, and the more we can do with it. Near-field communications and things like autonomous cars are going to increase the need for storage (temporary or more permanent). Not all companies are loving the idea of being in the data center business. Even if they have their own internal data centers, many will have other backup or just sites that are closer to the users. This is a very cyclical industry. We have seen the shift from centralized, to de-centralized, to centralized, and now we are decentralizing again. I don’t think this growth is going to stop any time soon.
Ring: Growth is caused by public and private cloud! Using a few “back-of-the-envelope” calculations, we can see how much data center infrastructure capacity growth may be needed. To find out, make a few basic assumptions:
- Assume a standard rack supplied at 8kW is used to support the servers and storage for hosting a cloud environment.
- Assume that each rack cabinet operating at that full load of 8kW, is capable of delivering $45,000 in monthly recurring revenue.
Based on these assumptions, we can calculate the incremental cloud revenue growth and what it can mean for the infrastructure needed to support the expansion.
If we look at the median forecast and use Gartner’s incremental growth figures of $102B over the 36 months between 2018 and 2021, and use the aforementioned assumptions, it translates to new incremental revenue of $2.83B per month. And adding our assumption of $45K in MRC per rack cabinet, this translates to just over 62,888 new racks of equipment that will be needed each month. At 8kW per rack, this equates to 503,104 kW or 503.1 megawatts of new data center infrastructure globally, each month. The infrastructure support can come from new facilities or retrofitted data centers, but it would be an incremental infrastructure necessity to some degree.
A common figure in the industry is that it takes an average of $8 to $10M to build a megawatt of capacity. But let’s assume costs have been improving, so it only requires $8M in capital expenses per megawatt. This means it will require over $4.0B in capital spending — each month — to build the required global capacity to support the forecasted revenue growth of the cloud.
MC: How soon will the remaining population add to this demand for data center growth?
Goetz: I think a natural progression is through attrition. As older assets near the end of life, the cost to do capital upgrades may make a shift in location more attractive. I think that there is also a shift in personnel, which may pull some of the resources through to other locations. That said, there are a lot of cities that are highly underserved by the mission critical market. It is just a matter of time before tier 3 and 4 cities begin bringing data centers online, and not long after that where edge compute brings data centers to the needs of users all the way out to the rural areas.
MC: If you were talking to a data center owner who wanted to grow, what one piece of advice would you offer?
Villa: It’s actually a two-part piece of advice: Learn from what you have done in the past, and plan for the future. But don’t plan too far out because that future is going to change. We see that in the terminology that we use today. Ten years ago who would have thought that a common phrase would be, “There is an app for that.” We carry more processing power in our smart phones than NASA had to put a man on the moon. So, the message is to plan for the future but realize that the future will change more quickly than you can plan for. Just try to keep a little bit ahead of that concept and it will lead you to providing the power, the latency, the connectivity, the cooling, the cyber security, anything you need to be ready for where we are going.
Goetz: Address the ecosystem with an eye to flexibility. I think there are many solutions and there is a misnomer that one size will fit all. It is rare that one size fits even one in all areas of the data center. The space is very adaptive to technology, the “flavor of the day,” and of course what vendors choose in their offerings. Consumers have been held hostage by the solutions available for a very long time. But locking your space into one vendor to the detriment of all others is not often the right thing to do for adapting data center needs. I think that data centers are a mix of technologies, locations, resources, and options. Some scale well, some don’t. Some adapt well, some don’t. But you must be flexible to be able to address all of the ecosystem needs. Budget and decision silos are not wise and often one decision has negative impacts on other budgets, expenses, and decisions. This space evolves and you have to be able to evaluate and evolve for the common good of the company and the space as a whole.
Ring: If you can’t cut your price, improve your efficiency and pass it on in lower PUE. PUE should tie to the “common area usage” fees or CAM charges, as electricity cost is typically passed through to the customer. Improving the efficiency and lowering the PUE reduces the multiplier on electricity consumed by the IT racks of equipment, lowering the customer cost.
MC: How does this industry solve the workforce development problem?
Villa: I think it’s about looking at the skill sets and it’s about getting people to realize that there is a future in this field. While we would all love to be big data scientists, or computer engineers, or web developers and so on, those other important applications live somewhere in our mission critical space. These should not be viewed as blue collar occupations. In the past, many data center operators, whether from the technician or management area, came from the military. I myself am a former Navy nuclear power plant operator. A lot of us are now running data centers.
It’s like we hear that home builders are having a hard time finding people, that it’s a dying art. It’s not dying if through outreach education you convince people that it’s necessary. That’s what we need in the mission critical world, too.
Goetz: It as a whole, doesn’t do a great job of using IT to self heal. We certainly need more curriculum and trade training. We need to reach younger kids and let them know the options out there. Community outreach is critical! Not everyone needs a master’s degree to be a productive member of the industry. A lot of people have grown within the industry, degree or not. Most managers will tell you that they would rather have hands on experience than theory. That is something you just can’t teach in school.
That said, I think that companies need to be more flexible with remote workers, hours of operations, and other policies that not only attract talent, but also retain talent, whose rate, at the moment, is not great across the board. I read a study that said that women in IT have a 67% attrition rate. That is simply not acceptable. I also feel that bringing real diversity to the workforce will be key. And when I say diversity, I mean through all layers of mission critical clear to the top. People need to be encouraged to fail without fear of losing their job. Sometimes the best innovation comes from breaking things and building them back better. I think we also need to be cognizant that as we (as a country) have concentrations of data centers in a few key cities that not everyone is up for moving to those jobs. There is a lot more to IT than writing code. The entire mission critical industry, for instance. Raising awareness of the industry and making curriculum available to a broader range of people will certainly help.
Ring: Outsourcing is becoming a bigger factor as it becomes more difficult for data center providers to manage their local 7x24 on-site staff. CBRE, CPG, Salute, and other companies are growing as data centers need an outsourcing provider’s ability to manage workforces across multiple facilities in a metro area or region, and can better leverage training and policies and procedures across their workforce.
MC: Besides workforce development what is the biggest issue affecting the mission critical industry?
Villa: The ownership question. Is it the enduser, the data center operator, the managed service provider, the cloud provider? And even within the organization is it the facility manager, an IT person, a C-level person? Instead of having these inherent barriers in operations because of ownership battles, everyone who can be impacted by data center operations must have a voice. Decisions can’t be made in a vacuum. I want everybody involved early and everyone involved often.
Goetz: Diversity in talent, locations, and solutions. In many ways, we have lost the critical thinkers that challenge vendors. Vendors work to be everything in your space when they may not always have the best solution to all of your needs. I think that people, quite naturally so, don’t want to be the one to buck the system, but that is where the greatest innovation comes from! Take redundancy, for example. We work to have everything redundant including power, cooling, networking, operating systems, servers, etc. Then that entire site is made redundant to another site, and in some cases several more. The amount of waste is staggering. At the end of the day, we want access to data and applications. How much redundancy is really needed with failover? That’s just one example, but people are so busy doing their day-to-day jobs, there is little time for the critical thinking and innovation that drives the best change. Fear is part of the problem, but that needs to change.
Ring: Lead times. Hyperscalers are reaching into the supply chain to secure manufacturing windows for electrical equipment, driving lead times out to 24 to 28 weeks or more. The components in switchboards are available in inventory, but the design engineering is the bottleneck. I believe enterprising suppliers with IEC rating will take advantage of this and start assembling switchboards to help alleviate the shortage of finished product. Majors would be wise to start setting up smaller production assemblers on their own to head off the demand surge and reap more revenue for themselves.
MC: What is the most important trend (two- to five-year view) that you see coming toward facilities managers/owners/IT executives?
Villa: The world we are used to is point-and-click; it is the world that I am used to and it is the world that I expect to have available always. I don’t want to hear about five 9s of reliability and resiliency; I only want to hear about 100%. That’s coming.
I see two specific trends. One is cost. While I realize we live in the era of Walmart and dollar stores and I do not want to waste anyone’s money, I still do not want to go to the cheapest solution. That may not be the best idea. We must encourage people to spend wisely and efficiently, and to be concerned with ROI, but recognize the value benefit.
Second trend in the industry today — the edge conversation. What is the edge? Where is the edge? Who runs the edge, and who owns the edge? As big of a buzzword as it is today, there is still a lot of confusion. It is not well-defined. Does edge suggest the size, the application, the location, the entity serviced? Managing and optimizing the edge in the realm of IoT and IIoT is going to be the trend and the challenge.
Goetz: I think we are going to see the return of the request for information (RFI) to better evaluate solutions on the market. Companies are going to open up their procurement to new vendors (even if they hate to) so that the best solutions can be brought into the ecosystem. Vendor loyalty (whether convenient, earned or not) is going to be challenged. “Because we always have” is not going to be good enough moving forward. There are many new and amazing solutions and forward thinking execs who will take the time to learn and challenge the norm. Some of the hyper scale data centers opened this door by developing their own hardware. I think the idea of the vendor being the tail that wags the data center dog is starting to change. There are simply way too many options out there to keep maintaining the status quo and expecting change.
I think we will also see a rise in disinterested third parties when it comes to these evaluations and decisions. It offloads part of the learning curve for new technologies and allows for a temporary extension of the workforce with the benefit being that the disinterested third party has zero benefit from the solution. They get no finder’s fees, rebates, or any financial interest from recommending products. This brings technology expertise to procurement and also helps to ensure that employees are not recommending solutions that benefit their resumes. Companies are getting wiser to the sphere of influence that impact purchasing and the fact that they are funding others through their purchases. I see this changing.
Ring: We are in a sustained growth curve that will only accelerate during a slowdown/recession, as that’s when more enterprises and medium/small companies will accelerate the outsourcing of their IT functions. Increasingly owning the IT hardware will matter more to CFOs that need to depreciate something, while the growing majority of companies will seek to outsource the IT hardware and have their IT departments focus on deriving information from their data, and securing and protecting it.
MC: Will the edge find a final destination?
Villa: The edge by definition will defy nailing it down to locations. It could be an underwater data container, a field in Wyoming, or a cruise ship. It can be simply a standalone enclosure supporting a very localized application. We are keeping the data local to where it is being created but it still has connectivity back to the cloud or to a data center. For me, edge is remote, it is low density, it is incredibility localized. I don’t like the term edge data center; it is almost an oxymoron.
Ring: The “edge” should be defined as the point of entry to where endusers obtain resources, so it’s already in your hand with a smartphone! Latency doesn’t matter for every application, as coding can help reduce some or all of the impact of greater latency. Michael Dell famously stated that every three smartphones needed the equivalent of one rack-mounted (1U) server to function, and I can see that compute capacity in phones increase to where the equivalence is five to six phones per server. Yet IoT applications will drive compute capacity closer to the enduser, as it makes sense to aggregate huge reams of data closer to where it’s being collected, before sending it back to the “mothership” in Northern Virginia.
MC: Any concerns about regulations for this industry?
Villa: This could easily be a discussion about climate change, energy efficiency, cost savings, digital divides, or first world vs. second world vs. third world, etc. Rittal as an international company has worked with many organizations in articulating these standards. We see regulations as working toward improvements in our world, and as being very good guideposts. What concerns me is when these metrics become a contest to brag about how much one company can exceed that metric. It should be a practical standard used as a guideline, not as a contest.
Goetz: I’m not a big regulation fan, as I feel that it places unfair burdens and levels of bureaucracy that are not always productive. I think the power companies are already trying to self heal the problems with alternative energy sources and even larger operators are looking at better ways to manage and provide energy for cost savings measures. But I also think that internal to the facilities, we all have an obligation to be better stewards of our environment and we need to do a better job of viewing the ecosystem, not just a piece of electronics. For instance, if a switch shows a low power consumption per port, we want to know what the offset is at the server, the uplink port, etc. Also, is it more energy efficient to have chassis-based switches or a bunch of top of rack switches? In most cases, the power is lower in the chassis-based switch due to the fact that we don’t always provide enough power to the cabinet to fully consume the ports there. I did one comparative study for a user where the power is literally half. I think this is part of the critical thinking and challenging of vendors that we will see over the coming years, not just for switching, but for everything as power costs increase and incentives play out.
Ring: Electric power is the fuel of the data center industry, and I could see a quandary arising where customers demand “Green & Sustainable” electric power but aren’t willing to pay for it. A customer told me once that nuclear power “wasn’t really green,” even though I gently pointed out that as it had zero emissions, doesn’t that qualify? This is why I welcome mandates for greater efficiency, as facilities should be required to improve the use of available resources first, and not state they are “greener” just because they buy wind credits from the local utility.
MC: How fast is change happening today?
Villa: You will be surprised at this answer: I don’t believe the world is changing as fast today as the pace of the past two decades. If we think about going to some of the very first data center trade shows as when Microsoft Windows was being introduced, etc., back in that day Ethernet was new, Windows and MS DOS were new. Our first computer was about 20 megabytes because that’s all that DOS could partition, but it was new. Our cell phones were attached to our car, then we had advanced pagers which actually lasted in the market about 20 years. Each revolutionary change was actually something new. But today when LG, Apple, or Samsung launches their next generation phone we are seeing marginal improvements; are we really seeing anything new? No.
The information and data exchange is faster and more efficient; however, we are not seeing what I would define as being rapid change the way we did in past years.
MC: How do you feel the tariffs imposed by President Trump will affect the industry? Or, will they have no effect at all?
Goetz: The tariffs are a short-term issue. Most companies that deal with them have been able to shift manufacturing to other non-tariff countries, shift delivery for assemblies, or change buying habits. For those that offer products made in China, for example, China is certainly not the only country that can make these products. It may slow some people down, and others will pay them, but I would like to believe that at some point we will reach some equilibrium. While inconvenient and certainly costly, markets tend to adjust one way or another. Although it does seem to raise awareness to how much of our manufacturing has moved and it would be nice to see some of that capacity come back.
Ring: Depending on how far they go, there could be a significant affect on finished products, but steel and aluminum fabricated parts are not seeing much impact as they are assembled into products in the U.S.
MC: Will the mission critical market be hindered by capacity problems of the electric grid, a problem that is a general hindrance to any industry or country’s growth?
Goetz: I think as mission critical players look to save money, they are offloading some of their load from the grids. But we certainly need to understand that there is a finite amount of power as we stand right now. Adding renewables and alternative sources will be helpful, but I also believe there is an onus on equipment manufacturers to learn their equipment’s power requirements and centers to manage levels of redundancy to increase capacity.
MC: How do you see your own company as an important cog in this growing industry?
Villa: Rittal builds the enclosures, we provide power distribution, climate control, monitoring, security, fire suppression, and so on. We know that we have the comprehensive product lines. We are an enclosure-based company, we operate in almost all these environments we’ve been talking about. We have our large OEM relationships with HP, Microsoft, and other major IT players. But, I think where Rittal can provide a good solution is that we take the time to understand a specific opportunity/application/project. We want to be able to get more information in order to begin working toward a solution. My specific role is to enable the type of conversation we discussed earlier — bringing all parties in to the discussion.
Ring: As a multi-tenant colocation provider that can support from 5kW up to 50kW per rack and deliver a PUE of 1.15 — guaranteed — we believe we have a great deal to offer, as we’re bringing hyperscale-levels of performance to the multi-tenant colo market.
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