The Value of Data Centers in a Post-Pandemic World
The COVID-19 Pandemic changed the way many of us work. We went from in-person meetings and happy hours to fully virtual interactions. This has changed the way that many companies plan on returning to “business as usual”. The Diode team is just one example of this. In March of 2020, our team moved to fully remote work outside of the offices, and now the team plans on staying that way. This has opened up opportunities for hiring, reduction in office space, and more. According to PwC’s US Remote Work Survey, most employers expect some sort of hybrid office-remote work situation once the pandemic has been resolved. This trend toward a more remote workforce has led to an increase in demand for cloud services and data centers.
So, what is a data center? A data center is a purpose-built facility designed to house all facets of computer equipment and ensure all systems are available at all times. Data centers can be used for remote storage, processing, or distribution of large amounts of data. On the outside, you might not recognize a data center. They usually compare to a non-descript fenced off office building or storage facility with few windows, which is purposely designed as confidentiality and building strength are typically important features for data center owners and operators. There isn’t much traffic other than periodic truck deliveries, maintenance technicians and a relatively small staff that operates the facility. On the inside, the data center is outfitted with rows and racks of computing equipment, electrical distribution equipment, and large cooling units to keep all systems cool. Each rack is a type of physical steel and electronic redundant framework that is designed to house servers, networking devices, cables, and other equipment with the goal to never shut down, no matter what the environment is inside or outside the building.
Prior to the pandemic, there was a lot of discussion about whether office workers could successfully work remotely; however, the shift to a digital environment had already begun. People were online shopping for goods, engaging in video conferences around the world, and receiving healthcare online with telemedicine before the pandemic. These things have been made easier by the growing data center industry.
The push towards remote work had already begun. Data centers enable people and businesses to stay connected even when they cannot connect in-person. Our ability to work from anywhere is in part due to the broad data center networks, or clouds that mesh our data centers together seamlessly. Applications running on multiple instances in multiple cloud environments eliminate downtime and create a seamless work experience regardless of setting.
With the growing demand for data centers, investors have an opportunity to gain a long-term source of revenue from high quality and credit-worthy counter parties, depending on the business model and type of customer in a data center. In this context the revenue stream would be very secure and thus makes a lower risk investment profile that is attractive to certain investors. As more clients move to the cloud, data centers can offer important computing, storage and interconnection/networking benefits for their mission critical needs when the data center is well located, designed, and maintained.
“This creates a stickiness effect that ensures customers have very little incentive to leave such a data center, providing a highly secure source of revenue for the data center operator,” said Bill Nguyen, Senior Project Finance Director, Diode Ventures.
Nguyen goes on to describe the data center business as being built on high switching costs which creates customer retention and high barriers to entry which prevent competition, both of which generate sustainable competitive advantages and ability to generate long term returns.
As more transactions and interactions continue taking place online, the data center market is booming. In many ways, the COVID-19 pandemic may have fueled the drive to conduct more business virtually or remotely. A new crop of technology services has been born from the pandemic that likely isn’t going to revert to pre-pandemic ways of living or doing things. Instead, these services will continue to evolve to provide people with options to go about their daily lives by utilizing technology. The technology industry will continue to require data centers to make their operations happen, and data centers will advance too. New equipment, systems and footprint size among other things will continue to change to allow for faster and more efficient ways to compute and store data.
“Instead of asking how businesses will use technology and data centers to adjust to the new ‘business as usual’, perhaps the question will be how will data centers adjust to become more of a central figure in business and the world as we know it – 2021 and beyond?” Anna Goebel, Director of Business Development at Diode Ventures
Diode Ventures specializes in development of data centers as well as other telecommunications infrastructure. To learn more about how Diode can help develop a data center for your company, visit our Services page or Contact Us.
