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January 27, 2016updated 30 Aug 2016 3:18pm

Can oil prices’ collapse ignite a data centre construction frenzy?

Analysis: Data centre infrastructure market to exceed $135 billion in 2016, but can oil prices boost up the value?

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The decline in oil prices, which has set crude barrel costs to a 13-year-low, could accelerate data centre investments as energy costs plummet.

Analysts predict the large data centre segment to grow 8% this year as a result of the fall in oil prices and as enterprises and service providers become more ambitious with the size of their facilities.

The good news for the data centre industry comes following a sharp drop in oil prices that has seen the cost of crude oil cut by as much as 70% since mid-2014.

Prices fell by 47% in 2015 and are expected to decline, on an annual average, by another 27% in 2016, according to the World Bank.

The World Bank today also slashed its forecast for oil prices and predicts the cost of a barrel of crude oil to be around the $37 mark throughout the year, down from its previous projection of $51.

As for data centres, market watcher Canalys predicts they will benefit from cheaper electricity as wholesale gas prices decline with their monolithic energy consumption.

The firm predicts investment to be mostly made towards larger hubs, as energy becomes less of a constraint on operating costs.

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Ben Stanton, analyst at Canalys, said: "Oil prices will amplify data centre investment this year, but that is just one part of the story.

"Software-defined environments are unlocking more value in hardware than ever before. Customers are being forced to rethink their IT strategies with features such as agile on-demand and as-a-service offerings, faster application deployment, and greater infrastructure flexibility and scalability."

Stanton also said that sales processes are becoming increasingly applications-led, which lends itself to digital transformation projects involving big data, analytics and IoT.

However, hardware will become increasingly commoditised as profit margins transition to software and services, Stanton said.

"As ASPs fall, shipment values will soften. We forecast that worldwide data centre infrastructure value will exceed $135 billion in 2016, which represents 4.4% growth, but we would expect unit growth to exceed this considerably."

The firm predicts the global data centre infrastructure market to grow across all verticals when compared to last year. It predicts the data centre server closet value to reach nearly $18 billion, up from last year’s $15 billion plus.

The server room market is also expected to grow to more than $31 billion in value, up from $30 billion in 2015. As for small data centre value, Canalys predicts slight growth from around $26 billion in 2015 to $27 billion in 2016.

Medium data centres will see infrastructure value rise to nearly $30 billion, up from last year’s nearly $28 billion.

As for larger facilities, the market watcher also forecasts a growth to $30 billion this year, from a $27 billion infrastructure value in 2015.

As for data centre equipment, other analysts have predicted that the EMEA enterprise IT market will grow 2019, reaching $5.4 billion.

According to IDC, Big Data-related server shipments will increase from 6% of all servers shipped in EMEA in 2015, to 16% by 2019. The value of servers will also increase from $1 billion in 2015 to $2.7 billion by 2019.

Big Data storage capacity share of new shipments is expected to reach 20 exabytes by 2019, with a value of $2.7 billion.

While the Canalys forecast could spark heavier investment from data centre and colo players, calls for the industry to embrace renewable energy to power its needs have been made over the last few months, including from environmentalists such as Greenpeace.

Recent research by The Green Grid has also found that 43% of European data centres still lack on energy efficiency objectives for the design and operation of their hubs, putting the management of IT resources at risk.

In the US, the Natural Resources Defence Council (NRDC) has predicted data centres to become the country’s top polluters by 2020.

At the Finance and Investment Forum hosted in London last week, industry experts recognised that the data centre sector will continue to grow exponentially in 2016, with most of the investment directed towards existing leading markets – such as Europe and North America – instead of emerging ones.

 

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