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Data Centers: Price Increases Seem Inevitable In 2023

After three years of successive crises, which have caused an increase in the costs of data center operators, the year 2023 should be that of “catching up.” Here are the five factors that will drive prices up. By providing the infrastructure and technologies necessary for storing, processing, and managing digital data, data centers are the backbone of the Internet and the foundation on which many modern digital services and applications are built. They have become the invisible pillars that sustain human activity in the 21st century. 

Data center trends are having a significant impact on businesses in a variety of ways. They influence the organization and operating methods of companies and modify how they plan their digital needs, going so far as to condition their attractiveness and ability to retain their employees in times of shortage. Also, companies are susceptible to fluctuations in subscription prices and to restructuring catalogs of offers. 

Operators Will Be “Faced With Difficult And Costly Challenges”

According to the study published at the beginning of each year by the Uptime Institute, the months to come, although promising good prospects for suppliers, should also be those of catching up. “The critical digital infrastructure sector continues to thrive amid economic uncertainty. Further opportunities and growth are expected in 2023 and 2024, but owners and operators will also likely face difficult and costly challenges.”

In all commercial logic, what is expensive for a supplier is automatically costly for its customers. Is this an indirect announcement of a price increase? It looks like it. The sector has indeed suffered the brunt of crises resulting from the pandemic or geopolitical concerns. For example, supply chain disruptions, component shortages, and increased component prices have driven up costs for data center operators and affected their bottom line. 

The New Challenges Faced By Operators

Admittedly, knowing that their customers are sensitive to price fluctuations, they delayed the deadline as much as possible, “increasing and tightening their budgets, keeping equipment in service longer, finding creative ways to work around the supply chain and devising new approaches to attracting and retaining staff.” The market is set to see a wave of consolidation, with the big ones absorbing the small ones to meet demand and gain economies of scale. This is not to suggest that the sector is in crisis”. As needs increase, data centers are not at risk of a recession. However, these five factors are likely to influence its evolution. 

Supply Chain Disruptions

Current geopolitical dynamics are creating additional threats to the security of data center supplies. In more precise terms, the policies of sovereign blocs are on a collision course, potentially resulting in significant crises. In short, starting from the principle that no one can be self-sufficient in electronic supplies if the situation becomes tense, there may be a breakdown in stores and, worse, an analysis of submarine cables. The Institute believes that, even by increasing its capacities, every national or regional industry can only meet the demand on its own. 

Operators Will Have To Fight With The New Chips

Data center operators must redesign their infrastructure from the ground up to comply with environmental regulations and produce compelling ESG reports. The rapid increase in computer density and power consumption means that design assumptions will have to consider these developments.

“Installations built today must remain economically competitive and technically efficient for 10 to 15 years. This means that certain assumptions must be made by speculation, without the data center designers knowing the future specifications of the IT racks”. Therefore, engineers and decision-makers must deal with the uncertainty surrounding data center technical requirements. 

Cloud Migrations Will Come Under Closer Scrutiny

The disappointments experienced by enterprise customers, as well as the high-profile outages that have hit the cloud, are prompting some customers to take a closer look.” Indeed, more often than not, “CIOs have seen public cloud adoption as forward-looking, low-risk, flexible, efficient, and low-cost. But these assumptions are now challenged. Pressure from governments and stakeholders will force companies to look hard at the financial and other risks of moving applications to the public cloud. 

More effort and investment will have to be made by operators to ensure that resilience is both guaranteed and visible to customers, who will be able to justify themselves more easily to regulators and for their image. While the cloud has historically been considered a low-risk option, “the balance of uncertainty is changing, and so are the cost equations,” the Institute says. 

Energy Efficiency At The Service Of IT… Finally

Data center power consumption is expensive (and generates massive carbon emissions) and puts a strain on already strained networks. This situation, concurrent with an inevitable increase in electricity prices, will be increasingly untenable. With limited energy availability in major data center markets, high energy prices, and growing pressure to comply with sustainability legislation, the energy footprint of businesses will need to be considered. More seriously. This will require efforts from the entire industry (semiconductors included) because chips represent a substantial source of energy savings. 

Datacenter Costs Should [Therefore] Increase

Stable until two years ago, the cost of building and operating data centers is expected to increase in 2023 and beyond. While market growth is expected to be driven by robust demand, operators’ capital needs will likely remain strong due to expansion plans. However, inflation and the rise in interest rates should somewhat dry up the financing capacities of operators, making it less accessible and more costly to raise capital. The recent increase in construction costs may have shocked many, but it is not accidental. Long wait times for some essential components (such as power generators and centralized inverter systems) have increased prices. 

They can now reach or exceed 12 months, which prolongs capacity extension and renovation projects, and sometimes prevents operators from earning income from almost complete installations. Overall, the current crises have significantly impacted the economics of data centers, affecting the supply chain, pricing, and operator spending. The emergence of data center trends, such as using renewable energy sources and implementing energy-efficient technologies, undoubtedly contribute to reducing the environmental footprint, but not their investments.

Also Read: What Is Low-Code Programming And Its Advantages


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