Data Center Portfolio Success Is Determined Locally | Altman Solon

Assessing data center operations and evaluating their future potential is strongly dependent on local and regional dynamics. The specific demand and supply constellation that can open opportunities or pose threats (oversupply and shortages) can only be identified on a local level.

The steps to identify the market potential on a local level need to involve analysis of historic and announced new-builds / expansions, utilization of existing facilities and pricing trends. In order to weight and properly categorize implications, these analyses require differentiation between data center segments such as retail, wholesale and hyperscale go-to-market approaches supplemented by industry focus (e.g. carrier, system integrators, media, etc.).

Beyond the demand and supply situation, the facility itself determines the strength of competitive positioning and future growth potential. Again, the positioning of facilities is most relevant to local competition rather than relative to global best-in-class competitors.

The main criteria that drive differentiation in a local or city market are:

• Track record & reputation: Track record and reputation, notably in terms of facility security and reliability, are essential for a data center, given the nature of the service provided outsourcing of critical IT infrastructure for large companies. In the hyperscale segment, large anchor tenants can be difficult to secure without previous solid track record.

• Location: Location drives distance to local staff and to end users. Distance is the main factor determining latency, which is important for CDN and cloud segments to reduce loading time. Additionally, distance between the data center and the client plays an important role for carriers, enterprises, and system integrators that need to be at a driving distance as staff need to work in the data center.

• Connectivity: Connectivity is the ability to make and maintain connections between two or more points by way of a telecom or datacom system; it is a business critical factor in the data center infrastructure with a different level required for different businesses and use cases..

• Data center quality: High supported power density is important to serve a full range of use cases (e.g. high performance computing) which result in a need for power and cooling systems. Data center quality is also measured through industry standard data center tiers I through IV, with IV offering the highest security and failure resilience levels.

Combining facility-specific success factors with the local market conditions allows for a consistently local assessment of the trajectory for a data center operation. The key to understanding the development potential of data center operations is understanding the asset itself as well as the local market and competition.