The data center crisis: Why a shortage of capacity will slow down your business growth. And soon.

In the coming 5 years we’ll produce twice as much data as we did in the past 10 years. And after that the growth will only accelerate. Where are we going to store all that data? In data centers. But the limits of what will fit in data centers is starting to come into view.

The explosive grow in dta and data processing is causing an explosive growth in the demand for for data center capacity. Data centers are multiplying like jackrabbits. One hyper-scale isn’t even finished when the next one is started.

The storage and processing capacity of a data center is limited and is of course determined when it’s built. Advances in computer and network technology can stretch it a little, but you can only keep up with the explosive growth in our data by building more data centers. It’s just … The limit of growth of data centers is coming into view and it’s closer than you think. For many reasons growth of data centers will stagnate. And that will cause … scarcity in data center capacity. Oops!

Your cost will go through the roof soon

In the recent energy crisis in Europe you’ve seen what scarcity does to prices. Prices of electricity and natural gas went through the roof. And it happened quite suddenly. In the end almost nobody went without electricity or natural gas, but cost went up so steeply that the government had to intervene financially to keep families out of trouble.

If that happens to data center prices the government won’t intervene. Companies will have to bear the higher cost themselves. At least commercial companies. What happens to your gross margin if your data center costs spin out of control rapidly?

Hello waiting list!

If capacity is scarce you’ll have to wait longer to expand your capacity. Today data center and cloud suppliers can fulfill your requests quickly. But when their capacity becomes scarce you’ll be put on a waiting list. What? Soaring prices are unwelcome, but if your orders can’t be fulfilled at all your business can’t grow at all. The waiting list is about to become a hot item on the meeting agenda. Hello!

Your innovation will grind to a halt

Data en compute intensive technologies, like AI and data lakes, require fast and quick expansion of your capacity. If that capacity has a long lead time, your innovation end up on the back burner. As much as we’d like to believe IT is the most crucial function in a company … it’s innovation that’s in the top 2 of most important strategic business functions (together with marketing). Not just starting up but also keeping innovation going is getting difficult. And that stagnation causes decline won’t be news to you, but a lot of businesses will experience that firsthand fairly soon.

Don’t be a fool

People are fairly unteachable. We don’t like to worry about the future, to really have our ducks in a row. But … Fool me once, shame on you, fool me twice, shame on me. The energy crisis took us by surprise. It shouldn’t have. Europe was forewarned long before the crisis of the dangers of it’s dependency on Russian oil and gas. Politicians and the business community alike dismissed that as fear mongering, they ignored the risk.
The same thing happened with the filling up of our power grid due to the energy transition. We are now reaping the bitter fruits of this too.
And there’s loads of examples of foreseeable scarcities that caused us to find a solution at the last minute at great cost, or we only looked for a solution after the fact.

You can see the scarcity in DC capacity coming from miles away. Now is the moment to do something about it. Now. Not in a few years when you’ve painted yourself into a corner.

An easy business case

When something is ‘expensive is irrelevant if you don’t need much of it. Before I explain further, lea word on the word expensive. Something is expensive if there is too little value in relationship to the cost. People will label something as expensive because they don’t see the value yet. Especially if it’s something in their future. In the previous examples you’ve seen they are a pitfall. That can’t always be avoided. As civilians we couldn’t just put a large tank of gas in our backyard to fuel a generator. But … this one you can see coming and you can anticipate now! But making your IT efficient takes time. So you need to start doing it on time so the coming data center crisis does not take you by surprise, or at least cause you to make the changes at the last minute in great haste and at great cost.

Making your IT more efficient will immediately - right now – give you a big cost saving. In other words, the business case is easy to make. The current generation of software is so inefficient that halving your cost, or better, is always possible in practice.

But Hugo, why don’t we just place faster hardware?

Hardware if becoming faster and more efficient, but at a much slower pace than our increasing demand for capacity. The increase in performance per watt roughly follows Moore’s law, doubling every two years. That increase is only for new hardware, existing hardware has no benefit from the improvements. Hardware does not get replaced every 2 years, so it takes much longer before you benefit from the improvements.

Because hardware improvements can’t keep up with the explosive growth in demand, we can only fulfill the demand by building more data centers. And that will have serious limitations in the near and far future.

Even if you can ‘fix’ things with faster hardware for now, that doesn’t get you to the finish line. Faster hardware becomes progressively more expensive and less efficient. Time to take action.

Why building more data centers is becoming increasingly difficult and expensive

There are a lot of reasons why we can’t build a limitless number of data centers. I’ll give you the most important ones:

• Not in my backyard: Data centers are not welcomed everywhere. The mega data center for Meta (Facebook’s mother company) in the Netherlands was canceled because there was too much resistance in the community of the town where it was to be built. And the Netherlands are not the only country where residents rise up when a data center is planned. Data centers produce noise, heat and horizon pollution. And they don’t produce the promised jobs, their not interesting for local employment rates. It’s understandable people would rather have them at a distance.

• Cooling requires scarce drinking water: Data centers produce massive amounts of heat. That heat has to go somewhere. It’s so much heat you can’t dissipate it to the air. So you need water, and lots of it, to absorb all that heat. That water needs to be super clean, otherwise it clogs up the cooling systems too quickly. In practice drinking water is used. And the supply of drinking water is limited.

• Electric power: In The Netherlands the power grid is completely full in most places. We cant fulfill the increasing demand. In other countries the situation is not much different, it’s a worldwide problem. That’s not just caused by an increase in data centers, the politically desired electrification of society also plays a large part in that. As long as the capacity is not upgraded – and we shouldn’t count on that the coming 10-15 years – the available capacity of the power grids imposes a severe limitation on all sorts of business activity, including data centers. Some data centers today cannot have their power needs met.

So how do I prepare?

At the very least you should start on time. In 1999 there was a sudden Y2K panic and systems had to be adapted in great haste and at towering cost. People had been warned as early as 1995 … If you start on time you can execute the process in a controlled manner and at much lower cost.

Book an appointment with me and you’ll have a plan. A plan that prepares you for the data center crisis everyone can see coming, in a timely and cost effective manner.

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