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fifteenfortyseven 2023 Predictions: The Trend Towards the Edge

vmblog-predictions-2023 

Industry executives and experts share their predictions for 2023.  Read them in this 15th annual VMblog.com series exclusive.

The Trend Towards the Edge

By John Bonczek, CRO, 1547

There are many market forces that will drive change in 2023 and in the predictable future. Although the COVID-19 lockdowns are primarily behind us in the US, the pandemic significantly expanded on remote and hybrid work capabilities. In addition, evolving device requirements, soaring data generation across multiple sectors, and economic uncertainty are creating new challenges, needs, and opportunities in the Edge Data Center space.

As companies are utilizing a combination of on-premise, hybrid, and public cloud, they are requiring data centers to adopt cloud principles, making data center infrastructure more cloud-like. This includes being service-centric, elastic, agile, energy-efficient, and highly scalable with capacity on-demand and consumption-based pricing. [1]

The Edge Network and Content Distribution Platforms

The global Edge Data Center market is expected to grow from $9 billion USD in 2022 to over $50 billion by 2032 with a 15% compound annual growth rate (CAGR). In North America alone, the Edge Data Center market is valued at more than $4 billion USD.[2] Edge data centers bring down latency and improve the performance of connected devices such as Internet of Things (IoT). Edge computing is a data center architecture that places resources closer to the user or device on the network edge for resolving actions and requests. Small, distributed edge data centers are being deployed to provide hyper-local storage and processing capacity at the edge of the network.

As more and more data is streamed over the Internet and the continuous rollout of high-speed networks, the greater the need for Content Delivery Networks (CDN), aka Content Distribution Platforms. The global CDN market size was valued at $15.47 billion USD in 2021. The United States held the largest revenue share of over 30% in 2021.[3] From 2022 to 2028, the CDN market is expected to reach $67.12 billion at a 20.43% CAGR by 2030.[4]

Edge data centers and CDNs will grow exponentially as automotive, manufacturing, healthcare, education, IT & telecom, energy, and government sectors, along with increased remote workforce and online shopping, all drive the need for networks to move closer to the Edge. For example, TikTok uses Cloudflare, a CDN to monitor traffic across the web. TikTok overtook Google in late 2021 to become the domain with the most recorded web activity.[5]

Tier 1, 2, and 3 Market Trends

Migration to Tier 2 and Tier 3 data center markets will continue as there is limited space and power availability in the major markets such as Northern Virginia and Silicon Valley. Within this marketplace, sustainability will be top priority in 2023 and beyond. Tier 1 data centers will need to seek innovative ways to meet sustainability demands as they are located in major cities with little room for retrofitting their existing locations. More 100+MW leases will be signed, as the shift to adoption of cloud computing continues. [ 6] Data center vacancy rates plunged from 8.9% in 2021 to just 1.9% in 2022.

The build-out of Tier 2 and Tier 3 data center markets will continue to expand due to several factors: lack of available space inside existing major market data centers, increase in the need for new data centers with the lack of available land, and the surge in data and content is driving the need for additional Edge data centers. One of the latest data center acquisitions by 1547 Critical Systems is in McAllen, TX near the Mexican border.

The Future of Acquiring Carrier Hotels

Investing in data centers will remain attractive to both private equity and real estate investors. Data centers are the fifth major real estate class investments. These transactions have grown at a compound annual rate of 15% over the last 10 years.[7] Acquiring existing data centers is a great investment as they are relatively recession-proof since most tenants sign long-term contracts, allowing data centers to generate recurring revenue.[ 8]

One of the latest data center acquisitions by 1547 Critical Systems is in McAllen, TX near the Mexican border. With over 209,000 square feet in the 17-story building, the Chase Tower is the telecommunication hub and Internet gateway between Mexico and the United States and serves as the financial hub for the greater Rio Grande Valley. With 46 unique carrier networks established in this telecommunications ecosystem, Chase Tower is Southwest's premiere carrier hotel and data center destination.

Overall, the Edge data center market is booming and will continue to move towards the Edge. Innovation and forward thinking solutions will begin to shape for 2023 and beyond. 1547 anticipates 2023 to be a year to continue evolving and proactive to provide the best solutions for the future of technology.

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ABOUT THE AUTHOR

John-Bonzcek 

As the Chief Revenue Officer of 1547 for the last five years, John has run the day-to-day sales and marketing operations of the retail colocation business, as well as the creation, communication, and implementation of the company's vision, mission, and strategy. John is a highly respected industry veteran with a reputation for successfully leading top sales organizations in the retail colocation data center industry.

Before joining 1547, John served as Vice President at Digital Realty Trust | Telx for 14 years. He received his undergraduate degree from Seton Hall University and his MBA from Stillman School of Business.



[1] Tech Republic: "Gartner analysis: IT infrastructure trends for 2023", December 12, 2022

[2] Global Market Insights: "Edge Data Center Market", November 2022

[3] Grand View Research: "Content Delivery Network Market Size, Share & Trends Analysis Report By Content-type (Static, Dynamic), By Solutions (Web Performance Optimization, Cloud Security), By Service Provider, By End Use, By Region, And Segment Forecasts, 2022 - 2030"

[4] Market Research Future: "Content Delivery Network Market Projected to Hit USD 67.12 Billion at a 20.43% CAGR by 2030 - Report by Market Research Future (MRFR)", November 16, 2022

[5] ScreenRant: "TikTok Somehow Ended 2021 With More Internet Traffic Than Google", December 23, 2021

[ 6] CBRE: "North America Data Center Trends H1 2022", September 26, 2022

[7] JLL: "H1 2022 Global Data Center Outlook", August 29, 2022

[ 8] Motley Fool: "Investing in Data Center REITs", July 8, 2022

Published Friday, January 20, 2023 7:34 AM by David Marshall
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