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.
##
ABOUT THE AUTHOR
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