Study Revises Expectations of Data Center Construction Outlays

March 25, 2011
Electrical manufacturers have been fighting hard for their share of the market for construction of new data centers

Electrical manufacturers have been fighting hard for their share of the market for construction of new data centers. A new study may change their expectations of that market. Efficiency advances in the design of data centers will flatten the growth curve in spending on data center construction over the next five years, but long-term growth looks pretty robust, according to a whitepaper released last week by engineers at Microsoft Corp., Redmond, Wash.

The study, titled “Projecting Annual New Datacenter Construction Market Size,” was produced by Christian Belady, Microsoft’s general manager - datacenter advanced development, who begins with a discussion of whether Jevon’s Paradox — the idea that technologies improving efficiency also increase the rate of consumption of the conserved resource — can explain the explosive growth in online services and the attendant demand for new data centers full of computer servers.

Belady finds that, “The past year has brought us significant changes in the cost per megawatt (MW) of capacity as a result of broader adoption of airside economization and advances in software resiliency.” Where today construction of a new data center costs on average $15 million per MW, new designs are emerging that are as low as $6 million per MW. Belady sets out to estimate the growth of the data center market in light of that change.

The study points out several factors that could limit the growth of data center construction, including uncertainty about the economy, the costs of energy, construction and labor and the impact of carbon regulations. Setting those unpredictable factors aside, he concentrates on improvements in the efficiency of data-center designs.

“There is a force that is effecting the annual growth in data center construction that is a bit more tangible: the shift from highly redundant and well-controlled data centers to lower cost, highly-efficient cloud data center designs. These designs leverage their scale and application redundancy, as opposed to hardware redundancy, to drive down cost. In addition, these designs use aggressive economizations that employ either liquid or air to help drive down cost and substantially improve efficiency. These data centers today are characterized by costs on the order of $6 million per MW and will continue to go lower in the future,” Belady writes.

The transition to those more efficient technologies will flatten the growth curve for investment in data center infrastructure over the next five years before it resumes its upward trajectory, Belady writes. He uses these changed expectations to redraw growth curves for the data center market, revising estimates for construction in 2020 from over $200 billion worldwide (projected using the prevailing $15 million/MW average) to about $78 billion. Estimates for U.S. data center construction in 2020 are similarly revised down to about $18 billion from about $50 billion.