luenendonk data center cloud [shutterstock: 517898035, Timofeev Vladimir]
[shutterstock: 517898035, Timofeev Vladimir]
Management Press Release

Quo Vadis, Data Center? A Luenendonk And CBRE Whitepaper

Companies that want to plan an economical and future-proof data center have to consider both the purpose of use and the likely market development. A key aspect is the search for suitable locations.

The traditionally highly dynamic market for data centers is no longer shaped solely by the sharp rise in demand, but is increasingly becoming the focus of public attention due to its growing importance for mankind: High power consumption, societal sustainability goals, increasingly scarce space in the vicinity of internet nodes, and stricter recommendations for the distance from potential sources of danger are challenges that had considerably less significance five years ago. In addition to advances in technology, these developments complicate the search for the ideal data center location. At the same time, the requirements for facilities management companies, which are essential for seamless operation, are also changing.

Since the discussion about data protection and the introduction of the General Data Protection Regulation (GDPR), the demand for data centers in Europe has increased significantly. But even within Europe, operators must balance operating costs, latency, operational security, and customer demand. In view of global efforts, sustainability is playing an increasingly important role. In a joint whitepaper, Luenendonk and CBRE evaluate the various advantages and disadvantages of different data center locations. Below are some key takeaways of the whitepaper.

How to find the perfect location for your data center

When looking for a new data center location, there is no simple recipe for success. The best possible compromise between the various influencing factors depends on the operators’ business model and the intended use.

Hyperscalers with latency-critical applications will weigh proximity to international network nodes in Frankfurt, London, Amsterdam, and Paris more heavily than low electricity prices. Companies offering computing power for smart cities and autonomous driving will prioritize 5G stations and proximity to many users over international internet nodes. Furthermore, not every application requires low latency. Enterprise operators value redundancy and security as well as low cost of ownership.

What they all have in common is that they depend on highly qualified personnel to ensure seamless operation. This can be an additional challenge, especially in peripheral locations.

The highly dynamic development in network charges and electricity prices, legal requirements, urban planning specifications, and possibilities for increasing the energy efficiency of data centers regularly requires a compilation of the current central challenges. In addition, customer requirements are changing: New business models require new data centers – both in terms of capacity and optimization for the respective application purpose.

In addition, many companies want and need to improve their CO2 balance along the value chain. This will play an even greater role in the planning and operation of data centers in the future. In the next years, data centers could mitigate peak loads in the power grid by feeding electricity back into the grid. However, due to the high availability requirement, this contribution is associated with risks for the operators and will therefore probably not be used across the board.

Away from major nodes

Most data centers require proximity to an international network node such as DE-CIX in Frankfurt am Main or AMS-IX in Amsterdam. This minimizes the distance that information must travel over fiber optic lines between the originating and receiving points. This applies at least to all data centers that connect receivers at many different points in Europe and the world.

Particularly cloud service providers with high-performance data centers, such as Amazon Web Services, Google, Apple, or Microsoft, and colocation operators are currently dependent on spatial proximity to the major international network nodes due to the necessary critical latency and will continue to be so in the future. However, most data centers are operated by companies for their own benefit (enterprise data centers).

The demand for web-based applications that require central computing power and storage capacity will continue to increase significantly in the coming years. This applies to the regions around the large data nodes as well as to the periphery, which still plays a subordinate role today.

Internet of Things embedded in Smart Home and Smart City, Industry 4.0, and other applications such as autonomous driving will also increase the importance of data centers in the periphery. The emerging 5G mobile communications will enable local applications that require low latency and therefore increase the demand for smaller data centers in the area (edge and enterprise). However, this development is not an alternative to large data centers, but a complement.

Despite fiber optic connections, latency is largely determined by the distance to the internet nodes that connect different network layers and operators. Thus, proximity to the major internet nodes is an essential location factor for all latency-critical applications.

Similar to power grids, international internet nodes are interconnected via (trans-)continental cables and satellites. The closer a data center is located to an international node, the lower the latency. At the next lower level, regional nodes are connected to the backbone networks.

Residential and commercial end users are usually connected via regional networks. If the majority of the expected users are located in the region, regional nodes may be a suitable alternative for data center operators to international nodes.

Increasing the sustainability of data centers

Since 2017, many countries have been tightening their measures to reduce CO2 emissions. When Ursula von der Leyen took office as President of the EU Commission, she placed Europe’s contribution to limiting global warming at the center of her agenda. In the meantime, numerous countries have adopted far-reaching measures to regulate greenhouse gas emissions, which have significant economic implications for the power-intensive data center industry.

Many international operators and customers are striving for carbon neutrality. The American investment company BlackRock, for example, now invests primarily in sustainable companies that focus on the entire supply chain, including data centers. Data center operators for whom the direct purchase of CO2-neutral generated electricity – i.e., without compensation through certificates – is highly relevant often opt for locations such as Scandinavia, where a particularly high proportion of electricity is already generated sustainably today.

The environmental balance of data centers can be improved not only by the purchase of environmentally friendly generated electricity, but also by the subsequent use of the waste heat. This can contribute to reducing electricity requirements and thus emissions elsewhere.

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