How new AI calls for are fueling the info middle trade within the post-cloud period

The rising use of synthetic intelligence (AI) means a speedy improve in knowledge use and a brand new period of potential knowledge middle trade development over the subsequent two years and past.

This shift marks the start of the “AI Period,” after a decade of trade development pushed by cloud and cell platforms, the “Cloud Period.” Over the previous decade, the biggest public cloud service suppliers and web content material corporations propelled knowledge middle capability development to unprecedented ranges, culminating in a flurry of exercise from 2020 to 2022 because of the surge in on-line service utilization and low-interest-rate financing for tasks.

Nevertheless, there have been vital shifts throughout the trade previously yr, together with a rise in financing prices, construct prices and construct instances, mixed with acute energy constraints in core markets. For instance, typical greenfield knowledge middle construct instances have prolonged to 4 or extra years in lots of international markets, roughly twice so long as a number of years in the past when energy and land had been much less constrained.

In the meantime, the biggest web corporations are participating in an accelerating race to safe knowledge middle capability in strategic geographies. For every of the worldwide know-how corporations, AI is each an existential alternative and a menace with distinctive challenges for knowledge middle capability planning. These dynamics are more likely to end in a interval of elevated volatility and uncertainty for the trade, and the stakes and diploma of issue of navigating this setting are larger than ever earlier than. 

Versatile knowledge middle capability planning can enable for altering inputs in quickly altering markets. Trying again, the Cloud Period gave rise to a totally new set of market-propelling prospects with completely different wants than earlier generations. Trade gamers that had been in a position to tackle these evolving wants gained an outsized share over the past trade cycle. 

Key issues for knowledge middle trade executives and their buyers ought to be:

• State of affairs planning to capitalize on the evolving wants of the market. 
• Proactive, but versatile, methods for market choice, facility design and different future choices.

New period of shopping for knowledge middle capability: Programmatic shopping for is over

Throughout the Cloud Period, public cloud service suppliers grew to become extra refined in forecasting the ramp-up of demand and adopted a extra programmatic strategy to procuring capability. For a number of years, these consumers usually procured comparatively normal quantities of third-party capability structured with an preliminary dedication, adopted by a reservation and a proper of first supply for an identical quantity. Nevertheless, as demand finally outpaced the unique forecasts, cloud service suppliers (CSPs) needed to return to the marketplace for extra capability. 

Over the previous two years, buyer conduct has notably shifted: With the advantage of hindsight, knowledge middle prospects at the moment are more and more prepared to signal considerably bigger offers, significantly in markets the place energy is presently comparatively extra accessible to keep away from last-minute scrambles for extra capability and sophisticated footprints. They’ve additionally demonstrated a willingness to lease capability at larger costs in markets the place capability is constrained. 

Key consideration for executives and buyers: 

• Prior fashions and expectations might have adjustment to mirror this Evolution in buyer shopping for conduct. 

Self-build knowledge middle improvement approaches are evolving

The biggest cloud and web corporations, the hyperscale consumers within the knowledge middle trade, have traditionally most popular to construct capability themselves in markets the place there’s vital anticipated demand, potential financial benefit and manageable danger.

Nevertheless, intense competitors has led these gamers to rely extra on leased capability from third events to get a extra environment friendly path to market. In response, there are indicators that the self-build technique could also be shifting.

Hyperscaler organizations acknowledge that it’s unrealistic to self-build every little thing, and leasing will proceed to play an necessary position in capability procurement. Consequently, hyperscalers are relying extra closely on leasing for velocity to market benefit, whereas additionally contemplating smaller self-builds to doubtlessly offset future demand. This means a possible improve within the complete variety of self-builds and a extra heterogeneous mixture of self-builds and leased capability inside cloud areas and even particular person availability zones. For third-party suppliers, assessing the specter of potential future migration danger, given this dynamic, shall be more and more necessary. 

Key consideration for executives and buyers: 

• The shifting mixture of self-build vs. leasing throughout the trade and inside particular native markets might alter the dimensions of the addressable market, execution decision-making, and potential dangers.

Elevated energy demand for AI workloads, cooling shift to liquid

AI workloads require power-hungry graphics processor models (GPU), leading to a lot larger energy density necessities throughout the knowledge middle. Presently, the AI market is comparatively homogenous on the server infrastructure degree, with Nvidia holding about 95% of the GPU market for machine studying (ML).

Subsequently, nearly all of high-end AI workloads are run on comparable {hardware}: Particularly, chassis consisting of eight of Nvidia’s newest AI-specific GPUs (H100s), with every chassis consuming 5 to 6kW of energy. As much as six chassis can slot in a single knowledge middle rack, leading to complete rack densities within the 30 to 40kW vary, in comparison with roughly 10kW/rack densities for commodity public cloud workloads. 

Consequently, hyperscalers and knowledge middle operators should discover methods to successfully cool the tools. Some main hyperscalers have introduced plans to shift to liquid cooling options or elevate the temperatures inside their knowledge facilities to assist these larger densities. 

Key issues for executives and buyers: 

• Present designs ought to assist the long run wants of power-dense workloads as densities shift over time.
• Deciding on completely different cooling know-how choices might have to contemplate each financial and sustainability considerations.

Environmental, Social and Governance (ESG) calls for

The info middle trade ESG issues are primarily targeted on sustainability. To attain their sustainability objectives, trade contributors have introduced ambitions associated to renewable power utilization, water utilization and discount of their carbon footprints. Knowledge middle operators are using a wide range of methods, the place accessible, to fulfill these objectives:

• Effectivity enhancements
  • Power-efficient designs utilizing applied sciences corresponding to free cooling, environment friendly energy distribution and environment friendly lighting techniques
• Renewable power utilization
  • Procuring renewable power from the grid
  • On-site renewable era, together with photo voltaic and wind
  • Energy buy agreements (PPAs) for long-term renewable power, specifying quantity and worth
• Water utilization
  • Air-cooled techniques
  • Closed-loop water techniques to cut back water use
  • Rainwater harvesting and water recycling
  • Water-free cooling, corresponding to evaporative cooling or adiabatic cooling
• Carbon neutrality
  • Power restoration utilizing warmth from IT tools
• Waste discount 
  • The flexibility to make the most of these methods will range extensively by market relying on native local weather, native power combine and different components corresponding to the necessity for employee security. 

Key issues for executives and buyers: 

• ESG technique ought to be differentiated from opponents. 
• An ESG technique ought to attempt to handle desired, measurable change, or it could run the chance of being labeled as “greenwashing.”

AI plugins: Subsequent wave of ecosystems

OpenAI has lately introduced plugins to assist third-party providers, corresponding to widespread on-line ordering and reservation functions. These plugins are designed to assist builders entry and combine exterior knowledge feeds instantly into OpenAI’s language mannequin, permitting for extra refined coaching and prompting capabilities.

This new performance might doubtlessly reshape present knowledge middle ecosystems round particular industries or knowledge sources. As this dynamic evolves, will probably be important for operators to determine future “magnets” for these communities of curiosity and supply a related set of connectivity merchandise to assist the wants of those ecosystem contributors. 

Key issues for executives and buyers:

• To assist ecosystem improvement, the appropriate set of merchandise, companions and infrastructure is vital. 
• It is very important determine the highest-value prospects on this new market setting and decide how the gross sales group is supplied to focus on them.

Conclusion

The stakes have by no means been larger for knowledge middle trade contributors to develop proactive, versatile methods to navigate this new period and construct the appropriate knowledge middle capability in the appropriate markets. AI is driving elevated knowledge storage demand, which is positioned to outstrip provide within the close to time period. Builders, buyers and customers will profit from versatile knowledge middle infrastructure methods that may harness the AI revolution and result in outsized development.   

Gordon Bell is EY-Parthenon principal for technique and transactions at Ernst and Younger LLP.

Lillie Karch is EY-Parthenon senior supervisor for technique and transactions at Ernst and Younger LLP

The views mirrored on this article are the views of the authors and don’t essentially mirror the views of Ernst & Younger LLP or different members of the worldwide EY group.