Demand for Data Centers on the Rise

When most people think of data centers, “big” and “boring” come to mind. It’s not exactly the sexiest topic to talk about at length. But thanks to cloud computing, this area may see its attraction value rise. A lot.

New cloud services are coming online on a close-to-daily basis. Evidence of this can be seen at this week’s Consumer Electronics Show (CES). With this growth, the demand for webscale data centers to power them is also on the rise.

According to Gigacom, Sam Barnett, directing analyst for data center and cloud for the market researcher Infonetics said of this growth, “In public cloud, where you do more things for more people — things like iCloud (NASDAQ:AAPL) or perhaps what Acer and Lenovo are doing [at CES], you’ve got to build out data centers to accommodate a bigger user base.”

Infonetics recently came out with data to support this comment. The company’s research showed that global data centers with the largest centers are also the ones with the most aggressive plans to build additional capabilities.

The company did not include the names of the companies surveyed, but they said it included large telecoms, cable operators and big data center and colocation providers. The large Internet content providers including Google (NASDAQ:GOOG), Facebook and Yahoo (NASDAQ:YHOO) were not surveyed.

In the survey of 19 big data centers, those with the biggest of the big “super data centers” have plans for additional ones. Aggregate numbers from these companies show they plan to expand from three to five data centers by the end of 2013. (Super data centers has been defined as more than 10,000 physical servers.)

Barnett commented on the growth, “That is very significant growth in a short amount of time.” He added there is also medium and large data center expansion occurring but at a less dramatic pace.

According to Gigacom, these findings jive with anecdotal evidence. Case in point: the largest data centers are expanding for additional capacity. This is in response to a realization that there’s a price advantage to moving a company’s work to outside data center providers.

Data Center M&A Activity

In light of the estimated data center growth, just last year there was $12.3 billion in M&A activity in this arena, according to Broadcom, the U.K.-based consulting firm. While most deals came in less than $100 million, a few were off the charts. This includes CenturyLink’s (NYSE:CTL) $2.5 billion Savvis purchases and the KKR (NYSE:KKR), Silver Lake and Technology Crossover Ventures buying GoDaddy for $2 billion. There was also Verizon’s (NYSE:VZ) purchase of Terremark.

A super-data center provider such as Amazon (NASDAQ:AMZN) runs its center very well. But look for the growth of the big data center providers to continue.

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To contact the reporter on this story: Debbie Baratz at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com