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Data Centers in the Post-Coronavirus Economy

By: Kayla Matthews on April 27, 2020

As the COVID-19 pandemic continues unfolding, people wonder how data centers fit into the post-coronavirus economy. Far more individuals are using the internet now to get work done, shop and stay connected with friends as they remain at home. How might that situation evolve over the coming months?

Potential New Construction Delays

The global impact of the coronavirus is arguably one of its most problematic aspects. As businesses deal with supply chain shortages and slowdowns, they cannot necessarily start doing business with another provider in a different part of the world to compensate. There's no guarantee that approach would reap the benefits sought. If COVID-19 hasn't severely affected a country or area by now, it might soon. 

Some analysts think the lockdowns and other challenges associated with the coronavirus could hinder new data center building projects. Colby Synesael, a managing director at Cowen, noted, “We believe it’s likely that most data center providers will experience some form of delay in construction and/or customer installation due to [COVID-19]."

He continued, "We have heard very little that would suggest widespread delays in sourcing equipment used in the construction of a data center, as most data center operators and/or manufacturers currently have enough inventory in stock. The key question is how long will that last, with some suggesting that if certain countries and businesses are still shut down in three to six months, this aspect will become more problematic."

Facebook emerged as the first big name affected by the coronavirus regarding construction on a new hyperscale data center. It halted its Clonee, Ireland, construction project after some people working on it fell ill with flu-like symptoms. 

Data Centers Aiding Economic Relief Efforts

People in all sectors frequently discuss the effects of COVID-19 on the economy and how nations can avoid the worst consequences. In the United States, legislators seem likely to work on economic relief packages through April and beyond. One of the most talked-about initiatives is the Coronavirus Aid, Relief and Economic Security (CARES) Act. It provides individual stimulus checks to Americans, plus has aspects that help small businesses avoid laying off workers.

There is data-related component of the CARES Act, too. It includes $500 million for public health data infrastructure updates. The real-time exchange of information between authorized parties is one of the priorities of the enhancements. It's easy to see how meeting that goal could make it easier for the country's health care system to keep the coronavirus at more manageable levels, thereby supporting economic improvements. 

Another effort, led by Rolls-Royce, brings companies together to use information in mutually beneficial ways. Google Cloud, IBM and The Data City are some of the brands taking part in the so-called Emer2gent  project. The aim is to use data analytics to investigate new ways of spurring economic recoveries after COVID-19.

Participants hope data correlations will enable them to look at information in different, empowering ways that they may otherwise miss without analytics tools. Thus, data centers may substantially impact the results by facilitating the processing and storage of any information gathered.  

Cloud Computing Capital Expenditures to Rise

Even with many countries loosening the restrictions implemented to curb the spread of coronavirus, people feel unsure of when life might return to relative normalcy. The data center industry is well-positioned to help them remain productive, entertained and connected from home, however.

Some industries, including dentistry, are heavily reliant on apps and data transfers while carrying out out remote consultations. Others, like construction, see the value of data centers as they use remote project management services and Internet of Things (IoT) equipment on jobsites. 

A report published in late March by the Dell'Oro Group projected cloud computing companies to up their capital expenditures (capex) despite the chaos caused by COVID-19. Baron Fung, the company's research director, said, "Despite recent market uncertainties, we anticipate the Tier 1 cloud service providers to increase data center capex as planned, primarily on servers, as the sector seeks to resume capacity expansion."

He also noted how a general enterprise spending reduction would work in favor of cloud computing providers. Those companies will increase their infrastructure to cater to customers.

"We project a steep decline in enterprise IT spending due to severe near-term supply-and-demand disruptions from COVID-19. Enterprises will seek to conserve capital during these uncertain times and resort to the cloud to satisfy near-term demand for digital services. We expect that the cloud service providers will need to expand their infrastructure at a measured pace to capture this incremental demand," Fung said. 

Data Centers Will Remain Relevant

There will be no question of the continued necessity of the data center industry moving forward. However, some long-term impacts are yet to emerge as COVID-19 continues to challenge the world.

 

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