With the announcement of Microsoft’s 2020 Q4 revenue growth driven by the company’s cloud computing venture, CEO Satya Nadella captured the wave of change sweeping the global IT landscape.
According to Nadella, the world is experiencing the dawn of a second wave of digital transformation which will be felt by every company and industry and Microsoft is responding to this by “building Azure as the world’s computer to support organizations growing cloud needs”.
But Microsoft has not enjoyed this lucrative season alone. Other players in the cloud platform space such as Microsoft, Amazon Web Services, and Google have also enjoyed accelerated growth thanks to the COVID-19 pandemic. The astronomical demand for cloud services has kept infrastructure developers scrambling to keep up on one hand, and businesses in the industry exhilarated with record growth on the other hand.
The magic of cloud computing lies in its superior efficiency and speed in deploying applications and services. As IT teams move towards cloud platforms, hyperscale computing will continue to experience exponential growth while attracting significant revenue for businesses within the cloud computing industry.
According to John Dinsdale, Chief Analyst at Synergy Research Group, the world welcomed 111 new hyperscale data centres within the last 8 quarters – 52 of these coming onstream amidst the disruptive 2020 COVID-19 pandemic. Dinsdale further stressed that (much to the delight of data centre hardware vendors and wholesale data centre operators), a further 219 data centres were at various stages of planning or building in addition to nearly 600 data centers in operation.
2020 saw an astounding 700+ MW of data centre capacity leased, with 75% of that business coming from hyperscale customers – up from 50 – 55%. DatacenterHawk notes that the demand for hyperscale contributed to over 70% of the absorption in 2020, with a projection that this trend will continue in 2021.
Data center campuses operated by specialised developers and cloud providers will play a proprietary role as IT capacity evolves. In preparation, these campuses are expanding and creating server cities that will physically house huge collections of computers not just through leasing activity, but through land acquisitions as well. This shows an evolutionary trend on the part of cloud providers towards purchasing and building capacity as demonstrated by Microsoft’s global network.
What does the future hold for data centres?
The Microsoft Azure cloud computing platform depicts the ultimate picture of growth in the industry with its announcement of 50% growth in the company’s most recent quarter, and a projection of $14.8 billion owing to the company’s “Intelligent Cloud” segment in the current quarter.
Microsoft’s CEO Nadella reiterates that “..digital capability is key to both resilience and growth. It’s no longer enough to just adopt the technology – businesses need to build their own technology to compete and grow. Microsoft is powering the shift with the world’s largest and most comprehensive cloud platform.”
Just like Microsoft, the major cloud providers appear to be taking a global approach towards investing in data centres in a bid to shift their focus towards global business and data sovereignty.
Hyperscale facilities for the future
The scale of the cloud is expanding. Google refers to its data centres as “warehouse-scale computers” and is joined by Amazon Web Services, Microsoft and Facebook in representing the top tier of cloud spenders, followed by Apple, Alibaba and Tencent.
Synergy estimated that in the first 3 quarters of 2020, hyperscale companies spent roughly $99 billion in capital expenditure on cloud capacity – a huge shift in capital expenditure allocation that has been attributed to the pandemic. Microsoft CEO Nadella explains this stating that while the COVID pandemic has put constraints on a lot of customers, it has also brought structural change which makes digital technology such as cloud infrastructure critical for core resilience and business continuity.
In addition to driving the shift towards cloud spend, the COVID-19 pandemic has also created challenges for data center construction teams as well as their supporting supply chains.
With the completion of 52 new hyperscale facilities in 2020 alone, Synergy’s Dinsdale sees this challenge as a testament to the ongoing robust growth in the digital industries driving these investments – not just cloud computing but also SaaS, e-commerce, gaming and video services. As these companies increase in size and magnitude, so will their reliance on data centres that support their rapid expansion.
