There has been a lot of buzz in the Canadian data centre space of late. For its part, InsightaaS media has noted and recently reported on significant investments in infrastructure by large global vendors, the launch of substantial new capacity and the entry of smaller players looking to best the best with state-of-the-art hardware and efficiency platforms. But what kind of smoke smoulders behind those market mirrors? A recently released report from Datacenter Dynamics (DCD) offers some answers with an in depth look at demand, drivers, costs and constraints that are shaping development of the data center market in the Greater Toronto Area. Why the GTA? As Datacenter Dynamics Market Abstract: Toronto, put it, the Toronto region is the fifth-most-populous metropolitan area in North America, the centre of Canada’s business and financial community, as well as the country’s “largest data center hub and one of North America’s 10 largest, with roughly the same amount of operating capacity as Washington, D.C./adjacent Virginia/Maryland and Los Angeles.”
Best known for its global roadshows aimed at peer-to-peer sharing of best practices in data centre build and operation, Datacenter Dynamics is also in the research business. Based on a Global Census launched in 2011 that now covers more than 30 countries (which in turn developed out of research conducted since 2006 at DCD events), DCD Intelligence generates targeted market intel that is fashioned into the Market Digest series, easy-to-consume bites that help readers understand specific city markets. The GTA report is a recent addition to this series, prepared by InsightaaS chief analyst Michael O’Neil, as a timely perspective on local conditions that will inform discussion at the upcoming Datacentre Dynamics Toronto event scheduled for November 6th.
Key findings in the report reflect both broad industry trends, as well as circumstances unique to the region that are pushing 25% growth in GTA data centre floor space since 2011, to 590,000 square metres of ‘white space’ in 2014. Along with expansion of raised floor and associated support space, the DCD report has also captured growing power usage (up 30 percent from 2011) by IT and facilities equipment, a finding that O’Neil notes is consistent with global trends towards increased rack densities found in other concentrated urban regions.
Another key trait of the GTA market is rapid investment growth, which DCD pegs at a CAGR of 12.8 percent. According to the DCD report, Toronto’s 2014 investment growth rate for 2014 (11.7%) positions the region as “the fourth-fastest growing major global market, and the fastest growing outside of emerging market centers such as Mumbai, Shanghai and Dubai.”
But despite this growth, the DCD census has uncovered a seemingly contradictory characteristic of GTA operations — the age of existing assets, including buildings and facilities gear, which on average are the “second-oldest” relative to that of 14 global markets and “younger only than New York’s.” At the same time, a high proportion of owner/operators (80%) reported to DCD that they were most likely to engage in retrofit/refresh of some part of existing assets, and a relatively low proportion — 34% in 2013 —claimed they are likely to embark on building new facilities: more are intent on extending existing data centers (46%), consolidating facilities (43%), and/or relocating or migrating operations, likely to a colo or cloud provider (37%). Study respondents identify the desire to reduce operating cost, increase capacity and enable the adoption of virtualization/cloud as specific priorities that are driving investment.
Other findings in the Toronto report benefit from DCD’s global research effort: according to the census, Toronto operators are less concerned than the majority of their global peers about the costs or availability of power, despite the fact that power consumes 31 percent of OPEX; but do cite greater concern over the availability of IT skills.
These and other high level findings from the report offer an intriguing snapshot of the GTA market. However, the real value in the document falls from the analysis which considers Toronto market indicators within the local context and in comparison to global results. While growth in white space and energy consumption indicate substantial demand for data centre capacity in the region, factors such as local investment priorities play are likely to play a critical role in market development. DCD, for example, believes that purchases to update facilities equipment will outpace growth of the market as a whole since Toronto’s aging infrastructure is incapable of meeting the power demands of new, high density server racks. Similarly, the prioritization of retrofit/refresh of existing facilities, by IT services and colocation providers in particular, which, along with financial institutions, account for half of GTA capacity, has implications for the local industry: consuming an ever increasing share of OPEX, O’Neil concludes that these investments are likely to drive further impetus for change and improvement. In his view, specific investment focus on “increasing operational efficiencies” over time will resonate with corporate sustainability strategies that are impacted by Scope 2 emissions (generated through the use of electricity, especially by power hungry data centres), while in the short term, Toronto operators who can access reliable hydro and nuclear supplies delivered by Ontario Power Generation remain unfazed — unlike their global colleagues — by power issues around cost and availability. And while the GTA data centre industry may suffer from the “brain drain” south of the border as skilled IT workers pursue higher salaries in US operations, as O’Neil explained, this challenge may be met through outsource contracts that can provision the requisite skills — assuming operators are willing to accept higher operating costs.
The combed power of comprehensive data and local expert opinion on these and other challenges — real and perceived need for data sovereignty, for example — provide a glimpse of the GTA market that is essentially positive: O’Neil concludes that Toronto “offers the high growth potential associated with emerging economies coupled with the institutional stability of an established nation.” The ‘how’ and ‘why’ this is so, which is discussed in all its complex glory in the report, offers existing owner/operators, businesses considering market entry and consumers of data centre services insight that may guide investment decisions going forward.
The Datacenter Dynamics Converged Toronto 2014 event will be held on November 6 at the Eaton Chelsea. The event begins at 9:00 am and concludes with a networking reception from 5:20-7:00 pm. Attendees will receive a copy of the Datacenter Dynamics Market Abstract: Toronto report. For more information on the program, please click here.