s the demand for data center capacity continues to grow — CapEx spending from the top hyperscale operators totaled a record $120 billion in 2018 — the role of value chain members has never been more important, but the challenges they face continue to intensify.
Old processes, procedures, and strategies no longer suffice in today’s paradigm. A modern value chain is needed to deliver on modern data center demands. To better understand how their focus areas have evolved, where they face the most challenges and see the biggest opportunities to succeed in this new future, Schneider Electric commissioned research that surveyed more than 200 decision makers across the four main value chain members: construction managers, electrical contractors, consulting engineers and distributors/integrators. The report, “The Impact of Hyperscale Data Centers: How the Wave is Changing the Value Chain,” sheds light on how hyperscale and colocation trends are impacting the current dynamics and future model of the data center value chain.
Overall, the study found that while new technology constructs such as open architectures, edge deployments, the software-defined data center (SDDC), prefab, and AI/digitization are having profound impacts on all members of the value chain, most value chain respondents agree hyperscale presents the biggest positive impact to their businesses. (Fig. 1)
The increase on profit margins and opportunity to gain new skills and expertise were some of the most significant opportunities presented. Nearly three-quarters (70%) of electrical contractors surveyed said they are looking forward to gaining new skills, but only 37% see potential in the scale of deployments. Given the need for new skills to support larger projects, the gap suggests that this group is both excited and anxious about what’s ahead. Conversely, the study reveals that hyperscale has amplified the impact of the industry’s ongoing skilled labor shortage, which ranked as a top challenge and day-to-day pain point across the value chain (Fig. 2 ).
Time allocation presents an additional challenge. According to the report, in the next three years, more than half (52%) of the value chain will spend the majority of their time onhyperscale and colocation projects (Fig. 3). Electrical contractors (26% to 54% of respondents) and construction managers (20% to 53% of respondents) will see the biggest shift — an increase of 157% and 165%, respectively.
This rise might not be surprising considering that more subsystems than ever are being procured by end-users.
Furthermore, the study found that it pays for electrical contractors to stay on top of new technology and applications. As a result, it’s typically more effective to train internally rather than wait for the industry to catch up. In fact, with the condensed build time, hyperscale is turning out to be so lucrative for contractors, many are making enough money to work only part of the year. Unfortunately for providers, this shortened availability compounds the existing shortage.
Members of the value chain agreed that increased collaboration — across roles as well as with end-users and manufacturers — and transparency are key to overcoming these challenges and supporting longer-term hyperscale success.
The insights revealed in the report may help serve as guidance to value chain members as they consider their roles over the next decade, as well as manufacturers and vendors when it comes to better understanding the people with whom they work. Key takeaways from the survey’s respondents of electrical contractors include:
- 42% of electrical contractors dedicated more than half their time to hyperscale and colocation projects in the last 12 months.
- In terms of the impact to their business, 51% placed hyperscale at number one, while 75% placed it in the top three as compared to other data center trends, such as open architectures, edge deployments, SDDC, prefab, and AI/digitization.
- Electrical contractors say their top three day-to-day pain points are: pressures to complete work in tighter deadlines (49%); greater client involvement (42%); and emerging construction technology (42%).
- Seven in 10 (70%) electrical contractors consider the ability to gain new skills and expertise to be the biggest opportunity when it comes to hyperscale and colocation projects.
The report concludes that the hyperscale trend will only get bigger and that Schneider Electric’s research indicates the value chain is poised to take advantage of its potential and is evolving with the era, but traditional (e.g., security) and recent (e.g., labor shortage) obstacles are compelling a transformation in how they operate. Hyperscale success will require continued fresh thinking and ongoing innovation. Ideas will come from every part of the value chain. Perhaps it will be one of these developments that creates the next great data center trend.
To access the complete report, click here.
