A New Year always marks a great time to look back and reflect on the previous year and predict what it means for the coming year. It’s specifically an exciting time for the Data Center Physical Infrastructure research at Dell’Oro Group, with the program’s first publication of the Q3 2021 Report. While we did not make any predictions for data center physical infrastructure in 2021, we can certainly recap the year before looking at 2022 predictions.
For the data center physical infrastructure market, 2021 can be split into two major themes. During the first half of 2021, the market for data center physical infrastructure rebounded strongly, growing 17.7% to $10 billion after a pandemic-induced market dip in 2020. Year-over-year comparisons were favorable, but cloud service provider investment and rebounding enterprise spending in North America and EMEA drove the market past 2019 levels. However, the story changed in the second half of 2021. New covid-19 variants Delta and Omicron reared their ugly heads, while supply chains began to break down, leading to a lack of availability in components and products, raw material price increases, and labor and logistical issues. We forecast that this slowed data center physical infrastructure growth to 4.7%, with the market reaching $11.4 billion in revenues during the second half of 2021. Data center physical infrastructure vendors entered 2022 with record backlogs, but questions remain on how much supply they will be able to deliver as demand continues to outpace supply. While these supply chain issues will likely persist throughout 2022, what else does the data center physical infrastructure market have in store for us?
1. Plans to Reach Long-Term Data Center Sustainability Goals Begin to Materialize
As the global COVID-19 pandemic accelerated digital adoption and growth throughout 2021, it also cast a large shadow on the growing climate impact of data center growth. It’s no wonder sustainability quickly became one of the most common buzzwords in the industry. The data center industry responded with aggressively expanding sustainability commitments, which were previously largely tied to 100% renewable energy offset credits. Renewable energy goals transitioned from 100% renewable energy offsets to 100% renewable energy consumption. Data center water usage also came under fire, with Microsoft notably pledging to cut water usage 95% by 2024 and become water positive by 2030. But by far the most common goal set by data center owners and operators was to become carbon neutral, or even carbon negative in some cases, by 2030. Critics were quick to point out the difficult path to achieve those goals, with details on how, sparse. 2022 will bring more clarity on some of the technologies that will help enable progress towards those goals. Data Center Physical Infrastructure will specifically play a big role in a number of areas.
- Backup power connects to the grid – A large portion of data center physical infrastructure is committed to providing clean, uninterruptible power to IT infrastructure even during a utility power outage, through the use of UPS systems, batteries, and generators. Those systems largely sit unutilized when utility power is on. That is beginning to change, spurred by the adoption of lithium-ion batteries, which are creating new energy storage use cases at data center facilities. This technology, commonly referred to as Grid-connected UPS, will enable opportunities for those idle assets to become revenue-generating or cost-saving, through peak shaving, frequency regulation, and other grid participation activities, in addition to supporting better integration of renewable energy. Microsoft and Eaton have publically collaborated on grid-interactive UPS, recently releasing a white paper on the subject. We predict major strides on-grid interactive UPS systems in 2022, with details and an ecosystem forming around early pilots to support execution on larger scale rollouts.
- Fuel cells replace generators – Okay, this isn’t happening in 2022. But, the recent announcement of Vertiv, Equinix, and other utility, fuel cell, and research partners working on a proof-of-concept (POC) fuel cell use case for data centers funded by the Clean Hydrogen Partnership sure does create some excitement. Vertiv has committed to providing a 100kW fuel cell module with an integrated UPS by 2023. Here’s to hoping we can get updates throughout the year to learn more about how fuel cell technology can be applied to data centers and on what timeline.
- Data center heat re-use bubbles up to the top of sustainability priorities – Data centers consume a lot of power, and in turn, generate a lot of heat. Today, air-based thermal management systems are in place to capture and reject that heat into the atmosphere. However, that heat has a significant opportunity to be re-used, with district heating and urban farming as commonly cited examples. The difficulty in scaling data center heat re-use is that today’s thermal management designs and infrastructure largely don’t support it. In 2022, we predict that to change, with heat re-use technology being designed into new products and data center architectures. To take full advantage of heat reuse, data centers owners and ecosystem vendors will turn to liquids, which transfer energy up to ten times more efficiently than air, to get the most out of heat-reuse technology.
2. Liquid Cooling Adoption Momentum Continues as POC Deployments Proliferate and Early Adopters Begin Larger Roll Outs
Traditionally, the data center industry has been conservative in adopting new physical infrastructure technologies. Interested in bringing liquids into my IT space, let alone into the IT rack? Absolutely not. However, as Moore’s Law has struggled to keep pace, data center rack densities have started to rise. In the high-performance computing (HPC) space, air-cooling simply wasn’t an option anymore as HPC IT rack densities surpassed 20 kW, 50 kW, and even 100 kW in some cases. This trend formed the foundation of the market that is liquid cooling today. This includes both direct liquid (pumping liquids to cold plates directly attached to CPUs, GPUs, and memory) and immersion (submerging an entire rack of servers in a liquid-filled tank).
Liquid cooling market revenue growth accelerated in 2021, growing an estimated 64.3% from 2020 to $113M. Another 25% growth is forecast for 2022, with the market forecast to reach $141M, despite constrained supply chains. This growth is forecast to be driven by proliferating POCs from cloud, colocation, and telco service providers, in addition to large enterprises dipping their toes in. For early adopters, larger-scale rollouts of liquid cooling technology are forecast to begin, with increased awareness and comfort in operating liquid-cooled data centers. With momentum continuing to build, an inflection point for liquid cooling adoption appears near.
3. Supply Chain Resiliency and Integrated Solutions Drive Mergers, Acquisitions, and Partnerships
Supply chain discussions are creeping into nearly every conversation these days, so we can’t have 2022 predictions without assessing what impact they might have on the year. First, we do believe supply chain issues will persist throughout 2022, and potentially into 2023. However, we predict their lasting impact on the year will be from the mergers, acquisitions, and partnerships they drive.
Supply chain disruptions have become common place over the past three years. From the onset of US and China trade war tensions, data center physical infrastructure vendors have already been localizing supply chains in region, for region. The pandemic has only added more unpredictability to global supply chains, exposing further weaknesses. To address these weaknesses, we predict a flurry of mergers and acquisitions. We believe these acquisitions will be focused on supply chain resiliency, establishing and growing manufacturing footprints in select regions, while also supporting the delivery of holistic data center solutions at the rack, row, pod or building level. Checking off multiple of these boxes makes any potential acquisition quite appetizing in 2022.
At the beginning of next year, we’ll circle back and see how we did on our predictions. In the meantime, stay connect with the data center physical infrastructure program for the latest updates.