The importance of the "Big 4" European data centre markets - London, Amsterdam, Frankfurt and Paris - will increase over the next three years, with presence in all four markets becoming a major competitive differentiator by 2016, but power shortages could lead to problems in the future, according to a new report.
The Datacentres Europe IV report, published by consulting firm BroadGroup, found that significant growth will occur in the wholesale data centre segment in Europe over the next three years, and data centres will increasingly target vertical segments such as cloud, media and finance.
Meanwhile the Big 4 markets, which represented around 85% of data centre Capex in the first quarter of 2012, will continue to attract huge focus. London's importance as a financial hub and telecoms centre, together with its extensive use of outsourcing and managed services, has guaranteed its position as one of the Big 4 since the early 1990s.
However, the report suggests that space is increasingly an unreliable and arguably misleading metric for data centres, and power supply has become more of a priority. This is not just a matter of cost, but also availability, quality, diversity, renewables, competition, regulation and other factors, according to BroadGroup.
This change of tack could have a significant impact on London's long-term status as one of the top four European data centre markets, because power is becoming increasingly expensive to obtain and is potentially subject to high taxation and regulation. The report warns that the UK's reliance on gas imports could lead to brown-outs as early as 2013.
"Short-term, it has made limited difference as demand is still strong, viable alternate options scarce, and most users still like data centres close to their business hubs," Steve Wallage, managing director of BroadGroup Consulting told Techworld.
"But in an era of ever improving telecoms, cloud and fundamental transformation of the data centre and integration with IT, the logic for placing a data centre in London becomes far less compelling."
Power supply remains a concern across all markets in the report, but some new locations are aggressively marketing their competitive advantage. The report cites Norway, Ireland, Switzerland and other locations with renewable energy resources which are seeking to attract data centres.
The report also found that, while procurement requirements are becoming smaller, shorter and more integrated, pricing of data centres will be driven upwards from 2013 onwards. This means that existing players will be focused on maximising returns from their existing assets.
Some companies are planning to re-position themselves in the cloud value chain, which offers significant growth potential and allows them to maximise the value from their existing data centre space. It has been argued that cloud could generate five times the revenue of co-location per square foot.
However, the report warns that there are some dangers in this strategy.
"The skills, capabilities, salesforce and experience needed to offer cloud services is very different from those of the data centre world," said Wallage. "Cloud opportunities, particularly PaaS, are highly price-sensitive and likely to be dominated by very large players."
He added that there is a major opportunity for data centre players to remain 'cloud-neutral' and support, rather than compete with, cloud players
"For a player like Equinix it already claims that around 25% of revenues come from this segment," he added.