The COVID-19 pandemic — and the subsequent disruption to supply chains — demonstrated the data center industry’s reliance on interdependent global markets and the components they produce. Although the data center sector was just one of many industries affected, the extensive variety of the often complex electrical and mechanical equipment involved exacerbated supply chain problems.
Engine generators illustrate the problem: they typically comprise hundreds of constituent parts shipped from at least a dozen countries spanning North America, Europe and Asia. Shortages of seemingly ordinary components, such as voltage regulators, air filters, valves or battery terminals, can lead to major delays in delivery. Even when the production of data center equipment (such as lead-acid batteries and fiber optic cables) is relatively localized, pricing and availability will be subject to changing dynamics in global markets.
The end of the pandemic does not mean a return to the normality of previous years, as strong pent-up demand, higher costs and abnormally long lead-times persist.
The Uptime Institute Supply Chain Survey 2022 illustrates the extent of the problem, with one in five operators reporting major delays or disruption to their procurement over the previous 18 months. Unsurprisingly, satisfaction with vendors’ supply chain management has nosedived: nearly half of respondents are unhappy with at least some of their suppliers. The availability of computer room cooling units and major electrical equipment — specifically, UPS, engine generators and switchgears — appear to be the greatest pain-points as of the end of 2022. Larger operators (superior purchasing power notwithstanding) are apparently bearing the brunt of supply problems.
A total of 40% of operators responding to the survey confirmed they were investigating additional sources of supply in response to these issues. A similar number reported increasing their inventories of parts and materials to safeguard maintenance schedules and operational resilience. Vendors, too, have taken similar measures to address shortages and delays. Supply appears to be improving as of the second half of 2022, with more than half of operators reporting improvements, albeit slow improvements for most (Figure 1).
Figure 1 Operators see slow improvements in the data center supply chain
Rising geopolitical tensions generate risks
Crucially, geopolitical dynamics — specifically between the US-led Western alliance, China and, to a lesser degree, Russia — are giving rise to additional threats. Even with more diversified supplies, higher inventory targets and a build-up of muscle memory, the data center industry remains particularly exposed to the threats posed by current geopolitical trajectories.
The profile of these emerging geopolitical risks is starkly different from other major events, however rare. In contrast to a pandemic, natural disaster, or grid energy crisis, it is more difficult to model the occurrence and fallout from geopolitical events — and, consequently, more difficult to develop effective contingency plans. This is because these threats are primarily the results of highly centralized political decision-making in Beijing, Brussels, Moscow and Washington, DC.
The shock therapy of the COVID-19 pandemic has made industries more resilient and mindful of potential future disruptions. Nonetheless, if some of the more radical threats posed by the current geopolitical situation become reality, their effects are likely to be longer lasting and more dramatic than anything experienced up to now.
Uptime Intelligence sees two major areas where the combination of global interdependency and concentration has made digital infrastructure vulnerable to potential economic and military confrontations, should the current geopolitical environment deteriorate further:
Semiconductor supply chains.
Subsea cable systems.
Semiconductors pose a unique problem
Nothing demonstrates the problem of global interdependency and systemic fragility better than the world’s reliance on advanced semiconductors. This issue is not just about IT hardware: controllers, processors, memory chips and power electronics are embedded in virtually every product of any complexity. Chips are not present just to add functionality or to enhance controls: they have become essential.
The health monitoring, real-time analysis, power correction and accident prevention functions offered by modern electrical gear occur through the use of high-performance chips such as signal processors, field-programmable logic and microprocessors. Some recent delays in data center equipment deliveries (including switchgear and UPS shipments) have been caused by shortages of certain specialist chips.
This reliance is precarious because chip production is globally entangled. Semiconductor manufacturing supply chains span thousands of suppliers, across a wide range of industries, including ultra-pure metals and gases, chemical agents, high-performance lasers and optics, various pieces of wafer processing equipment, clean-room filtration systems and components, and the fine-mechanical packaging of chips. At every stage, only a small number of highly specialist suppliers are able to meet the required quality and performance standards.
The production of state-of-the-art photolithography machines, for example, relies on just three noteworthy vendors — ASML, Canon and Nikon. Of these, only ASML has the capability to produce the most advanced equipment, one which uses extreme ultraviolet wavelengths to create the smallest transistor structures.
The level of complexity and specialization required to manufacture advanced semiconductors means that no single country or trading bloc — no matter how large or resource-rich — is entirely self-sufficient, or will become so within reasonable timeframes and at reasonable economic cost. This means that multiple single points of failure (and potential bottlenecks) in the data center and IT equipment supply chain will persist.
Governments have become acutely aware of these issues. The US government and the European Commission (EC) have responded with legislation directed at supporting and stimulating investment in local production capacity (the US CHIPS and Science Act and the European Chips Act). China, too, while still lagging some five to 10 years behind its international competitors, continues to invest in its capabilities to develop a more competitive semiconductor industry. In the meantime, political battles over intellectual property (combined with problems over the supply of and access to materials, components and expertise) remain ongoing.
Any impact from these legislative initiatives is likely to take a decade or more, however, and will largely only address the “onshoring” of chip manufacturing capacity. Even assuming unsparing political will (and bottomless fiscal support for private investment) to promote self-sufficiency in chipmaking, decoupling semiconductor supply chains (all the way from raw materials to their processing) borders the impossible. The complexity and costs involved cannot be overstated.
It is for this reason that the US government’s increasingly stringent measures, designed to limit China’s access to cutting-edge semiconductor technology, are proving effective. But it is precisely because they are effective, that the situation is becoming more volatile for the entire industry — increasing, as it does, the likelihood of reprisal.
Taiwan is of particular concern. The high concentration of the global semiconductor fabrication and IT hardware manufacturing in and around the island, home to the world’s largest and most advanced contract chipmaking cluster, creates major supply chain vulnerabilities. The consequence of any major confrontation (economic or military) would result in profound and far-reaching disruption for the entire IT industry and many others.
Deep risks around subsea network
The vulnerability of subsea fiber optic cables is another concern — and, as is the case regarding semiconductors, by no means a new issue. Growing geopolitical tensions, however, have raised questions regarding the likelihood of sovereign states engaging in acts of sabotage.
Subsea fiber optic networks consist of hundreds of subsea cables that carry nearly all intercontinental data traffic, supporting trillions of dollars of global economic activity. There are currently more than 500 international and domestic networks in operation, which are owned and operated (almost exclusively) by private companies. The length of these cables make them very difficult to protect against potential threats.
Some subsea cables represent high-value targets for certain actors — and are attractive because they can be damaged or broken in secrecy and without the blowback of a traditional attack.
Most subsea cable breakages do not result in widespread outages. Typically, traffic can be rerouted through other cables, albeit at the cost of increasing latency. But when multiple lines are simultaneously severed in the same region (undermining path diversity), the effect can be more substantial.
In 2006, a major earthquake (with multiple aftershocks) in the Luzon Strait (between Taiwan and the Philippines) resulted in seven of nine subsea cables being taken offline. This caused severe and widespread outages across the Asia-Pacific region, significantly disrupting businesses and consumers in Hong Kong, Japan, Singapore, South Korea and Taiwan. Fixing these vital network connections ultimately involved more than 40% of the global cable repair fleet. Full restoration of services was not complete until seven weeks after the initial outage.
Cables are also vulnerable to human activities — both accidental and deliberate. Ships are the most common cause, as fishing equipment or anchors can catch a cable and damage it. Malicious state actors are also a threat: for example, unidentified individuals seized telecommunications nodes and destroyed terrestrial cables in 2014, as Russia occupied the Crimean peninsula. The same could happen to submarine cables.
Such acts of sabotage fall into the category of hybrid warfare: any such attack would be unlikely to trigger a conflict but, if successfully coordinated, would cause severe disruption. Protecting against such threats — and detecting and monitoring potential threats, or identifying those responsible when attacks occur — is difficult, particularly with regard to subsea cables often spanning thousands of miles. Since the location of these cables is in the public domain, and international law prohibits the boarding of foreign vessels in international waters, protecting these vital facilities is particularly fraught. Taiwan, as an island, is especially vulnerable to attacks on its subsea cables.
Attracting and retaining qualified data center staff has been a major industry challenge for years — and continues to cause substantial problems for operators worldwide. Uptime Institute’s 2022 Management and Operations Survey shows staffing and organization (54%) is the leading requirement cited by operators (see Figure 1).
Figure 1. Staffing is operators’ key requirement
In an environment where rapid growth in data center capacity has led to an increase in job openings that continues to outpace recruitment, it’s hardly surprising that attracting and retaining staff is a key pain point for data center operators.
How difficult is it to attract and retain staff?
More than half (53%) of the respondents to Uptime’s 2022 Global Data Center Survey report that their organizations are having difficulties finding qualified candidates — up from 47% in last year’s survey and 38% in 2018.
Staff retention is also an issue: 42% of respondents saying their organization is having difficulty retaining staff due to them being hired away, compared with just 17% four years ago. Moreover, a majority of those workers changing jobs are being hired by direct competitors (see Figure 2).
Figure 2. More operators struggle with attracting and retaining staff
Women an underrepresented force
Historically, data center design and operations teams have employed few women, and this hasn’t improved much since Uptime first started collecting information on gender demographics in our data center surveys in 2018.
More than three-quarters of operators (77%) report that they employ around 10% women or less, unchanged since 2018. Strikingly, one-fifth of respondents (20%) still do not employ any women at all in their design and operations teams, although this number is down from 26% in 2018 (see Figure 3).
Figure 3. Women remain underrepresented in the data center industry
In short, a growing number of unfilled positions coupled with the low and stagnating proportion of women workers suggests the data center industry still has much work to do to leverage the untapped potential of the female workforce.
How the inability to hire is affecting management and operations
The shortage of qualified staff is seen as a root cause of a host of data center operational issues.
Data center staff execution (36%), insufficient staff (28%), and incorrect staff processes / procedures (21%) all rank among the top four most common root causes of data center issues in Uptime’s 2022 Management and Operations Survey (see Figure 4).
Figure 4. Staffing – a major root cause of management and operations issues
In addition, when we asked about the key challenges experienced in the last two years, 30% of respondents describe staffing issues — by far the highest response category.
As one respondent explained: they’re seeing a “lack of available and qualified resources for both technical and coordination tasks.” A separate respondent reports that their organization has “insufficient levels of operation and maintenance personnel,” and another finds “staff turnover and inadequate training / experience” to be their company’s biggest pain point.
Will AI come to the rescue? Not in the near term
Although artificial intelligence (AI)-based components are currently being incorporated into data center power and cooling systems, it’s unclear when — or if — AI will begin to replace data center employees.
When asked about the potential impact of AI on data center staffing, only 19% of respondents believe it will reduce their operations staffing levels within the next five years — down from 29% in 2019. This decrease hints at lowered industry expectations that are more in line with the near-term capabilities of AI.
Just over half (52%) of respondents expect AI to reduce their staffing numbers in the longer term, but not in the next five years (see Figure 5).
Figure 5. Fewer operators expect AI to reduce staffing in the near term
In a related finding from this year’s annual survey, more than half of respondents (57%) say they would trust an adequately trained machine-learning model to make operational decisions, which is up from 49% last year.
Bottom line: staffing remains a major concern for operators
In its most recent forecast of data center workforce requirements, Uptime estimates that staffing requirement levels will grow globally from about 2.0 million full-time equivalents in 2019 to nearly 2.3 million by 2025 (see The people challenge: Global data center staffing forecast 2021-2025).
As the need for qualified staff increases, however, operators are having increasing difficulty filling critical data center roles and retaining staff in these positions. Additionally, an aging workforce in the more mature data center markets, such as North America and Western Europe, means a significant proportion of the existing workforce will retire concurrently — leaving data centers with a shortfall on both headcount and experience.
Hiring efforts are often offset by jobseekers’ poor visibility of the sector, but some employers are looking at more effective ways to attract and retain talent, such as training and mentoring programs, and improving their diversity / inclusion efforts. Staffing is a serious concern for the data center industry now and going forward. Uptime will continue to monitor the industry’s ongoing difficulties in maintaining adequate staffing levels.
https://journal.uptimeinstitute.com/wp-content/uploads/2023/02/Data-center-staffing-an-ongoing-struggle-featured.jpg5391030Dr. Paul Carton, Research Vice President, Uptime Institutehttps://journal.uptimeinstitute.com/wp-content/uploads/2022/12/uptime-institute-logo-r_240x88_v2023-with-space.pngDr. Paul Carton, Research Vice President, Uptime Institute2023-03-01 13:00:002023-03-01 11:52:50Data center staffing — an ongoing struggle
Many digital infrastructure operators have set themselves carbon-neutral or net-zero emissions goals: some large hyperscale operators claim net-zero emissions for their current operating year. Signatories to the Climate Neutral Data Center Pact, a European organization for owners and operators, aim to be using 100% clean energy by 2030.
All these proclamations appear laudable and seem to demonstrate strong progress for the industry in achieving environmental goals. But there is a hint of greenwashing in these commitments which raises some important questions: how well defined is “net zero”? What are the boundaries of the commitments? Are these time frames aggressive or the commitments meaningful?
There are good reasons for asking these questions. Analysis by Uptime Institute Intelligence suggests most operators will struggle to meet these commitments, given the projected availability of zero-carbon energy, equipment and materials and carbon offsets in the years and decades ahead. There are three core areas of concern that critics and regulators are likely to raise with operators: the use of renewable energy certificates (RECs), guarantees of origin (GOs) and carbon offsets; the boundaries of net-zero commitments; and the industry’s current lack of consensus on the time frame for attaining true net-zero operations.
RECs, GOs and carbon offsets
RECs and GOs are tradeable certificates representing 1 MWh of zero emissions of renewable energy generation; carbon offsets are certificates representing a quantity of carbon removed from the environment. All of these tools can be used to offset operational carbon emissions. Most current net-zero claims, and the achievement of near-term commitments (i.e., 2025 to 2035), depend on the application of these tools to offset the use of fossil-fuel-based energy.
Under currently accepted climate accounting methodologies, the use of RECs and offsets is a viable and acceptable way for digital infrastructure operators to help reduce emissions globally. However, using these certificates can distract from the real and difficult work of driving infrastructure efficiency improvements to increase the workload delivered per unit of energy consumed and the procurement of consumed clean energy to reduce the carbon emissions per unit of consumed energy toward zero.
Uptime Institute believes that stakeholders, regulators, and other parties will increasingly expect, and perhaps require, operators to focus on moving towards the consumption of 100% zero-emissions energy for all operations — that is, true net-zero emissions. This objective, against which net-zero claims will ultimately be judged, is not likely to be achieved in 2030 and perhaps not even by 2040: but it is an objective that deserves the industry’s full attention, and the application of the industry’s broad and varied technical expertise.
The boundaries of the net-zero commitment
Digital infrastructure operators have not adopted consistent accounting boundaries for their net zero commitments. While all operators include Scope 1 and 2 emissions, and while some do address Scope 3 emissions in full, others are ignoring these — completely or partially. There is no clear sector-wide consensus on this topic — either on which applicable Scope 3 emissions should be included in a goal, or in the classification or allocation of emissions in colocation facilities. This can create wide discrepancies in the breadth and scope of different operator’s commitments.
For most organizations running IT and / or digital infrastructure operations, the most consequential and important Scope 3 category is Category 1: Purchased goods and services — that is, the procurement and use of colocation and cloud services. The CO2 emissions associated with these services can be quantified with reasonable certainty and assigned to the proper scope category for each of the three parties involved in these services offerings — IT operators, cloud service operators and colocation providers (see Table 1).
Table 1 Scope 2 and 3 assignments for digital infrastructure (Category 1: Purchased goods and services emissions)
Uptime Intelligence recommends that digital infrastructure operators set a net-zero goal that addresses all Scope 1, 2 and 3 emissions associated with their IT operations and / or facilities in directly owned, colocation and cloud data centers. IT operators will need to collaborate with their cloud and colocation service providers to collect the necessary data and set collaborative emissions-reductions goals. Service providers should be required to push towards 100% renewable energy consumption at their facilities. Colocation operators, in turn, will need to collaborate with their IT tenants to promote and record improvements in workload delivered per unit of energy consumed.
Addressing the other five Scope 3 categories applicable to the data center industry (embedded carbon in equipment and building material purchases; management of waste and end-of-life equipment; fuel and other energy-related activities; business travel; and employee commuting) — necessitates a lighter touch. Emissions quantifications for these categories typically have high degrees of uncertainty: and suppliers or employees are best positioned to drive their operations to net zero emissions.
Rather than trying to create numerical Scope 3 inventories and offsetting the emissions relating to these categories, Uptime Intelligence recommends that operators require their suppliers to maintain sustainability strategies and net-zero GHG emissions-reduction goals, and provide annual reports on progress in achieving these.
Operators, in turn, should set (and execute) consequences for those companies that fail to make committed progress — up to and including their removal from approved supplier lists. Such an approach means suppliers are made responsible for delivering meaningful emissions reductions, without data center operators duplicating either emissions-reduction efforts or offsets.
Insufficient consensus on the time frame for attaining true net-zero operations
There appears to be no industry-wide consensus on the time frame for attaining true net-zero operations. Many operators have declared near-term net-zero commitments (i.e., 2025 to 2035), but these depend on the use of RECs, GOs and carbon offsets.
Achieving a true net-zero operating portfolio by 2050 will require tremendous changes and innovations in both the data center equipment and energy markets over the next 28 years. The depth and breadth of the changes required makes it impossible to fully and accurately predict the timing and technical details of this essential transformation.
The transition to zero carbon will not be achieved with old or inefficient equipment. Investments will need to be made in more efficient IT equipment, software management tools, and in clean energy generation. Rather than buying certificates to offset emissions, operators need to invest in impactful technologies that increase data centers’ workload delivered per unit of energy consumed while reducing the carbon intensity of that energy to zero.
What does all this mean for net-zero commitments? Given the difficulties involved, Uptime Intelligence recommends that data center operators establish a real net-zero commitment for their IT operations that falls between 2040 and 2050 — with five- to eight-year sequential interim goals. Operators’ current goal periods should achieve emissions reductions based on current and emerging technologies and energy sources.
After the first goal period, each subsequent interim goal should incorporate all recent advances in technologies and energy generation — on which basis, operators will be able to reach further in achieving higher workloads and lower carbon emissions per unit of energy consumed. Suppliers in other Scope 3 categories, meanwhile, should be held responsible for achieving real net-zero emissions for their products and services.
The bottom line? Instead of relying on carbon accounting, the digital infrastructure industry needs to focus investment on the industry-wide deployment of more energy-efficient facilities and IT technologies, and on the direct use of clean energy.
https://journal.uptimeinstitute.com/wp-content/uploads/2023/02/Unraveling-net-zero-featured.jpg5391030Jay Dietrich, Research Director of Sustainability, Uptime Institute, jdietrich@uptimeinstitute.comhttps://journal.uptimeinstitute.com/wp-content/uploads/2022/12/uptime-institute-logo-r_240x88_v2023-with-space.pngJay Dietrich, Research Director of Sustainability, Uptime Institute, jdietrich@uptimeinstitute.com2023-02-22 13:00:002023-02-22 09:48:39Unravelling net zero
Google was an underdog when it launched its infrastructure cloud in 2013. Amazon had already made a name for itself as a disruptive technology provider, having launched Amazon Web Services (AWS) seven years prior. Microsoft, a household name in commercial software, launched Azure in 2010. What chance did Google, a company known primarily for its search engine, have competing with cloud leader AWS and enterprise behemoth Microsoft?
Initially, it was difficult to understand Google Cloud’s value proposition. Google was primarily a consumer business, with users expected to serve themselves through instruction manuals and support portals. In a business-to-business (B2B) engagement involving significant expenditure, most cloud buyers need more of a personalized and professional relationship — i.e., help and technical support accessible round the clock, coupled with regular review meetings and negotiations.
Although organizations like the idea of the newest and shiniest technologies, it is the reliability and consistency — not just of the product but also of its vendor — that drives day-to-day success. Buyers want relationships, commitments and financial sustainability from their suppliers. Google had the technology, but its reliability and consistency as an IT services partner were untested and unclear.
Google Cloud has, since then, become a more credible enterprise cloud provider. It has achieved this by developing its partnerships and enterprise credentials while harnessing its existing reputation for innovation and scale. But Google’s endeavor to build a competitive cloud business has never been straightforward: nor has it proved possible by mimicking its rivals.
Building differentiation
When it first launched, Google Cloud had yet to identify (or at least promote) its fundamental value proposition. As part of its reinvention, however, it is now promoting itself as specializing in Big Data. Google has a core web business (search and advertising) that effectively uses the entire web as its database. Google’s search engine exemplifies outstanding web-wide reliability and simplicity, and the company is known globally for innovation on a vast scale.
Google has doubled down on this message, promising users access to those innovations that have made Google so ubiquitous — such as machine learning and web-scale databases. The company doesn’t want users to choose Google Cloud because it has low-price virtual machines; rather, Google sees its role (and brand) as helping businesses scale their opportunities, using the newest technology.
In this vein, the company recently announced new capabilities for its BigQuery database, new machine learning translation tools, and other Big Data products and capabilities at the company’s developer conference, Google Cloud Next ‘22. But even infrastructure capabilities (such as new Intel and NVIDIA server chips) as well as the general availability of Google’s latest generation of AI-accelerators (tensor processors or TPUs) were presented in the context of making the most of data. In Google’s messaging, new infrastructure doesn’t just promise faster virtual machines — it delivers better processing capabilities to customers looking to develop new ways of extracting value from data.
Building credibility
Google might be relatively new to enterprise sales, but its partners are experienced players. Google has addressed its lack of enterprise experience by partnering with systems integrators such as Infosys, HCLTech, Tata Consultancy Services (TCS), Accenture, Capgemini and Atos. It has developed European “sovereign” clouds with T-Systems, Thales and Minsait. Google offers its Anthos Multi-Cloud platform through original equipment manufacturers (OEMs) including Cisco, Dell EMC, Hewlett Packard Enterprise (HPE), Intel, Lenovo, NetApp, Nutanix, NVIDIA, and VMware.
Google is historically popular with developers due to its open-source approach. But some recent successes may be the result of its repositioning to promote business value over technical ability. This approach is more likely to capture the ear of C-level executives (who make the big, transformational decisions), including appointing primary cloud providers. Google has built credibility by selling to brands such as Toyota, Wayfair, Snap, Twitter, PayPal and HSBC.
The company also demonstrates credibility through continued investment. At Google Cloud Next ‘22 the company announced new regions in Austria, Greece, Norway, South Africa, and Sweden, bringing the total number of regions to 48. Security and productivity, too, were high on the agenda at that event, again helping to build brand credibility.
Economics is still a challenge
Although Google’s cloud business has matured considerably in recent years, it still faces challenges. As previously discussed in Cloud price increases damage trust, Google Cloud prices saw some sharp increases in October 2022 – with multi-region nearline storage rates, for example, increasing by 50%, and some operations fees doubling. Load balancers will also be subject to an outbound bandwidth charge. Google Cloud has made considerable gains in convincing users that it is a relationship-led, enterprise-focused, innovative company and not just a consumer business. But such sweeping price increases would appear to damage its credibility as a reliable business partner in this regard. Google Cloud revenue increased by 35% year-on-year in Q2 2022, reaching $6.3 billion. Despite this growth, however, the division reported an operating loss of $858 million for the same period. Google Cloud’s revenue trails that of AWS and Microsoft Azure, by a wide margin. Google Cloud may well have implemented its recent price increases with the intention of building a more profitable and more sustainable business. Its recent price hikes are reasonable, considering, as outlined above, the importance customers attach to reliability and consistency. The question is, has Google yet convinced the market that it is worth its recent price hikes? While users should continue to consider Google Cloud as part of fuller vendor evaluations, they should perhaps bear in mind its history of raising prices.
https://journal.uptimeinstitute.com/wp-content/uploads/2023/02/Is-Google-a-credible-enterprise-cloud-featured.jpg5391030Dr. Owen Rogers, Senior Research Director for Cloud Computing, Uptime Institute, orogers@uptimeinstitute.comhttps://journal.uptimeinstitute.com/wp-content/uploads/2022/12/uptime-institute-logo-r_240x88_v2023-with-space.pngDr. Owen Rogers, Senior Research Director for Cloud Computing, Uptime Institute, orogers@uptimeinstitute.com2023-02-15 13:00:002023-02-22 09:51:07Is Google a credible enterprise cloud?
A debate has been raging since cloud computing entered the mainstream: which is the cheaper venue for enterprise customers — cloud or on-premises data centers? This debate has proved futile for two reasons. First, the characteristics of any specific application will dictate which venue is more expensive — there is no simple, unequivocal answer. Second — the question implies that a buyer would choose a cloud or on-premises data center primarily because it is cheaper. This is not necessarily the case.
Infrastructure is not a commodity. Most users will not choose a venue purely because it costs less. Users might choose to keep workloads within their data centers or at a colo because they want to be confident they are fully compliant with legislation and / or regulatory requirements, or to be situated close to end users. They might choose cloud computing for workloads that require rapid scalability, or to access platform services further up the stack. Of course, costs matter to CIOs and CFOs alike, but cloud computing, on-premises data centers and colos all deliver value beyond their relative cost differences.
One way of assessing the value of a product is through a price-sensitivity analysis, whereby users are asked how they would (hypothetically) respond to price changes. Users who derive considerable value from a product are less likely to change their buying behavior following any increase in cost. Users more sensitive to cost increases will typically consider competing offers to reduce or maintain costs. Switching costs are also a factor in a user’s sensitivity to price changes. In cloud computing, for example, the cost of rearchitecting an application as part of a migration might not be justifiable if the resultant ongoing cost savings are limited.
IT decision-makers surveyed as part of Uptime Intelligence’s Data Center Capacity Trends Survey 2022 were asked what percentage of current workloads they would be likely to migrate to the cloud if their existing data center costs (covering on-premises and colos) rose 10%, 50% or 100%, respectively (assuming cloud prices remained stable).
While Uptime has neither conducted nor seen extensive research into rising costs, most operators are likely to be experiencing strong inflationary pressures (i.e., of over 15%) on their operations: energy prices and staff shortages being the main drivers.
The survey responses are illustrated in two different formats:
Figure 1 summarizes the average percentage of workloads likely to be migrated to the cloud as a result of any increase in costs.
Figure 2 shows what percentage of respondentswould make no response to any such increases (shown as 0%), what proportion would be likely to migrate some of their workloads (10% to 50%) and what proportion would be likely to migrate most of their workloads (50% or more).
Figure 1 Average likely workload migration to public cloud due to data center cost increasesFigure 2 Operators’ responses to data center cost increase
What does this data tell us? Figure 1 shows that if on-premises or colo costs were to increase by 10%, then around 12% of workloads could migrate to the cloud. If costs were to increase by 50%, approximately 24% of workloads would potentially move to the cloud. Even if costs were to double, however, only just over 30% of workloads would be likely to migrate to the public cloud. This suggests that on-premises and colo users are not particularly price-sensitive. While they are likely to have some impact, rising data center costs per se are unlikely to trigger a mass exodus to the public cloud.
Some users are more price sensitive than others, however. Figure 2 shows that 42% of respondents indicate a 10% increase in costs would not drive any workloads to the public cloud. One quarter of respondents would still be unlikely to migrate workloads even if faced with price hikes of 50%. Notably, a quarter of respondents indicate they would not migrate any workloads even if costs were to double. This may suggest that at least 25% of those organizations surveyed do not consider the public cloud to be a viable option for their workloads currently.
This reluctance may be the result of several factors. Some respondents may derive value from hosting workloads in non-cloud data centers and may believe this to justify any additional expense. Others may believe that regulatory, technical and compliance issues render the public cloud unviable, making cost implications irrelevant. Some users may feel that moving to the public cloud is simply cost-prohibitive.
Most users are susceptible to price increases, however — at least to some extent. A 10% increase in costs would drive 55% of organizations to migrate some or most of their workloads to the cloud. A total of 59% of respondents indicate they would do so if faced with a more substantial 50% increase. Faced with a doubling of their costs, over a quarter of respondents would migrate most of their workloads to the cloud. Again, this is assuming that cloud costs remain constant — and it is unlikely that cloud providers could absorb such significant upward cost pressures without any increase in prices.
Other survey data (not shown in graphics) indicates that even if infrastructure expenditure were to double, only 7% of respondents would migrate their entire workloads to the cloud. Given that 25% of respondents indicate that they would keep all workloads on-premises regardless of cost increases, this confirms that most users are adopting a hybrid IT approach. Most users are willing to consider on-premises and cloud facilities for their workloads, choosing the most appropriate option for each application.
Although the Uptime Intelligence Data Center Capacity Trends Survey 2022 did not, specifically, cover the impact of price reductions, it is possible to estimate the potential impacts of cloud providers cutting their rates. A price cut of 10% would be unlikely to attract significantly more workloads to the public cloud: but a 50% reduction would have a more dramatic impact. As indicated above, however, cloud providers — faced with the same energy-cost challenges as data center owners and colos — are more likely to absorb any cost increases in their gross margins rather than risk damaging their credibility by raising prices (see OVHcloud price hike shows cloud’s vulnerability to energy costs).
In conclusion:
Many organizations have no desire (or the ability) to use the public cloud, regardless of any cost increases, and will absorb any price hikes as best as they can.
Most organizations are adopting a hybrid IT approach and use a mix of cloud and on-premises locations for their workloads.
Rising costs (such as energy) may accelerate workload migration from on-premises data centers and colos to the public cloud (assuming cloud providers’ prices do not rise too).
The costs involved in moving applications and rearchitecting them to work effectively in the public cloud mean single-digit cost increases are likely to have only a minimal effect on migrations.
More significant cost increases could drive more workloads to the cloud since the savings to be made over the longer term could justify the switching costs involved.
Public-cloud price reductions could, similarly, accelerate cloud migration; however, dramatic price cuts are unlikely.
https://journal.uptimeinstitute.com/wp-content/uploads/2023/02/Higher-data-center-costs-unlikely-to-cause-exodus-to-public-cloud-featured.jpg5391030Dr. Owen Rogers, Senior Research Director for Cloud Computing, Uptime Institute, orogers@uptimeinstitute.comhttps://journal.uptimeinstitute.com/wp-content/uploads/2022/12/uptime-institute-logo-r_240x88_v2023-with-space.pngDr. Owen Rogers, Senior Research Director for Cloud Computing, Uptime Institute, orogers@uptimeinstitute.com2023-02-08 13:00:002023-02-06 11:34:16Higher data center costs unlikely to cause exodus to public cloud
The past year (2022) has seen regulators in many countries develop or mandate requirements to report data centers’ operating information and environmental performance metrics. The first of these, the European Commission (EC) Energy Efficiency Directive (EED) recast is currently under review by the European Parliament and is expected to become law in 2023. This directive will mandate three levels of information reporting, the application and publication of energy performance improvement and efficiency metrics, and conformity with certain energy efficiency requirements (see EU’s EED recast set to create reporting challenges).
Similar legislative and regulatory initiatives are now appearing in the US with the White House Office of Technology and Science Policy’s (OTSP’s) Climate and energy implications of crypto-assets in the US report, published in September 2022. Concurrently with this, Senator Sheldon Whitehouse is drafting complimentary legislation that addresses both crypto and conventional data centers and sets the stage for the introduction of similar regulation to the EED over the next three to five years.
The OTSP report focuses on the impacts of the recent precipitous increase in energy consumption resulting from cryptocurrency mining in the US — initially driven by high crypto prices, low electricity costs and China’s prohibition of cryptomining operations. The OTSP report estimates cryptomining energy consumption (for both Bitcoin and Ethereum mining) to be responsible for 0.9% to 1.7% of US electricity consumption, and for 0.4% to 0.8% of greenhouse gas (GHG) emissions, in 2021.
The OTSP’s projections may already be out of date due to the current high energy prices and the collapse in value of most crypto assets. The OTSP’s projections, moreover, do not take into account the likely impact of Ethereum mining operations (estimated to account for one-quarter to one-third of industry consumption) moving from “proof of work” (PoW) to “proof of stake” (PoS).
PoW is the original “consensus mechanism” used in cryptocurrency transactions, whereby miners compete to solve increasingly difficult algorithms to validate transactions — at the cost of ever-increasing energy consumption. PoS transactions are mediated by randomly selected miners who stake a quantity of cryptocurrency (and their experience level) for the right to confirm transactions — enabling the use of less computationally intense (and therefore less energy-intense) algorithms. Ethereum converted to PoS in September 2022 in an initiative known as “the Merge”: this change is expected to reduce its mining energy consumption by over 99%.
The OTSP report implies that the broader adoption of crypto assets and the application of the underlying blockchain software used across a range of business processes will continue to drive increasing blockchain-related energy consumption. The report does not offer a specific projection of increasing energy consumption from cryptomining and further blockchain deployments. Given that most, if not all, enterprise blockchain deployments use PoS validation, and given the ability of PoW infrastructure to move quickly to locations with minimal regulation and energy costs, much of this anticipated energy growth may not materialize.
To mitigate this projected growth in energy consumption, the OTSP report calls on the federal government to encourage and ensure the responsible development of cryptomining operations in three specific areas.
Minimizing GHG emissions and other impacts from cryptomining operations. The report proposes that the US government implement a collaborative process to develop effective, evidence-based environmental performance standards governing the development, design and operation of cryptomining facilities. It proposes that the Department of Energy (DOE) or the Environmental Protection Agency (EPA) should be empowered to set energy performance standards for “crypto-asset mining equipment, blockchain and other operations.”
Requiring cryptomining organizations to obtain and publicly report data in order to understand, monitor and mitigate impacts. The report stipulates that cryptomining operations should publicly report their location(s), energy consumption, energy mix, GHG emissions (using existing protocols), electronic waste recycling, environmental justice implications and demand-response participation.
Promoting further research to improve understanding and innovation. The report recommends prioritizing research and development in next-generation digital asset technologies that promote the US’ goals in terms of security, privacy, equity, resiliency and climate.
While these recommendations are primarily directed at cryptomining operations, the report also assesses conventional (i.e., non-crypto-asset) data center operations, noting that cryptomining energy consumption in 2021 was roughly comparable to that of conventional data centers. This clearly raises the question: if cryptomining energy consumption warrants public data reporting and energy performance standards, then why should conventional data center operations not also be included in that mandate?
Under US law, Congress would need to pass legislation authorizing an administrative agency to require data centers to report their location(s), operational data and environmental performance information. Senator Whitehouse is developing draft legislation to address both crypto-asset and conventional data centers, using the EED as a blueprint. The Senator’s proposals would amend the Energy Independence and Security Act of 2007 (EISA) to require all public and private conventional and cryptomining data center locations with more than 100 kW of installed IT equipment (nameplate power) to report data to the Energy Information Administration (EIA). These data center locations would need to outline their operating attributes: a requirement remarkably similar to the EED’s information reporting mandates.
The proposals also require the DOE to promulgate a final rule covering energy conservation standards for “Servers and Equipment for Cryptomining” within two years of the EISA amendments going into force. While this requirement is specific to cryptomining equipment, it is likely that the DOE will lobby Congress to include energy conservation standards for conventional data center IT equipment as part of these proposed amendments. The DOE has already attempted to set energy conservation standards for computer servers (79 FR 11350 02/28/2014) through authority granted under the EISA regulating commercial office equipment.
Little will happen immediately. Legislative and regulatory processes and procedures in the US can be laborious, and final standards governing data center information and energy efficiency reporting are likely to remain several years away. But the release of the OTSP report and the development of draft US legislation indicate that the introduction and adoption of these standards is a matter of “when” (and how strictly?) rather than “if”.
Owners and operators of digital infrastructure need to be prepared. The eventual promulgation of these standards, taken in conjunction with proposed regulation on climate change disclosures from the Securities and Exchange Commission will, sooner or later, dictate that operators establish data collection and management processes to meet information reporting requirements. Operators will need to develop a strategy for meeting these requirements and will need to have policies in place to ensure they undertake projects that increase the work delivered per megawatt-hour of energy consumed across their data center operations.
Data center managers would also be wise to engage with industry efforts to develop simple and effective energy-efficiency metrics. These metrics are required under both US draft legislation and the EC EED recast and are likely to be included in legislation and regulation in other jurisdictions. An ITI Green Grid (TGG) Working Group has been put in place to work on this issue, and other efforts have been proposed by groups and institutions such as Infrastructure Masons (iMasons) and the Climate Neutral Data Centre Pact. Uptime Institute is also providing detailed feedback on behalf of its members on an EC study proposing options and making recommendations for data reporting and metrics as required under the EED recast.
Industry initiatives that encompass all types of IT operations are going to be important. Just as importantly, the industry will need to converge on a single and cohesive globally applicable metric (or set of metrics) to facilitate standardized reporting and minimize confusion.
https://journal.uptimeinstitute.com/wp-content/uploads/2023/01/First-signs-of-federal-data-center-reporting-mandates-appear-in-US-featured.jpg5391030Jay Dietrich, Research Director of Sustainability, Uptime Institute, jdietrich@uptimeinstitute.comhttps://journal.uptimeinstitute.com/wp-content/uploads/2022/12/uptime-institute-logo-r_240x88_v2023-with-space.pngJay Dietrich, Research Director of Sustainability, Uptime Institute, jdietrich@uptimeinstitute.com2023-02-01 13:00:002023-01-30 10:51:42First signs of federal data center reporting mandates appear in US
Geopolitics deepens supply chain worries
/in Executive, Operations/by Daniel Bizo, Research Director, Uptime Institute Intelligence, dbizo@uptimeinstitute.comThe COVID-19 pandemic — and the subsequent disruption to supply chains — demonstrated the data center industry’s reliance on interdependent global markets and the components they produce. Although the data center sector was just one of many industries affected, the extensive variety of the often complex electrical and mechanical equipment involved exacerbated supply chain problems.
Engine generators illustrate the problem: they typically comprise hundreds of constituent parts shipped from at least a dozen countries spanning North America, Europe and Asia. Shortages of seemingly ordinary components, such as voltage regulators, air filters, valves or battery terminals, can lead to major delays in delivery. Even when the production of data center equipment (such as lead-acid batteries and fiber optic cables) is relatively localized, pricing and availability will be subject to changing dynamics in global markets.
The end of the pandemic does not mean a return to the normality of previous years, as strong pent-up demand, higher costs and abnormally long lead-times persist.
The Uptime Institute Supply Chain Survey 2022 illustrates the extent of the problem, with one in five operators reporting major delays or disruption to their procurement over the previous 18 months. Unsurprisingly, satisfaction with vendors’ supply chain management has nosedived: nearly half of respondents are unhappy with at least some of their suppliers. The availability of computer room cooling units and major electrical equipment — specifically, UPS, engine generators and switchgears — appear to be the greatest pain-points as of the end of 2022. Larger operators (superior purchasing power notwithstanding) are apparently bearing the brunt of supply problems.
A total of 40% of operators responding to the survey confirmed they were investigating additional sources of supply in response to these issues. A similar number reported increasing their inventories of parts and materials to safeguard maintenance schedules and operational resilience. Vendors, too, have taken similar measures to address shortages and delays. Supply appears to be improving as of the second half of 2022, with more than half of operators reporting improvements, albeit slow improvements for most (Figure 1).
Rising geopolitical tensions generate risks
Crucially, geopolitical dynamics — specifically between the US-led Western alliance, China and, to a lesser degree, Russia — are giving rise to additional threats. Even with more diversified supplies, higher inventory targets and a build-up of muscle memory, the data center industry remains particularly exposed to the threats posed by current geopolitical trajectories.
The profile of these emerging geopolitical risks is starkly different from other major events, however rare. In contrast to a pandemic, natural disaster, or grid energy crisis, it is more difficult to model the occurrence and fallout from geopolitical events — and, consequently, more difficult to develop effective contingency plans. This is because these threats are primarily the results of highly centralized political decision-making in Beijing, Brussels, Moscow and Washington, DC.
The shock therapy of the COVID-19 pandemic has made industries more resilient and mindful of potential future disruptions. Nonetheless, if some of the more radical threats posed by the current geopolitical situation become reality, their effects are likely to be longer lasting and more dramatic than anything experienced up to now.
Uptime Intelligence sees two major areas where the combination of global interdependency and concentration has made digital infrastructure vulnerable to potential economic and military confrontations, should the current geopolitical environment deteriorate further:
Semiconductors pose a unique problem
Nothing demonstrates the problem of global interdependency and systemic fragility better than the world’s reliance on advanced semiconductors. This issue is not just about IT hardware: controllers, processors, memory chips and power electronics are embedded in virtually every product of any complexity. Chips are not present just to add functionality or to enhance controls: they have become essential.
The health monitoring, real-time analysis, power correction and accident prevention functions offered by modern electrical gear occur through the use of high-performance chips such as signal processors, field-programmable logic and microprocessors. Some recent delays in data center equipment deliveries (including switchgear and UPS shipments) have been caused by shortages of certain specialist chips.
This reliance is precarious because chip production is globally entangled. Semiconductor manufacturing supply chains span thousands of suppliers, across a wide range of industries, including ultra-pure metals and gases, chemical agents, high-performance lasers and optics, various pieces of wafer processing equipment, clean-room filtration systems and components, and the fine-mechanical packaging of chips. At every stage, only a small number of highly specialist suppliers are able to meet the required quality and performance standards.
The production of state-of-the-art photolithography machines, for example, relies on just three noteworthy vendors — ASML, Canon and Nikon. Of these, only ASML has the capability to produce the most advanced equipment, one which uses extreme ultraviolet wavelengths to create the smallest transistor structures.
The level of complexity and specialization required to manufacture advanced semiconductors means that no single country or trading bloc — no matter how large or resource-rich — is entirely self-sufficient, or will become so within reasonable timeframes and at reasonable economic cost. This means that multiple single points of failure (and potential bottlenecks) in the data center and IT equipment supply chain will persist.
Governments have become acutely aware of these issues. The US government and the European Commission (EC) have responded with legislation directed at supporting and stimulating investment in local production capacity (the US CHIPS and Science Act and the European Chips Act). China, too, while still lagging some five to 10 years behind its international competitors, continues to invest in its capabilities to develop a more competitive semiconductor industry. In the meantime, political battles over intellectual property (combined with problems over the supply of and access to materials, components and expertise) remain ongoing.
Any impact from these legislative initiatives is likely to take a decade or more, however, and will largely only address the “onshoring” of chip manufacturing capacity. Even assuming unsparing political will (and bottomless fiscal support for private investment) to promote self-sufficiency in chipmaking, decoupling semiconductor supply chains (all the way from raw materials to their processing) borders the impossible. The complexity and costs involved cannot be overstated.
It is for this reason that the US government’s increasingly stringent measures, designed to limit China’s access to cutting-edge semiconductor technology, are proving effective. But it is precisely because they are effective, that the situation is becoming more volatile for the entire industry — increasing, as it does, the likelihood of reprisal.
Taiwan is of particular concern. The high concentration of the global semiconductor fabrication and IT hardware manufacturing in and around the island, home to the world’s largest and most advanced contract chipmaking cluster, creates major supply chain vulnerabilities. The consequence of any major confrontation (economic or military) would result in profound and far-reaching disruption for the entire IT industry and many others.
Deep risks around subsea network
The vulnerability of subsea fiber optic cables is another concern — and, as is the case regarding semiconductors, by no means a new issue. Growing geopolitical tensions, however, have raised questions regarding the likelihood of sovereign states engaging in acts of sabotage.
Subsea fiber optic networks consist of hundreds of subsea cables that carry nearly all intercontinental data traffic, supporting trillions of dollars of global economic activity. There are currently more than 500 international and domestic networks in operation, which are owned and operated (almost exclusively) by private companies. The length of these cables make them very difficult to protect against potential threats.
Some subsea cables represent high-value targets for certain actors — and are attractive because they can be damaged or broken in secrecy and without the blowback of a traditional attack.
Most subsea cable breakages do not result in widespread outages. Typically, traffic can be rerouted through other cables, albeit at the cost of increasing latency. But when multiple lines are simultaneously severed in the same region (undermining path diversity), the effect can be more substantial.
In 2006, a major earthquake (with multiple aftershocks) in the Luzon Strait (between Taiwan and the Philippines) resulted in seven of nine subsea cables being taken offline. This caused severe and widespread outages across the Asia-Pacific region, significantly disrupting businesses and consumers in Hong Kong, Japan, Singapore, South Korea and Taiwan. Fixing these vital network connections ultimately involved more than 40% of the global cable repair fleet. Full restoration of services was not complete until seven weeks after the initial outage.
Cables are also vulnerable to human activities — both accidental and deliberate. Ships are the most common cause, as fishing equipment or anchors can catch a cable and damage it. Malicious state actors are also a threat: for example, unidentified individuals seized telecommunications nodes and destroyed terrestrial cables in 2014, as Russia occupied the Crimean peninsula. The same could happen to submarine cables.
Such acts of sabotage fall into the category of hybrid warfare: any such attack would be unlikely to trigger a conflict but, if successfully coordinated, would cause severe disruption. Protecting against such threats — and detecting and monitoring potential threats, or identifying those responsible when attacks occur — is difficult, particularly with regard to subsea cables often spanning thousands of miles. Since the location of these cables is in the public domain, and international law prohibits the boarding of foreign vessels in international waters, protecting these vital facilities is particularly fraught. Taiwan, as an island, is especially vulnerable to attacks on its subsea cables.
See our Five Data Center Predictions for 2023 webinar here.
Daniel Bizo, Research Director, Uptime Institute
Lenny Simon, Senior Research Associate, Uptime Institute
Max Smolaks, Research Analyst, Uptime Institute
Data center staffing — an ongoing struggle
/in Executive, Operations/by Dr. Paul Carton, Research Vice President, Uptime InstituteAttracting and retaining qualified data center staff has been a major industry challenge for years — and continues to cause substantial problems for operators worldwide. Uptime Institute’s 2022 Management and Operations Survey shows staffing and organization (54%) is the leading requirement cited by operators (see Figure 1).
In an environment where rapid growth in data center capacity has led to an increase in job openings that continues to outpace recruitment, it’s hardly surprising that attracting and retaining staff is a key pain point for data center operators.
How difficult is it to attract and retain staff?
More than half (53%) of the respondents to Uptime’s 2022 Global Data Center Survey report that their organizations are having difficulties finding qualified candidates — up from 47% in last year’s survey and 38% in 2018.
Staff retention is also an issue: 42% of respondents saying their organization is having difficulty retaining staff due to them being hired away, compared with just 17% four years ago. Moreover, a majority of those workers changing jobs are being hired by direct competitors (see Figure 2).
Women an underrepresented force
Historically, data center design and operations teams have employed few women, and this hasn’t improved much since Uptime first started collecting information on gender demographics in our data center surveys in 2018.
More than three-quarters of operators (77%) report that they employ around 10% women or less, unchanged since 2018. Strikingly, one-fifth of respondents (20%) still do not employ any women at all in their design and operations teams, although this number is down from 26% in 2018 (see Figure 3).
In short, a growing number of unfilled positions coupled with the low and stagnating proportion of women workers suggests the data center industry still has much work to do to leverage the untapped potential of the female workforce.
How the inability to hire is affecting management and operations
The shortage of qualified staff is seen as a root cause of a host of data center operational issues.
Data center staff execution (36%), insufficient staff (28%), and incorrect staff processes / procedures (21%) all rank among the top four most common root causes of data center issues in Uptime’s 2022 Management and Operations Survey (see Figure 4).
In addition, when we asked about the key challenges experienced in the last two years, 30% of respondents describe staffing issues — by far the highest response category.
As one respondent explained: they’re seeing a “lack of available and qualified resources for both technical and coordination tasks.” A separate respondent reports that their organization has “insufficient levels of operation and maintenance personnel,” and another finds “staff turnover and inadequate training / experience” to be their company’s biggest pain point.
Will AI come to the rescue? Not in the near term
Although artificial intelligence (AI)-based components are currently being incorporated into data center power and cooling systems, it’s unclear when — or if — AI will begin to replace data center employees.
When asked about the potential impact of AI on data center staffing, only 19% of respondents believe it will reduce their operations staffing levels within the next five years — down from 29% in 2019. This decrease hints at lowered industry expectations that are more in line with the near-term capabilities of AI.
Just over half (52%) of respondents expect AI to reduce their staffing numbers in the longer term, but not in the next five years (see Figure 5).
In a related finding from this year’s annual survey, more than half of respondents (57%) say they would trust an adequately trained machine-learning model to make operational decisions, which is up from 49% last year.
Bottom line: staffing remains a major concern for operators
In its most recent forecast of data center workforce requirements, Uptime estimates that staffing requirement levels will grow globally from about 2.0 million full-time equivalents in 2019 to nearly 2.3 million by 2025 (see The people challenge: Global data center staffing forecast 2021-2025).
As the need for qualified staff increases, however, operators are having increasing difficulty filling critical data center roles and retaining staff in these positions. Additionally, an aging workforce in the more mature data center markets, such as North America and Western Europe, means a significant proportion of the existing workforce will retire concurrently — leaving data centers with a shortfall on both headcount and experience.
Hiring efforts are often offset by jobseekers’ poor visibility of the sector, but some employers are looking at more effective ways to attract and retain talent, such as training and mentoring programs, and improving their diversity / inclusion efforts. Staffing is a serious concern for the data center industry now and going forward. Uptime will continue to monitor the industry’s ongoing difficulties in maintaining adequate staffing levels.
Unravelling net zero
/in Design, Executive, Operations/by Jay Dietrich, Research Director of Sustainability, Uptime Institute, jdietrich@uptimeinstitute.comMany digital infrastructure operators have set themselves carbon-neutral or net-zero emissions goals: some large hyperscale operators claim net-zero emissions for their current operating year. Signatories to the Climate Neutral Data Center Pact, a European organization for owners and operators, aim to be using 100% clean energy by 2030.
All these proclamations appear laudable and seem to demonstrate strong progress for the industry in achieving environmental goals. But there is a hint of greenwashing in these commitments which raises some important questions: how well defined is “net zero”? What are the boundaries of the commitments? Are these time frames aggressive or the commitments meaningful?
There are good reasons for asking these questions. Analysis by Uptime Institute Intelligence suggests most operators will struggle to meet these commitments, given the projected availability of zero-carbon energy, equipment and materials and carbon offsets in the years and decades ahead. There are three core areas of concern that critics and regulators are likely to raise with operators: the use of renewable energy certificates (RECs), guarantees of origin (GOs) and carbon offsets; the boundaries of net-zero commitments; and the industry’s current lack of consensus on the time frame for attaining true net-zero operations.
RECs, GOs and carbon offsets
RECs and GOs are tradeable certificates representing 1 MWh of zero emissions of renewable energy generation; carbon offsets are certificates representing a quantity of carbon removed from the environment. All of these tools can be used to offset operational carbon emissions. Most current net-zero claims, and the achievement of near-term commitments (i.e., 2025 to 2035), depend on the application of these tools to offset the use of fossil-fuel-based energy.
Under currently accepted climate accounting methodologies, the use of RECs and offsets is a viable and acceptable way for digital infrastructure operators to help reduce emissions globally. However, using these certificates can distract from the real and difficult work of driving infrastructure efficiency improvements to increase the workload delivered per unit of energy consumed and the procurement of consumed clean energy to reduce the carbon emissions per unit of consumed energy toward zero.
Uptime Institute believes that stakeholders, regulators, and other parties will increasingly expect, and perhaps require, operators to focus on moving towards the consumption of 100% zero-emissions energy for all operations — that is, true net-zero emissions. This objective, against which net-zero claims will ultimately be judged, is not likely to be achieved in 2030 and perhaps not even by 2040: but it is an objective that deserves the industry’s full attention, and the application of the industry’s broad and varied technical expertise.
The boundaries of the net-zero commitment
Digital infrastructure operators have not adopted consistent accounting boundaries for their net zero commitments. While all operators include Scope 1 and 2 emissions, and while some do address Scope 3 emissions in full, others are ignoring these — completely or partially. There is no clear sector-wide consensus on this topic — either on which applicable Scope 3 emissions should be included in a goal, or in the classification or allocation of emissions in colocation facilities. This can create wide discrepancies in the breadth and scope of different operator’s commitments.
For most organizations running IT and / or digital infrastructure operations, the most consequential and important Scope 3 category is Category 1: Purchased goods and services — that is, the procurement and use of colocation and cloud services. The CO2 emissions associated with these services can be quantified with reasonable certainty and assigned to the proper scope category for each of the three parties involved in these services offerings — IT operators, cloud service operators and colocation providers (see Table 1).
Uptime Intelligence recommends that digital infrastructure operators set a net-zero goal that addresses all Scope 1, 2 and 3 emissions associated with their IT operations and / or facilities in directly owned, colocation and cloud data centers. IT operators will need to collaborate with their cloud and colocation service providers to collect the necessary data and set collaborative emissions-reductions goals. Service providers should be required to push towards 100% renewable energy consumption at their facilities. Colocation operators, in turn, will need to collaborate with their IT tenants to promote and record improvements in workload delivered per unit of energy consumed.
Addressing the other five Scope 3 categories applicable to the data center industry (embedded carbon in equipment and building material purchases; management of waste and end-of-life equipment; fuel and other energy-related activities; business travel; and employee commuting) — necessitates a lighter touch. Emissions quantifications for these categories typically have high degrees of uncertainty: and suppliers or employees are best positioned to drive their operations to net zero emissions.
Rather than trying to create numerical Scope 3 inventories and offsetting the emissions relating to these categories, Uptime Intelligence recommends that operators require their suppliers to maintain sustainability strategies and net-zero GHG emissions-reduction goals, and provide annual reports on progress in achieving these.
Operators, in turn, should set (and execute) consequences for those companies that fail to make committed progress — up to and including their removal from approved supplier lists. Such an approach means suppliers are made responsible for delivering meaningful emissions reductions, without data center operators duplicating either emissions-reduction efforts or offsets.
Insufficient consensus on the time frame for attaining true net-zero operations
There appears to be no industry-wide consensus on the time frame for attaining true net-zero operations. Many operators have declared near-term net-zero commitments (i.e., 2025 to 2035), but these depend on the use of RECs, GOs and carbon offsets.
Achieving a true net-zero operating portfolio by 2050 will require tremendous changes and innovations in both the data center equipment and energy markets over the next 28 years. The depth and breadth of the changes required makes it impossible to fully and accurately predict the timing and technical details of this essential transformation.
The transition to zero carbon will not be achieved with old or inefficient equipment. Investments will need to be made in more efficient IT equipment, software management tools, and in clean energy generation. Rather than buying certificates to offset emissions, operators need to invest in impactful technologies that increase data centers’ workload delivered per unit of energy consumed while reducing the carbon intensity of that energy to zero.
What does all this mean for net-zero commitments? Given the difficulties involved, Uptime Intelligence recommends that data center operators establish a real net-zero commitment for their IT operations that falls between 2040 and 2050 — with five- to eight-year sequential interim goals. Operators’ current goal periods should achieve emissions reductions based on current and emerging technologies and energy sources.
After the first goal period, each subsequent interim goal should incorporate all recent advances in technologies and energy generation — on which basis, operators will be able to reach further in achieving higher workloads and lower carbon emissions per unit of energy consumed. Suppliers in other Scope 3 categories, meanwhile, should be held responsible for achieving real net-zero emissions for their products and services.
The bottom line? Instead of relying on carbon accounting, the digital infrastructure industry needs to focus investment on the industry-wide deployment of more energy-efficient facilities and IT technologies, and on the direct use of clean energy.
Is Google a credible enterprise cloud?
/in Executive, Operations/by Dr. Owen Rogers, Senior Research Director for Cloud Computing, Uptime Institute, orogers@uptimeinstitute.comGoogle was an underdog when it launched its infrastructure cloud in 2013. Amazon had already made a name for itself as a disruptive technology provider, having launched Amazon Web Services (AWS) seven years prior. Microsoft, a household name in commercial software, launched Azure in 2010. What chance did Google, a company known primarily for its search engine, have competing with cloud leader AWS and enterprise behemoth Microsoft?
Initially, it was difficult to understand Google Cloud’s value proposition. Google was primarily a consumer business, with users expected to serve themselves through instruction manuals and support portals. In a business-to-business (B2B) engagement involving significant expenditure, most cloud buyers need more of a personalized and professional relationship — i.e., help and technical support accessible round the clock, coupled with regular review meetings and negotiations.
Although organizations like the idea of the newest and shiniest technologies, it is the reliability and consistency — not just of the product but also of its vendor — that drives day-to-day success. Buyers want relationships, commitments and financial sustainability from their suppliers. Google had the technology, but its reliability and consistency as an IT services partner were untested and unclear.
Google Cloud has, since then, become a more credible enterprise cloud provider. It has achieved this by developing its partnerships and enterprise credentials while harnessing its existing reputation for innovation and scale. But Google’s endeavor to build a competitive cloud business has never been straightforward: nor has it proved possible by mimicking its rivals.
Building differentiation
When it first launched, Google Cloud had yet to identify (or at least promote) its fundamental value proposition. As part of its reinvention, however, it is now promoting itself as specializing in Big Data. Google has a core web business (search and advertising) that effectively uses the entire web as its database. Google’s search engine exemplifies outstanding web-wide reliability and simplicity, and the company is known globally for innovation on a vast scale.
Google has doubled down on this message, promising users access to those innovations that have made Google so ubiquitous — such as machine learning and web-scale databases. The company doesn’t want users to choose Google Cloud because it has low-price virtual machines; rather, Google sees its role (and brand) as helping businesses scale their opportunities, using the newest technology.
In this vein, the company recently announced new capabilities for its BigQuery database, new machine learning translation tools, and other Big Data products and capabilities at the company’s developer conference, Google Cloud Next ‘22. But even infrastructure capabilities (such as new Intel and NVIDIA server chips) as well as the general availability of Google’s latest generation of AI-accelerators (tensor processors or TPUs) were presented in the context of making the most of data. In Google’s messaging, new infrastructure doesn’t just promise faster virtual machines — it delivers better processing capabilities to customers looking to develop new ways of extracting value from data.
Building credibility
Google might be relatively new to enterprise sales, but its partners are experienced players. Google has addressed its lack of enterprise experience by partnering with systems integrators such as Infosys, HCLTech, Tata Consultancy Services (TCS), Accenture, Capgemini and Atos. It has developed European “sovereign” clouds with T-Systems, Thales and Minsait. Google offers its Anthos Multi-Cloud platform through original equipment manufacturers (OEMs) including Cisco, Dell EMC, Hewlett Packard Enterprise (HPE), Intel, Lenovo, NetApp, Nutanix, NVIDIA, and VMware.
Google is historically popular with developers due to its open-source approach. But some recent successes may be the result of its repositioning to promote business value over technical ability. This approach is more likely to capture the ear of C-level executives (who make the big, transformational decisions), including appointing primary cloud providers. Google has built credibility by selling to brands such as Toyota, Wayfair, Snap, Twitter, PayPal and HSBC.
The company also demonstrates credibility through continued investment. At Google Cloud Next ‘22 the company announced new regions in Austria, Greece, Norway, South Africa, and Sweden, bringing the total number of regions to 48. Security and productivity, too, were high on the agenda at that event, again helping to build brand credibility.
Economics is still a challenge
Although Google’s cloud business has matured considerably in recent years, it still faces challenges. As previously discussed in Cloud price increases damage trust, Google Cloud prices saw some sharp increases in October 2022 – with multi-region nearline storage rates, for example, increasing by 50%, and some operations fees doubling. Load balancers will also be subject to an outbound bandwidth charge. Google Cloud has made considerable gains in convincing users that it is a relationship-led, enterprise-focused, innovative company and not just a consumer business. But such sweeping price increases would appear to damage its credibility as a reliable business partner in this regard. Google Cloud revenue increased by 35% year-on-year in Q2 2022, reaching $6.3 billion. Despite this growth, however, the division reported an operating loss of $858 million for the same period. Google Cloud’s revenue trails that of AWS and Microsoft Azure, by a wide margin. Google Cloud may well have implemented its recent price increases with the intention of building a more profitable and more sustainable business. Its recent price hikes are reasonable, considering, as outlined above, the importance customers attach to reliability and consistency. The question is, has Google yet convinced the market that it is worth its recent price hikes? While users should continue to consider Google Cloud as part of fuller vendor evaluations, they should perhaps bear in mind its history of raising prices.
Higher data center costs unlikely to cause exodus to public cloud
/in Executive, Operations/by Dr. Owen Rogers, Senior Research Director for Cloud Computing, Uptime Institute, orogers@uptimeinstitute.comA debate has been raging since cloud computing entered the mainstream: which is the cheaper venue for enterprise customers — cloud or on-premises data centers? This debate has proved futile for two reasons. First, the characteristics of any specific application will dictate which venue is more expensive — there is no simple, unequivocal answer. Second — the question implies that a buyer would choose a cloud or on-premises data center primarily because it is cheaper. This is not necessarily the case.
Infrastructure is not a commodity. Most users will not choose a venue purely because it costs less. Users might choose to keep workloads within their data centers or at a colo because they want to be confident they are fully compliant with legislation and / or regulatory requirements, or to be situated close to end users. They might choose cloud computing for workloads that require rapid scalability, or to access platform services further up the stack. Of course, costs matter to CIOs and CFOs alike, but cloud computing, on-premises data centers and colos all deliver value beyond their relative cost differences.
One way of assessing the value of a product is through a price-sensitivity analysis, whereby users are asked how they would (hypothetically) respond to price changes. Users who derive considerable value from a product are less likely to change their buying behavior following any increase in cost. Users more sensitive to cost increases will typically consider competing offers to reduce or maintain costs. Switching costs are also a factor in a user’s sensitivity to price changes. In cloud computing, for example, the cost of rearchitecting an application as part of a migration might not be justifiable if the resultant ongoing cost savings are limited.
IT decision-makers surveyed as part of Uptime Intelligence’s Data Center Capacity Trends Survey 2022 were asked what percentage of current workloads they would be likely to migrate to the cloud if their existing data center costs (covering on-premises and colos) rose 10%, 50% or 100%, respectively (assuming cloud prices remained stable).
While Uptime has neither conducted nor seen extensive research into rising costs, most operators are likely to be experiencing strong inflationary pressures (i.e., of over 15%) on their operations: energy prices and staff shortages being the main drivers.
The survey responses are illustrated in two different formats:
What does this data tell us? Figure 1 shows that if on-premises or colo costs were to increase by 10%, then around 12% of workloads could migrate to the cloud. If costs were to increase by 50%, approximately 24% of workloads would potentially move to the cloud. Even if costs were to double, however, only just over 30% of workloads would be likely to migrate to the public cloud. This suggests that on-premises and colo users are not particularly price-sensitive. While they are likely to have some impact, rising data center costs per se are unlikely to trigger a mass exodus to the public cloud.
Some users are more price sensitive than others, however. Figure 2 shows that 42% of respondents indicate a 10% increase in costs would not drive any workloads to the public cloud. One quarter of respondents would still be unlikely to migrate workloads even if faced with price hikes of 50%. Notably, a quarter of respondents indicate they would not migrate any workloads even if costs were to double. This may suggest that at least 25% of those organizations surveyed do not consider the public cloud to be a viable option for their workloads currently.
This reluctance may be the result of several factors. Some respondents may derive value from hosting workloads in non-cloud data centers and may believe this to justify any additional expense. Others may believe that regulatory, technical and compliance issues render the public cloud unviable, making cost implications irrelevant. Some users may feel that moving to the public cloud is simply cost-prohibitive.
Most users are susceptible to price increases, however — at least to some extent. A 10% increase in costs would drive 55% of organizations to migrate some or most of their workloads to the cloud. A total of 59% of respondents indicate they would do so if faced with a more substantial 50% increase. Faced with a doubling of their costs, over a quarter of respondents would migrate most of their workloads to the cloud. Again, this is assuming that cloud costs remain constant — and it is unlikely that cloud providers could absorb such significant upward cost pressures without any increase in prices.
Other survey data (not shown in graphics) indicates that even if infrastructure expenditure were to double, only 7% of respondents would migrate their entire workloads to the cloud. Given that 25% of respondents indicate that they would keep all workloads on-premises regardless of cost increases, this confirms that most users are adopting a hybrid IT approach. Most users are willing to consider on-premises and cloud facilities for their workloads, choosing the most appropriate option for each application.
Although the Uptime Intelligence Data Center Capacity Trends Survey 2022 did not, specifically, cover the impact of price reductions, it is possible to estimate the potential impacts of cloud providers cutting their rates. A price cut of 10% would be unlikely to attract significantly more workloads to the public cloud: but a 50% reduction would have a more dramatic impact. As indicated above, however, cloud providers — faced with the same energy-cost challenges as data center owners and colos — are more likely to absorb any cost increases in their gross margins rather than risk damaging their credibility by raising prices (see OVHcloud price hike shows cloud’s vulnerability to energy costs).
In conclusion:
First signs of federal data center reporting mandates appear in US
/in Executive, Operations/by Jay Dietrich, Research Director of Sustainability, Uptime Institute, jdietrich@uptimeinstitute.comThe past year (2022) has seen regulators in many countries develop or mandate requirements to report data centers’ operating information and environmental performance metrics. The first of these, the European Commission (EC) Energy Efficiency Directive (EED) recast is currently under review by the European Parliament and is expected to become law in 2023. This directive will mandate three levels of information reporting, the application and publication of energy performance improvement and efficiency metrics, and conformity with certain energy efficiency requirements (see EU’s EED recast set to create reporting challenges).
Similar legislative and regulatory initiatives are now appearing in the US with the White House Office of Technology and Science Policy’s (OTSP’s) Climate and energy implications of crypto-assets in the US report, published in September 2022. Concurrently with this, Senator Sheldon Whitehouse is drafting complimentary legislation that addresses both crypto and conventional data centers and sets the stage for the introduction of similar regulation to the EED over the next three to five years.
The OTSP report focuses on the impacts of the recent precipitous increase in energy consumption resulting from cryptocurrency mining in the US — initially driven by high crypto prices, low electricity costs and China’s prohibition of cryptomining operations. The OTSP report estimates cryptomining energy consumption (for both Bitcoin and Ethereum mining) to be responsible for 0.9% to 1.7% of US electricity consumption, and for 0.4% to 0.8% of greenhouse gas (GHG) emissions, in 2021.
The OTSP’s projections may already be out of date due to the current high energy prices and the collapse in value of most crypto assets. The OTSP’s projections, moreover, do not take into account the likely impact of Ethereum mining operations (estimated to account for one-quarter to one-third of industry consumption) moving from “proof of work” (PoW) to “proof of stake” (PoS).
PoW is the original “consensus mechanism” used in cryptocurrency transactions, whereby miners compete to solve increasingly difficult algorithms to validate transactions — at the cost of ever-increasing energy consumption. PoS transactions are mediated by randomly selected miners who stake a quantity of cryptocurrency (and their experience level) for the right to confirm transactions — enabling the use of less computationally intense (and therefore less energy-intense) algorithms. Ethereum converted to PoS in September 2022 in an initiative known as “the Merge”: this change is expected to reduce its mining energy consumption by over 99%.
The OTSP report implies that the broader adoption of crypto assets and the application of the underlying blockchain software used across a range of business processes will continue to drive increasing blockchain-related energy consumption. The report does not offer a specific projection of increasing energy consumption from cryptomining and further blockchain deployments. Given that most, if not all, enterprise blockchain deployments use PoS validation, and given the ability of PoW infrastructure to move quickly to locations with minimal regulation and energy costs, much of this anticipated energy growth may not materialize.
To mitigate this projected growth in energy consumption, the OTSP report calls on the federal government to encourage and ensure the responsible development of cryptomining operations in three specific areas.
While these recommendations are primarily directed at cryptomining operations, the report also assesses conventional (i.e., non-crypto-asset) data center operations, noting that cryptomining energy consumption in 2021 was roughly comparable to that of conventional data centers. This clearly raises the question: if cryptomining energy consumption warrants public data reporting and energy performance standards, then why should conventional data center operations not also be included in that mandate?
Under US law, Congress would need to pass legislation authorizing an administrative agency to require data centers to report their location(s), operational data and environmental performance information. Senator Whitehouse is developing draft legislation to address both crypto-asset and conventional data centers, using the EED as a blueprint. The Senator’s proposals would amend the Energy Independence and Security Act of 2007 (EISA) to require all public and private conventional and cryptomining data center locations with more than 100 kW of installed IT equipment (nameplate power) to report data to the Energy Information Administration (EIA). These data center locations would need to outline their operating attributes: a requirement remarkably similar to the EED’s information reporting mandates.
The proposals also require the DOE to promulgate a final rule covering energy conservation standards for “Servers and Equipment for Cryptomining” within two years of the EISA amendments going into force. While this requirement is specific to cryptomining equipment, it is likely that the DOE will lobby Congress to include energy conservation standards for conventional data center IT equipment as part of these proposed amendments. The DOE has already attempted to set energy conservation standards for computer servers (79 FR 11350 02/28/2014) through authority granted under the EISA regulating commercial office equipment.
Little will happen immediately. Legislative and regulatory processes and procedures in the US can be laborious, and final standards governing data center information and energy efficiency reporting are likely to remain several years away. But the release of the OTSP report and the development of draft US legislation indicate that the introduction and adoption of these standards is a matter of “when” (and how strictly?) rather than “if”.
Owners and operators of digital infrastructure need to be prepared. The eventual promulgation of these standards, taken in conjunction with proposed regulation on climate change disclosures from the Securities and Exchange Commission will, sooner or later, dictate that operators establish data collection and management processes to meet information reporting requirements. Operators will need to develop a strategy for meeting these requirements and will need to have policies in place to ensure they undertake projects that increase the work delivered per megawatt-hour of energy consumed across their data center operations.
Data center managers would also be wise to engage with industry efforts to develop simple and effective energy-efficiency metrics. These metrics are required under both US draft legislation and the EC EED recast and are likely to be included in legislation and regulation in other jurisdictions. An ITI Green Grid (TGG) Working Group has been put in place to work on this issue, and other efforts have been proposed by groups and institutions such as Infrastructure Masons (iMasons) and the Climate Neutral Data Centre Pact. Uptime Institute is also providing detailed feedback on behalf of its members on an EC study proposing options and making recommendations for data reporting and metrics as required under the EED recast.
Industry initiatives that encompass all types of IT operations are going to be important. Just as importantly, the industry will need to converge on a single and cohesive globally applicable metric (or set of metrics) to facilitate standardized reporting and minimize confusion.