A wave of new technologies, from 5G to the internet of things (IoT) to artificial intelligence (AI), means much more computing and much more data will be needed near the point of use. That means many more small data centers will be required. But there will be no sudden mass deployment, no single standout use case, no single design dominating. Demand is likely to grow faster from 2022.
Small package, big impact
Suppliers in the data center industry are excited. Big vendors such as Schneider, Vertiv and Huawei have been rapidly adding to their product lines and redrawing their financial forecasts; startups — companies such as Vapor IO, EdgeMicro, EdgeInfra and MetroEDGE — are pioneering new designs; and established telco specialists, such as Ericsson, along with telco operators, are working on new technologies and partnerships. Builders and operators of colocation data centers, such as EdgeConneX, Equinix and Compass, are assessing where the opportunity lies.
The opportunity is to supply, build or operate local edge data centers — small micro data centers that are designed to operate near the point of use, supporting applications that are not suited to run in big, remote data centers, even in mid-sized regional colocation data centers. Unlike most larger data centers, micro data centers will mostly be built, configured and tested in a factory and delivered on a truck. Typical sizes will be 50 kW to 400 kW, and there are expected to be a lot of them.
But with the anticipation comes consternation — it is possible to commit too early. Some analysts had predicted that the explosion in edge demand would be in full swing by now, fueled by the growing maturity of the IoT and the 2020 launch schedules for 5G services. Suppliers, however, mostly report only a trickle — not a flood — of orders.
Privately, some suppliers admit they have been caught off guard. There is a deep discussion about the extent of data center capacity needed at the local edge; about just how many applications and services really need local edge processing; and about the type and size of IT equipment needed — maybe a small box on the wall will be enough?
While the technical answers to most of these questions are largely understood, questions remain about the economics, the ownership, and the scale and pace of deployment of new technologies and services. These are critical matters affecting deployment.
Edge demand and 5G
In the past decade, data and processing has shifted to a cloudy core, with hundreds of hyperscale data centers built or planned. This will continue. But a rebalancing is underway (see Uptime Institute Intelligence report: The internet tilts toward the edge), with more processing being done not just at the regional edge, in nearby colocation (and other regional) data centers, but locally, in a micro data center that is tens or hundreds of meters away.
This new small facility may be needed to support services that have a lot of data, such as MRI scanners, augmented reality and real-time streaming; it may be needed to provide very low latency, instantly responsive services for both humans and machines — factory machines are one example, driverless cars another; and it may be needed to quickly crunch AI calculations for immediate, real-time responses. There is also a more mundane application: to provide on-site services, such as in a hospital, factory or retail establishment, should the network fail.
With all these use cases, why is there any doubt about the micro data center opportunity?
First, in terms of demand drivers, no new technology has created so much interest and excitement as 5G. The next generation telecom wireless network standard promises speeds of up to 10 gigabits per second (Gbps) communications, latency of below five millisecond (ms), support for one million devices per square kilometer, and five-nines availability. It will ultimately support a vast array of new always-on, low latency and immersive applications that will require unimaginable amounts of data and compute power — too much to realistically or economically send back to the internet’s hyperscale core. Much of this will require low-latency communications and rapid processing of a few milliseconds or less — which, the speed of light dictates, must be within a few kilometers.
Few doubt that 5G will create (or satisfy) huge demand and play a pivotal role in IoT. But the rollout of 5G, already underway, is not going to be quick, sudden or dramatic. In fact, full rollout may take 15 years. This is because the infrastructure required to support 5G is too expensive, too complex, and involves too many parties to do all at once. Estimates vary, with at least one analyst firm predicting that telecom companies will need to spend $1 trillion upgrading their networks.
A second issue that is creating uncertainty about demand is that many edge applications — whether supported by 5G or some other networking technology (such as WiFi 6) — may not require a local micro data center. For example, high-bandwidth applications may be best served from a content distribution network at the regional edge, in a colo, or by the colo itself, while many sensors and IoT devices produce very little data and so can be served by small gateway devices. Among 5G’s unique properties is the ability to support data-heavy, low-latency services at scale — but this is exactly the kind of service that will mostly be deployed in 2021 or later.
Suppliers and telcos alike, then, are unsure about the number, type and size of data centers at the local edge. Steve Carlini, a Schneider Electric executive, told Uptime Institute that he expects most demand for micro data centers supporting 5G will be in the cities, where mobile edge-computing clusters would likely each need one micro data center. But the number of clusters in each city, far fewer than the number of new masts, would depend on demand, applications and other factors.
A third big issue that will slow demand for micro data centers is economic and organizational. These issues include licensing, location and ownership of sites; support and maintenance; security and resiliency concerns; and management sentiment. Most enterprises expect to own their own edge micro data centers, according to Uptime Intelligence research, but many others will likely prefer to outsource this altogether, in spite of potentially higher operational costs and a loss of control.
Suppliers are bullish, even if they know demand will grow slowly at first. Among the first-line targets are those simply looking to upgrade server rooms, where the work cannot be turned over to a colo or the cloud; factories with local automation needs; retailers and others that need more resiliency in distributed locations; and telcos, whose small central offices need the security, availability and cost base of small data centers.
This wide range of applications has also led to an explosion of innovation. Expect micro data centers to vary in density, size, shape, cooling types (include liquid), power sources (including lithium ion batteries and fuel cells) and levels of resiliency.
The surge in demand for micro data centers will be real, but it will take time. Many of the economic and technical drivers are not yet mature; 5G, one of the key underlying catalysts, is in its infancy. In the near term, much of the impetus behind the use of micro data centers will lie in their ability to ensure local availability in the event of network or other remote outages.
The full report Ten data center industry trends in 2020 is available to members of the Uptime Institute Network here.