We’ve all heard about data centers – the massive, 100,000 sq. ft hulking monstrosities mostly located in the Northern Virginia area of the country – and the impact they have had on making the internet accessible and expedient.
As a business owner, you should know what data centers are – but how much do you really need to know? In this article, we’ll cover the basics of data centers: what they are, what their purpose is, how they interact with businesses, and ultimately, whether you need data center services for your business!
Let’s dig in.
What is a Data Center?
A data center, at its most elemental, is a facility composed of networked computers and storage used to organize, process, store, and disseminate large amounts of data.
A data center houses critical assets like servers, storage hardware, networking switches, and supporting services like cooling mechanisms that keep all those hot machines cool and safe. These hulking pieces of infrastructure are designed to provide reliable, scalable, and secure data storage and access services for businesses and individuals across the globe.
In reality, data centers are massive structures housing thousands of servers that process and store the world’s data. These giant concrete structures are essential for robust and speedy internet – they are the hubs through which data is routed.
However, there are a number of different types of data centers. Data centers can be small, housing only a few servers in a basement on-premises, or they can be colossal structures that handle millions of businesses’ data at once.
Who Owns and Operates Data Centers?
Data centers can be owned and operated by large corporations, government agencies, or specialized data center providers. You’re probably familiar with the bigwigs – your AWSes, your Alphabets, your Microsofts – but data centers can also be operated by a single IT person or even a managed IT service provider.
While some large businesses may own their data centers, small to medium-sized enterprises often leverage services provided by third-party data center operators to avoid the high capital and operational expenses associated with owning a data center.
The State of Data Centers In 2024
The data center industry has seen remarkable growth in recent years across North America, Europe, Latin America, Asia-Pacific, and Africa – and it’s a pattern that isn’t going to break anytime soon.
As of 2023, North America leads the global rankings with regions like Northern Virginia showcasing a supply of 2.1 GW, marking a 19.5% increase year-over-year from Q1 2022 to Q1 2023. Europe and Asia-Pacific are also witnessing substantial growth in data center supply, driven by strong demand and significant development projects.
Latin America has seen a doubling of supply since Q1 2020, with Brazil leading the expansion. The region’s inventory reached 672 MW as of Q1 2023, primarily across Brazil, Mexico, Chile, and Colombia. Meanwhile, the African data center market has spent a cumulative $2 billion since 2017, adding over 200 MW of commercial IT load capacity.
The global data center market size is projected to reach $65.55 billion by 2027, from $16.56 billion in 2019, showing the increasing demand for advanced and green data center infrastructures. Additionally, cloud spending reached an all-time high of $53 billion in the first quarter of 2022, indicating a clear shift towards cloud-based solutions.
What Services Do Data Centers Provide to Businesses?
There are a dozen or so different types of services that data centers provide. The main ones business owners need to know are:
- Dedicated Hosting: Renting physical server space to a single client for exclusive use. These are usually expensive agreements for the client and are usually only employed by big businesses.
- Shared Hosting: Providing server space shared by multiple clients. This is the most common type of hosting.
- Cloud Services: Offering scalable and flexible computing resources over the internet, including processing power and/or data storage. If you use Google Drive, you’re using a data center.
- Colocation Services: In this unique arrangement, some data centers allow businesses to place their servers in a provider’s facility to take advantage of the data center’s infrastructure. This is good for small tech companies with specific needs and limited resources.
- Disaster Recovery and Business Continuity: Data centers play a crucial role in disaster recovery by offering comprehensive packages that ensure data is backed up and can be restored in the event of a disaster.
Who Provides Data Center Services?
Anyone can provide data center services – no, really. There’s a number of different tiers of data center services.
Starting small, you may even have an internal data center in the form of your IT team’s local servers. This used to be more commonplace when affordable, scalable IT services were more rare for small businesses.
In the mid-tier are local operators who may own data centers in your local area. This is also becoming increasingly rare as owning and maintaining 24/7 data is an expensive job – which is why the biggest companies in the world are taking over this space.
The biggest operators in the data center space are exactly who you would expect. The four largest data center users – Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, and Alibaba Cloud – make up over 67% of the world’s cloud infrastructure. Their market dominance allows them to offer businesses cheap and scalable data center solutions by leveraging their eye-watering economies of scale.
What Kinds of Businesses Need Data Centers?
Virtually every sector that relies on data for operations can benefit from data center services, but here are some of the early adopters (and now heavy users) of data center services.
- Tech Companies: Duh! Tech companies have a desperate need for data centers, using them for cloud services, web hosting, and application development.
- Financial Services: The finance world juggles huge amounts of data at once, so they constantly use data centers for secure transactions, data analysis, and compliance with regulatory requirements.
- Healthcare: Healthcare has big confidentiality and compliance needs – data centers can help store their massive amounts of data safely and securely for patient data storage, telemedicine, and research.
- Retail: With so much business happening online these days, retail companies lean on data centers to maintain 24/7 ecomm platforms, improve collaboration, handle inventory management, and maintain customers.
What Sorts of Services Do Businesses Need from Data Centers?
When it comes to the specific types of services data centers can provide to businesses, there’s four major areas. They are:
- Infrastructure as a Service (IaaS): Hardware-based services, such as storage and server space. This means companies can use data centers to physically store their own data OR they can leverage the massive amounts of computing power or data storage facilities to empower their business.
- Platform as a Service (PaaS): Critical for companies in tech and research, PaaS offerings give developers and researchers the tools to build and deploy applications by using data center power and storage.
- Software as a Service (SaaS): Finally, we have the top layer of the main services: software. SaaS are all of the software tools that companies use at a top level – things like messaging, file sharing, and data analysis.
- Network Security Services: Data center providers also offer network security solutions – including firewalls, intrusion detection systems, encryption services, and as we mentioned earlier, data recovery and business continuity.
How Do You Get Data Center Services for Your Business?
Don’t be overwhelmed by the wealth of options and information related to data center services. The process of finding the right data center solutions is not so difficult. Like any other business decision, you need to balance the costs against your needs.
Assess Your Needs: Understand the specific requirements of your business, such as storage capacity, computing power, and security needs.
Research Providers: Identify data center providers that offer the services that meet your business’s needs. Usually, these are the big providers, but you may have access to a local solution.
Do a Cost-Benefit Analysis: We don’t have to tell you this, but doing a CBA when making your choice will give you all the clarity you need to make a good decision.
Negotiate Your Service Level Agreements (SLAs): SLAs are the contracts that dictate the services that the provider will provide and the costs for said services. There is always space for negotiation here, so chat with your provider about it!
When Do You Need to Get Data Center Services?
You may not need data center services on a large scale, but you may need – or are already using – data center services with the likes of Google Drive, Dropbox, or even Microsoft Office.
However, if you are growing in any way, you’ll probably want to leverage the power of data centers to scale safely and efficiently.