Data Center Market About to Get Edgy | Article | FTI Consulting

The Data Center Market is About to Get Edgy

Demand is Set to Outpace Supply in Secondary Data Center Markets

Corporate Finance & Restructuring | Telecom, Media & Technology (TMT)

June 13, 2017

data center

Rapid adoption of over-the-top (OTT) video, the proliferation of the Internet of Things (IoT) and growth of high quality, bandwidth-hungry content is leading service providers increasingly to move select strategic IT assets closer to the edge of the network. To the benefit of customers, providing local connectivity to the network edge will lead to improved quality of service and security. For web content companies and cloud service providers, edge connectivity will allow them to satisfy increasing consumer demand, for quicker response times needed in streaming content rich social platforms, webpage load speeds and processing data for IoT devices.

Edge connectivity is especially relevant when you consider that IoT devices have limited computing abilities and will increasingly rely on computational power, access to data storage, high bandwidth and low latency connectivity. Moreover, the increasing demand for bandwidth is taxing the current legacy network infrastructure. The 24/7 collection of data for internet connected devices such as phones, computers, cars, buildings, and nearly every electronic device with a sensor is forecasted to grow to 20.8B devices by 2020.1 The graphic to the right illustrates the network edge and the challenge of low latency computing with the centralized cloud architecture.

To help alleviate current network constraints, utilization of content distribution networks (CDN) - third party providers such as Akamai Technologies, Limelight and CenturyLink / Level 3 or content companies using homegrown solutions such as Netflix and Comcast - are increasingly in demand to cache popular content and web-application data on servers closer to end users residing outside of the traditional internet hubs, such as: New York, Los Angeles, Northern Virginia, Dallas, or Silicon Valley (also referred to as Tier-I markets).

The increased demand for data center space in smaller emerging markets (also referred to as Tier-II and Tier-III markets and include cities such as: Denver, Phoenix, Portland, Atlanta, Minneapolis, Columbus, and Nashville) has created a whole new category of data center service providers referred to as “edge data centers” - facilities that extend the “edge” of the network, further from traditional Tier-I internet hubs and closer to end-users.

1Gartner (November 2015)

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