Every corner of the world seems to have been affected by the Coronavirus following the aggressive and frightening outbreak from China, that spread to South Korea, Italy, United States, and other countries.
Each nation has taken on its own approach in tackling the challenges that have emerged out of keeping the virus infectivity under control: some have begun tracking and texting those possibly exposed and told to self-quarantine for weeks, some nations have made staying at home an obligation, and others are allowing citizens to return to their normal lives.
Regardless of location or severity of population quarantine, though, there has been an even greater, and even more rapidly growing outbreak which has not shared the same level of attention that COVID-19 but has still been felt by many individuals and organizations.
It is the lifeblood of today’s economy and impacts the very fabric of over 4.5 billion people daily. This outbreak is the skyrocketing creation, transmission, and consumption of data – all supported by data centers which play a key behind-the-scenes role in housing data and acting as the mission-critical infrastructure that underpins nearly every digital interaction for every individual in the world.
Work From Home, School From Home, & Collaborate From Home
Quarantine has been deemed by nearly every nation as a necessary precaution in order to try and minimize the spread of the virus. As of mid-March, most individuals working in a corporate setting have encountered a form of COVID-19 quarantine and have very likely received notice from their employers that work-from-home protocols are to be enacted. At the same time, most grade schools and universities have closed their doors and enacted school-from-home curriculums via online educational platforms and video conferences.
Working remotely is not new and has in fact grown in popularity in the last several years and paved the way toward a greater need for organizational collaboration.
Platforms like Zoom and Slack, which embody the very environment of collaboration, have both enjoyed great success through worldwide adoption over time – commanding $9.2B and $19.5B valuations at the time of IPO in April of 2019, respectively. Recent figures released by Reuters show that downloads of collaboration-based business apps including Slack, Zoom, Tencent Conference, WeChat Work, and Microsoft Teams rose fivefold since the start of 2020 and have all seen handsome usage.
Fivefold adoption of business tools in the new year and subsequent usage – especially if video streaming is involved – naturally requires beefed-up network bandwidth as video streaming is naturally very data-hungry. In the last few weeks, some companies have found themselves fully prepared on this front while others have been left to scramble to support stable online services to clients.
Preparedness vs Scrambling – A Grave Dichotomy
In the wake of market uncertainty and confusion, Zoom has displayed itself as an agile and steadfast market player while also establishing itself as a shining example for customer-service preparedness. In explaining how the company is planning on grappling with increased demand after work from home and school from home protocols were enacted, Kelly Steckelberg, CFO of Zoom shared in an interview on March 18 via CNBC: “In general, we architect our data centers so they run at 50% of peak capacity” she followed with “Zoom’s engineering operations team have been adding servers and other equipment inside every one of the company’s 17 data center locations, we plan to have two more (data centers) become available this week or next week”. This pivot was executed without a single publicly reported Zoom service interruption and despite already having the existing capability of supporting nearly 40-50% more traffic from where it is today, Zoom chose to distribute any additional stress by partnering with additional data centers to keep operating at 50% peak capacity.
Comcast, now the largest U.S. broadband network, reported network traffic increase by 32% between March 1 & March 30 with some cities seeing network traffic grow up to 60%. Work and school from home were also noted for increased VoIP and video conferencing at 212% and 50%, respectively. The same report stated that despite these increases in usage, network speeds continue to be uninterrupted.
Amazon has also experienced a great demand for its AWS Cloud offerings but more notably reported an increase in web traffic. For example, Italy’s Amazon web traffic jumped from 5 Gbps to about 20 Gbps before and after the nation went into lockdown, respectively. Atlas, a VPN tool that inherently relies deeply on digital infrastructure, saw user adoption in Italy catapulting to 112% in the same time period without note of any sluggishness in their tool.
Mobile telecommunications provider Swisscom AG suffered outages it blamed on an “overload” caused by a spike in call volume according to Bloomberg. The same article states that telecommunications and internet provider Three UK is handling 40% more voice calls in the second week of March as compared to the first, thus adding that much more stress to the network.
TD Ameritrade, E-Trade, and Robinhood all experienced major online outages and slowdowns, as investors who manage their own investments tried accessing their funds amid the market downturn. In particular, Robinhood had to scramble to repair access to their securities trading platform before peak hours returned.
On March 16, Microsoft’s chat and communications tool, Microsoft Teams, went down twice for a matter of hours.
These outages hindered thousands of workers in Europe who could not log on to perform work on MS Teams, outages also affected some several thousands of U.S. clients as well.
Online gaming and network services like Xbox Live, Nintendo, and Discord all reported short term outages on March 19 with Nintendo reporting a 9-hour downtime.
It’s important to make note that not all organizations who experienced outages can attribute their downtimes to issues in processing capacity through their own use of data centers or via use of vendor services which may have been overwhelmed. These organizations may very well have had other internal challenges. There is no question that a myriad of other obstacles exist for organizations at this time, however, regardless of how great these obstacles are, business is run one way or another through online infrastructure and thus precautions should be made in order to hedge against any operationally hazardous situations which may lead to losses in user base today and in the future.
The dichotomy between operational preparedness and scrambling can make or break a business. Keeping a product running smoothly for client success is critical during normal business days but should be held in even greater focus amid prolonged volatile market conditions where companies must decide what to trim off and what to continue to pay for – this cannot be stressed enough.
Essential Infrastructure & Immunity
Coronavirus quarantine and CDC order “Shelter in Place” requires that individuals not leave home unless absolutely necessary and mandates that non-essential businesses shut their doors. With this order in place, California’s governor, Gavin Newson, is including data centers as “essential infrastructure” alongside pharmacies and grocery stores and fully grants exemptions to staff to help support those with needs to keep data centers online.
Given that data center firms have the primary responsibility of keeping their facilities operational at all times for clients, in extreme cases, organizations have resorted to drafting contingency plans which included Sleeping Pods for team members ensuring that the facility can be manned 24/7 as long as necessary.
Where There’s Demand There’s Supply
Synergy Research, an agency that tracks the data center market, reported in December of 2017 that the total number of hyperscale data centers in the world reached 400. The same source reported that in late 2019, the number grew to 500.
They also noted that tech giants like Google, Amazon, Microsoft, Facebook, Alibaba, Baidu, Tencent, Apple, IBM, Twitter, LinkedIn, and eBay own these facilities for the use of their own data processing/storage and for leasing out to organizations in need of space. These organizations cannot build these facilities fast enough.
There’s such strong demand that tenants sign leases on warehouses that have not even been constructed yet. Managing Director of Investment and Data Analytics at Transwestern, Jimmy Hinton, explained in a CNBC interview on warehouse leasing plummeting because there’s so little new space to lease: “What we see often is that when developers announce that they have formulated a business plan, found a suitable site, and capitalized it, the tenants are eager to go ahead and commit, so that they can make their own plans to try to deliver their goods to the end consumer.” This has led the big tech firms to push forward with the creation of even more data warehouses for the purpose of holding and leasing.
Google & Appetite for Consistent Investments
An example of scale behind the hyperscale data center projects that tech giants launch, Google has been steadily investing enormous streams of cash into projects such as these. Sundar Pichai shared Google’s plan to invest $9 billion in 2018 on data centers and offices in his blog. Pichai also shared that in 2019 the plan was to invest another $13 billion into data centers and offices to then extend the U.S. data center footprint to 13 data centers.
The following year Pichai announced in his blog post in late February on Google’s plans to invest more than $10 billion dollars in offices and data centers in 11 states throughout 2020. If all goes to plan, Google’s Search, Maps, YouTube, and Gmail and capabilities scaling the Google Cloud platform only becomes more powerful.
Pichai’s aggressive and consistent investment over the last 3 years should provide a strong perspective around Google’s strategies and priorities when it comes to data centers and getting a taste for how they plan to leverage this business segment to its maximum potential.
All is Not Lost – Competition Has Ground & More
Despite the ever-growing presence of enormous players in the data center space and despite big tech’s annual double-digit billion-dollar investments in this critical infrastructure, this has not in any sense discouraged competition. Here are a few examples:
- China Telecom is one of the largest providers of Data Center services in the world. It serves 10 countries and owns over 456 data centers with a grip on services in mainland China.
- Digital Realty runs approximately 214 data centers with a presence in 14 countries.
- Equinix, founded in the same year as Google in 1998, serves 24 countries and has a vast network of 202 data centers around the world.
Other organizations such as Galaxy Capital Partners have taken a unique approach of buying out or partially owning data center supply chains in order to cut power costs, ensure continued installation of most efficient cooling, and support creation of scalable solutions for future demand growth throughout data center architecture and construction partnerships.
Data Centers & Their Intertwined Nature With Our Future
Before COVID-19, before 3G, and even before the first iPhone, we as people adopted a new way of life after the creation of the internet. Since then, our access to the internet has grown exponentially, the establishment of internet based companies has initiated a new chapter in how we think of doing business, share information, and spend our days. Our internet speeds and information consumption have both grown and our time spent online only continues to rise.
This is all while approximately a third of the world population – nearly 2.5 billion people – does not have access to mobile devices. Slightly less than half of the planet’s population still does not have access to the internet and thus cannot take part in the digitally enriched everyday life we know and experience every day.
Opportunities to penetrate enormous portions of the market are already underway as SpaceX’s Starlink satellite launches are already underway with a current plan of launching up to 12,000 satellites to provide broadband connectivity to underserved areas of the planet. While Google and Facebook have retired similar projects, satellite internet access company OneWeb continues launching satellites with the same goals as SpaceX. Amazon has also been developing its own space and satellite projects but has yet to release definitive plans for internet satellite launches.
It’s important to note that even taking account of user growth across the world thanks to a worldwide internet – regardless of what company establishes the web – this new population of individuals who can contribute to more data creation and consumption remain outnumbered as the Internet of Things has already surpassed more connected things than there are people on earth.
Growth of IoT infrastructure and subsequent analysis of data pushed from these products for the purpose of gaining decision making insights in all facets of product improvement will also be critical. This goes without mentioning the integration of AI and Machine Learning into processes which will in themselves require more massive amounts of data storage, warehousing, computational capacity, and unprecedented amounts of power and bandwidth.
The IoT will only continue to grow as we connect more things into the internet and is slated to grow even more rapidly as 5G is rolled out and infrastructure is built to support machine communications at massively accelerated speeds. Thanks to us, data generation, storage, and processing have nothing to do but continue to skyrocket to new heights.
Thanks to data centers & their continued aggressive growth, it is possible to stay in touch and make new connections in this time of isolation. As organizations readjust their infrastructures and once again achieve resolute paths of confidence, we’ll enter a path with COVID in the rearview and move ahead into a renewed and prosperous time.
Galaxy Capital Partners is an investment and development firm that aims to develop the next-generation of data center infrastructure. Contact us at hello@galaxycapitalpartners.com.