Data Centers – The Internet – The Economic Impacts
November 23, 2020
A 100 years ago a person could intimately know no more than 50 books in a lifetime, today we can access information from over 600,000 books. When I went to school, I had books and access to a library. My children went to school with laptops and access to the Internet. That is a revolution from new digital products to digital services providing an economic change and impact.
New industries and skill sets have arisen with new global giant companies with new levels of power, leverage and insights; driving digital change in an increasingly digital world. All but unthinkable to those who where schooled in the 60’s, 70’s or even in the 80’s would have thought ‘Data is the new oil’ would be used in common industry parlance.
Digitalization is transforming the value chain with increased efficiency, productivity, quality and competitiveness. The digital infrastructure underpinning digitalization, including the Internet’s backbone — data centers, the cloud and network infrastructure — is closing a global social-economical gap, in business and for those on the right side of the digital divide.
Time and again I hear Government agencies asking Data Center Foreign Direct Investors “How many onsite Jobs will this investment create?”. In the age of the Digital Economy, a more pertinent question is “What will the wider economic impact be?” let’s explore’
Measuring the Size of the Digital Economy
Measuring the Digital Economy is difficult yet the IMF ‘Measuring the Digital Economy 2018’ report stated that the Digital Economy in most nations is less than 10 percent of total economic activity if measured by value-added, income or employment.
And according to the UNCTAG 2019 report, the Digital Economy ranges from 4.5% GDP in developed countries (circa 12%+ for Nordic nations and the UK) to 15.5% of global GDP in developing countries. For most of the G-20, that makes the Digital Economy larger than Mining, Utilities, Agriculture, Education and Transportation.
34% of investors questioned in the ‘2018 EY Attractiveness Survey Europe’ regard the Digital Economy as the leading investment class. As for 2020, IT Data Center spending is expected to reach $191bn, while $100bn will be pumped into Cloud IT Infrastructure between now and 2023.
It’s worth comparing the digital age to previous revolutions. On average, the Internet, over its initial 15 years, contributed to a $500 increase per capita in developed countries. The industrial revolution took about 50 years to achieve a similar impact.
What are Data Centers Anyway and How Many are There?
While Wikipedia offers a perfectly fine definition of a data center, a more all-inclusive understanding of what data centers are and what they enable helps us to form a better sense of their global economic impact. In short, a data center(s) is or are:
- Data Driven Critical Infrastructure
- A Data Factory that processes digital workloads
- Moving photons & electrons processing Applications & Services
- Engines of a digital outsourcing revolution
- Heart, lungs and nerve cells of ‘digital driven delivery’
- Physical enabler to new business and social models
- An ‘A$$et Cla$$’ (the smart money knows it even if it is not recognised by institutions!)
As for how many: Emerson in 2011 stated there where 509,147 data centers worldwide, IDC estimated this peaked in 2017 which dipped to circa 8,400,000 globally. Likely due to more enterprises migrating to more efficient facilities with lower OPEX and into the cloud which include 562 hyperscale data centers.