State of the industry comes under scrutiny

After two difficult years, much of Europe now appears to be emerging from the worst direct impacts of the pandemic, through a combination of intense vaccination programmes and daily management to live alongside the virus. However, the long-term effects of the global pandemic, coupled with new geopolitical issues mean that the world now faces some robust challenges.

It is against this background that our latest survey on the current state and prospects for the European data centre industry was undertaken. It reflects responses from technical real estate developers and investors, corporate occupiers, colocation providers and IT and telecom service providers, as well as design and build specialists, consultants and other key market practitioners across Europe.

In total, we analysed the views of respondents who controlled data centre portfolios of around 5 million square metres of technical floor space across some 38 countries; a fivefold increase in survey coverage since we began in 2009.

Looming threat of self-regulation

According to our findings there is a firm commitment amongst respondents to move towards a renewable-sourced future. However, there are also strong concerns that regulation could be placed on the industry to push initiatives for the greater use of renewable sources of power at a more rapid rate, with around 90% of the 3,000 of those surveyed believing that this could be introduced to ensure greater compliance.

With ambitious targets to be achieved by 2025 and 2030 under the green deal, it begs the question that if our sector doesn’t get ahead of these targets, will the self-regulatory initiative become legislative and regulated? We believe our sector is at a crossroads with one route being proactive, investing in new technologies, self-generation and looking at innovative storage solutions to reach climate neutral targets. The other route is having legislation and regulation imposed on us and having to react to the imposition of energy, water and emission targets that we have no influence over.

Continuing Demand

Despite these concerns and with the backdrop of economic indicators that suggest that stagnation and recession are at the foremost in the thoughts of the markets,

confidence in the sector continues with a 5% increase in respondents seeing a rising demand against a falling supply (up to 90%) which was further reinforced by a near 100% response that demand will either rise or remain the same over the next 12 months. This is despite the challenges voiced by our respondents around energy supply, skills shortages and sharply increasing costs across the board.

Ongoing challenges

Disruptions to global supply chains continue to plague the data centre industry and 87% of our respondents stated that they had experienced such an eventuality in the past year, a marginal decline on the 91% recorded in our preceding survey. There are also some indications of an easing in the challenge of sourcing construction raw materials. In 2021 just over half of respondents experienced sourcing difficulties for

concrete/cement, steel, cladding materials, and dry lining materials – this has fallen to around 32% in 2022 for the concrete /cement and two-fifths for the other materials.

The long-term effects of the global pandemic, coupled with new geopolitical issues mean that the world now faces some robust challenges. Whilst an economic slowdown across Europe may have its own consequences for growth in our industry, perhaps the most immediate and stark issue is the inflationary pressures on energy pricing that has already hit consumers and business. With the backdrop of economic indicators that suggest that stagnation and recession are at the foremost in the thoughts of the markets, the optimism shown by our respondents on the current state and future growth prospects of our sector even more remarkable.

Skill shortages impact

In our report, the well documented issues of skill shortages is set within the context of its impact on the delivery of suitable stock for the end users. Unsurprisingly there appears to be little doubt that these shortages have already had real consequences and directly impacted on our respondents. Notably, when questioned about impacts experienced due to shortages in skilled professionals over the past year, most respondents cited multiple factors.

The most cited impact is that a greater workload has been placed on existing staff, nearly nine-out-of-ten cited this as the case, an uplift from the eight-out-of-ten recorded six months ago. The shortage of staff has also inevitably led to increasing operating/labour costs recorded by 83%, although it is noted this is a marginal

decline from the 86% recorded six months earlier. These shortages can be seen as a contributory factor in the increasingly popularity of the use of outsourcing options, with around 51% citing this.

It appears that more respondents are finding it difficult to resource existing work this year than was the case in 2021, with just over half stating that they had experienced difficulties in meeting deadlines or client objectives. This is a rise on the 39% recorded six months ago, although notably lower than the 70% who cited it as factor at the beginning of the pandemic in 2020.

In addition, just over two-fifths stated that shortages had led to delays to developing new products/innovations, up from the quarter recording this in our last survey, whilst the proportion that noted they had ceased offering certain products or services has also risen to 14% from 9%.

However, lost orders is one of the more extreme consequence of skills shortages, and in our latest survey just 8% believed this had happened, a quite significant fall on the 20% identified six months ago.

The Green Deal

At BCS we are continuing to help clients navigate these global challenges and undertake the transformation that is necessary to prosper in the Green Deal environment. Our current services include informing clients of Green Deal levies, the financial modelling of impacts and supply-chain transformation that will form the map to reach our green destination.

*The Summer Report 2022, now in its 14th Year is undertaken by independent research house IX Consulting, who capture the views of over 3000 senior datacentre professionals across Europe, including owners, operators, developers, consultants and end users. It is commissioned by BCS who offer integrated solutions through IT asset consultancy.

Link to download the report free of charge: