Published: March 25, 2020

Introduction

Employees relying upon cloud-based remote services; media, content and network service providers experiencing unprecedented demand for streaming and online entertainment; and hospitals, utilities, and governments battling with decreased staff and relying upon digitized services like never before. For many countries, this is the outcome of COVID-19 social isolation policies and protective measures. Behind every one of these activities exists a datacenter, in most cases a leased or multi-tenant facility. Few people understand what these facilities do and how they run, but this 'invisible infrastructure' is responsible for keeping the lights on for organizations and activities we have come to rely on during this pandemic.

If they were not already, governments (as a result of COVID-19) are starting to consider datacenters as mission-critical infrastructure alongside power and water utilities due to their integral role in keeping economies, hospitals and society in working order – from dissemination of information to online shopping. This has placed an increased importance on providers' own business continuity plans (BCPs).

German internet exchange DE-CIX has already achieved record traffic peaks (and the highest jump it has seen in a short period) as a result of recent events. In some European countries, internet use has been up as much as 50%. Companies relying upon VPNs have been scrambling for additional bandwidth, service providers have been seeking to add servers to increase service delivery and PoPs are being rolled out to address growing demand for technology during this testing time.

The 451 Take

It is the role of datacenter operators to be resilient – their customers expect that the lights will be kept on during any major disrupting event. This does not mean the current pandemic does not test the industry – far from it. Providers and customers have learned valuable lessons from the past. For instance, many learned about resiliency and the importance of communicating with transparency during such events as the Tokoku earthquake and tsunami in Japan in 2011 and Hurricane Sandy in New York in 2012. Providers had to deal with major increases in service requirements during the recession of 2007/2008, when more people spent time at home streaming content and doing online shopping. COVID-19 adds some new elements to these challenges – especially around staffing, supply chains and access as cities go into lockdown.

Due to past events, such as SARS, some providers are more prepared than others, but the industry is being opaque about lessons learned, and in many countries we are seeing combined efforts to ensure that the datacenter industry does its best to keep operating for those relying upon its services. Providers need to reconsider their own build and customer pipelines, which are likely to suffer short-term impacts. Post COVID-19, however, we expect demand will rise as enterprises start factoring pandemic preparedness into future business continuity strategies.


Mission-Critical Business

Examples of where datacenters are being used during the COVID-19 current crisis include:
  • Delivery of remote working tools/cloud-based services.
  • Regional access to overcome latency concerns/costs.
  • Tools that help track location of employees and their families.
  • AI and other tools for tracking the spread of the virus.
  • R&D into vaccines.
  • Healthcare systems.
  • Emergency services systems.
  • VPNs for business.
  • Media and content/gaming delivery.
  • Social media tools.
  • Retail systems – food delivery, etc.
  • Supply chain management.
  • Virtual gyms, schools etc.
At the end of January, COVID-19 started to sweep across China. Datacenter providers in the country were quick to enact BCPs – many adopted during the SARS epidemic. Companies mandated work-from-home (WFH) orders for employees, placing strain on company virtual private networks (VPNs) and offering a glimpse of the network pressures that were about to impact Europe a month later. The European market has turned to its Asian counterparts for guidance on disaster-recovery (DR) measures, putting in place a tiered response to the crisis from the initial precautionary measures of WFH to moving workloads to backup sites when and if a datacenter cannot be properly managed or accessed.

While enacting their own plans, datacenter operators are being called into discussions around strategic governmental initiatives. Governments are recognizing the important role that the leased datacenter industry will play during this crisis. The state of Hessen in Germany, for example, only recently listed its critical infrastructure as being police, hospitals, fire departments, power, water and electrical supplies, as well as digital infrastructure (for the first time). This allows datacenter operators to gain the same level of child care and support as other frontline workers. A similar move was approved in the UK, where providers have also been working closely with the government to secure special access passes for datacenter workers if the country goes into forced lockdown, to allow staff to travel to sites.

Keeping the Lights on during a Crisis

What are datacenter providers doing to actually keep the lights on? Once the seriousness of the outbreak was understood, most providers implemented a mandatory 'stop' on all travel and a WFH order on all nonessential staff. Business teams have been relying on remote working tools, conducting meetings from home offices, etc. In some cases, management has been split into teams to ensure the running of the business if certain staff members take ill.

Both staff and customers require access to facilities. These must remain on-site – or at least have access to environments. On top of standard hygiene procedures, such as hygiene stations and setting guidelines for entry (based on possible symptoms or travel from high-risk areas, with guidance from the World Health Organization and local bodies), many providers have trained security teams in fever screening. Customers (and business staff) are often kept separate from datacenter provider operational teams, which themselves are split into multiple groups – three or more in most cases – that work in shifts and individually to try and limit exposure to the virus. Datacenters are 24x7 operations, and in most cases providers run two teams covering two shifts each week – current plans ensure these teams never meet and a backup team is always on standby.

Most providers want to keep traffic through data halls to a minimum – often one person at a time – and many are offering reduced prices for remote-hands services or even free services. There are also efforts by providers to track and trace movements within datacenters and between datacenters. These arrangements have had a knock-on effect leading to increased demand across the outsourced operational management industry, with some providers using outsourced datacenter teams.

The pandemic is also affecting some security measures, such as biometrics and fingerprint entry. Many providers are considering how safe these measures are in terms of contagion risk, and in some cases sign-in and registration books have been suspended. The industry is also considering its requirements for special disinfecting cleaning measures, although some providers say they have been concerned about their ability to gain access to the right specialist cleaners (that also work in sensitive datacenter environments – often CDC-approved) due to current high demand.

Customer Challenges

As was learned in previous emergency situations, communication with customers is paramount. In most multi-tenant facilities, the datacenter provider does not touch the server unless tasked to do so with remote-hands tickets. This means many mission-critical services require some customer staff on-site. Providers need to share regular updates with customers not only on how they are keeping the lights on, but also on the restrictions that customers will face entering the site or facility and accessing their own servers. Most providers are tasked with providing daily updates due to the incredibly fast pace with which restrictions due to the virus are being rolled out by governments around the world.

Customers planning on working on-site are often required to provide information about their (and their family's) current health and previous travel. In many cases, they are being tested for fever in quarantine rooms before entering a site. The number of requests for customer access to sites has reduced with travel restrictions, and providers say many customers are holding back on new projects where they can – especially new migrations and other large-scale projects. That doesn't mean there isn't more demand. Quite the opposite for colocation providers that work with cloud, managed services, systems integrators, networking operators and content providers. These customers are increasingly asking for additional datacenter and networking bandwidth. Peloton, the online exercise bike, has seen huge increases in demand, for example, with more people confined to home environments. So have remote working services such as Zoom or Microsoft Teams.

The challenge for many multi-tenant datacenter providers is to cater to temporary spikes while enabling customers to return to pre-COVID-19 use cases after the event. Many are looking to offer flexibility in contracts (often seen on a month-by-month basis), if they don't already. Some providers have also seen an increase in customers seeking second (DR) sites, as well as an increase in conversations around desktop recovery sites and office space pointing to some long-term trends. We expect this to continue as businesses start to factor pandemic preparedness into their BCPs.

Restrictions on server production and deliveries have meant some managed services simply cannot expand, despite increases in demand. Some managed service providers are also facing challenges in manning their own increasing demand. For many customers, remote-hands services have become crucial for helping keep their own lights on in the datacenter. Some customers have even been asking their providers to offer services for managing customer server environments. For many colocation providers, this blurs the lines of demarcation but opens up opportunities for those with marketplaces where they can promote managed services and other providers existing inside their facilities.

Contractor and Construction Challenges

Many providers have told us that construction work has not been halted, but we expect this could change soon as further WFH measures and restrictions are introduced across many global markets. Construction teams that are carrying out work have been kept segregated from live sites, with many only working now on new build projects as opposed to expansions at existing sites, to minimize risk to operational teams.

Some providers fear construction projects may run into their own supply chain difficulties or staffing challenges, especially where equipment comes from quarantined areas. This could push the pipeline out for many large projects throughout 2020 and even 2021. Providers are also concerned about delays to approval processes due to government bottlenecks. Critical infrastructure vendor Vertiv, which provides equipment for the datacenter industry, says it expects the COVID-19 pandemic could wipe around $70m-90m from its Q1 net sales as a result of shipment and supply chain disruption. Schneider Electric also expects to see a significant impact in Q1 due to factory closures – it says COVID-19 could lead to about €300m ($326m) in lost revenue, much of this in China. These vendors expect to recover losses, however, as the world arises from its coronavirus lockdown. Many providers say they have already ensured pipelines for current projects, and that they will be in a good place to commence work on new phases and builds as soon as they can.


Other Challenges

There are still many challenges ahead for the datacenter industry (beyond keeping the lights on) as a result of COVID-19. Business leaders will need to carefully prepare for the possibility of longer sales cycles and a reduction in the size of new business. In Europe, many providers are also concerned about issues such as data protection – for example, if movement is tracked in the datacenter in an effort to limit contamination – as well as reliability of utility supply and what emergency powers in many countries may actually mean to the industry.

These are not normal times, and while the datacenter industry has proven it can be resilient during times of crisis, the datacenter industry will – like the rest of us – face challenges ahead. Meanwhile, few people watching Netflix at home, using online health services or doing their isolation grocery shop will realize just how much of everything they do over the coming months will rely on a datacenter. This will be a testament to the importance of this invisible infrastructure (operations that are critically important and always need to run, which often never get noticed due to their 'always on' nature). We expect, as a result, to start seeing datacenters become more widely recognized across Europe for the role they have to play in keeping society ticking.
Penny Jones
Research Director - MTDC & Managed Services

Penny Jones is a Research Director for the Multi-Tenant Datacenter channel and the Managed Services & Hosting channel. Penny provides insight into the European multi-tenant datacenter markets; European managed services and hosting markets; and European cloud (IaaS, PaaS & SaaS) markets.

Jeremy Korn
Research Associate

Jeremy Korn is a Research Associate at 451 Research. He graduated from Brown University with a BA in Biology and East Asian Studies and received a MA in East Asian Studies from Harvard University, where he employed quantitative and qualitative methodologies to study the Chinese film industry.

Aaron Sherrill
Senior Analyst

Aaron Sherrill is a Senior Analyst for 451 Research covering emerging trends, innovation and disruption in the Managed Services and Managed Security Services sectors. Aaron has 20+ years of experience across several industries including serving in IT management for the Federal Bureau of Investigation.

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