Zima Red ep 141: Mike Netzer - Data Centers 101: What powers our modern world
Primer: Curious about the data center industry and how it works? Let’s find out from Mike Netzer of datacenterHawk in this episode of Zima Red. You will learn about some pretty cool facts too!
Background
Joined datacenterHawk 4 years ago
About datacenterHawk
A platform that tracks the real estate side of the data center industry
There are 4-5 big buyers that dictate the terms of the market
Spent time tracking what these groups are doing
The majority of their business comes from subscribers who access their analytics
Their Subscribers
Primarily data center operators
During the pandemic, data centers and industrials experienced positive growth, gathering interest from the investor class
What Is A Data Center?
A data center is just a very large computer that has a couple of things:
A storage
A processor to do computations
Connection to the Internet
It has hundreds of servers — Basically a computer without a screen
The buildings are massive, highly secure, and uptime
Data centers have redundant power feeds and generators that automatically kick in if the power feeds go down
Costs for data center outages are measured in millions of dollars an hour for advertising revenue and e-commerce
Do Data Centers Specialize In Storage, Compute, Or Network?
Have to look at what the largest groups have done historically
The Google and Microsoft data centers in Iowa have massive storage. They may do some compute, but are not servicing customers from their location
Core data centers in big population centers house a lot of information to service those populations
There’s a term called edge — Pushing a subset of the data from the core to the edge/nearer to the end user
One of the big decision points in data center decision-making is latency — How long it takes for the info to get from the data center to the user
Why Are Data Centers Located In The Middle Of Nowhere?
When companies lease from a data center, they are leasing power, space, and cooling
Servers generate a ton of heat, so they require a ton of power to power them and cool them
There’s a loose correlation between megawatts and square footage
When companies design and build their data centers, they work closely with their customers to make sure that they are delivering something that the customer actually needs
The big deployments in the Midwest were early deployments in the space and those sites are still growing
Colocation data centers: Groups that build data centers to lease them to other groups
When tech increased, companies started building data centers. Over time, it became too expensive and they started to outsource to colocation data centers
A third category is hyper-scale data centers, which are owned and operated by the tech giants
The Cloud And The Data Center Space
A cloud is just a data center that is publicly accessible
They have a pay-as-you-go model that is infinitely scalable
Cloud service providers divide their services by region, offering flexibility to their customers
Northern Virginia has grown so much because of its history in the early 90s — AOL’s headquarters was located there
Do Companies Still Build Their Own Data Centers?
Fewer companies are building their own data centers
Companies are putting some of their stuff in the cloud and some of their stuff in a colocation facility for security reasons
Only A Few Main Players In The Cloud Space
Some groups are rising to challenge tier 2 cloud providers
There are regional players and groups that are building cloud-like platforms
More options are available on the pricing side and development side
Land And Data Centers
There’s an intersection at Ashburn, Northern Virginia that’s called the heart of the internet — 70% of the world’s internet traffic travels through it. The land is highly valuable here
It’s not that the US is running out of land, but prime land
The proximity to existing data centers is highly valued
There’s a group called Quantum Loophole that bought a large parcel of land 20 miles north of Ashburn and has spent money to run a fiber ring up to Frederick, Maryland, and back down, where power and land are much cheaper
Crypto Mining And Data Centers
2 years ago, they had plenty of people from crypto reaching out to them
It tapered off with crypto prices
Crypto mining groups do not need a full-blown data center
Traditional data center operators shied away from Bitcoin mining operations as they were not in for the long haul
Making Data Centers More Environmentally Friendly?
The community is not pushing back against data centers. Instead, the pushback comes from the corporate world
Various groups are looking into various approaches like carbon credits, wind farms, solar farms, etc.
These large groups have set targets, but we have to look into what those definitions mean
Impact Of AI On Data Centers
AI is going to either sustain or accelerate the growth of the cloud service providers
The Future Of Data Center Growth
In 2018, there was a study that said that 50% of the world's data had been created in the last two years
Demand is getting higher
Markets are spreading (e.g. groups well-established in North America are establishing a presence in Europe, Asia, etc.)
European And Asian Internet Traffic Going Through Virginia
As these countries and markets grow, less traffic will be served by Ashburn, Virginia
Europe is an interesting case as it is a patchwork of different countries with different rules around data privacy and power usage
Investing In Data Centers
The easiest is to buy stocks in these companies
There are only 3 publicly traded data center REITs left
Data center operators are partnering with institutional investors or private funds to fund their growth
Interest rates have hurt the industry, making it harder to get deals done
The average cost of building a data center is $330 million
Technologies That Will Transform The Data Center Industry
Most probably it will be liquid cooling
Has not been widely adopted as it is expensive
Thoughts On The Metaverse
Sees the potential and appeal of it
Thinks that it is inevitable but worried about its unintended consequences
All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.