The Nordic datacentre market comes of age
The ample provide of comparatively low cost, inexperienced power the Nordic area has at its disposal has seen it repeatedly hyped as a super location for enterprises and hyperscale cloud corporations to website their datacentres.
It has, nevertheless, taken these organisations maybe a little bit longer to purchase into this hype than analysts and operators initially envisaged.
“From a sustainability perspective, the Nordics had it all from the start and [the operators] created a good strategy based around the fact they have the energy, and they built a lot of datacentres, but then they realised the customers weren’t coming. And operators started to realise that just having cheap power doesn’t necessarily bring the clients in,” Harald Riise, CEO of Norway-based datacentre service supplier Compute Nordic, tells Computer Weekly.
Steve Wallage, managing director of datacentre market-focused analyst home Danseb Consulting, says half of the issue was how some operators marketed their amenities within the early half of this decade.
“The marketing wasn’t always great,” he says. “They might need an amazing PowerLevel presentation, and discuss lots about concerning the nice environmental and financial advantages of being within the Nordics, however they didn’t speak about what this meant in quantifiable phrases.
“How a lot cash would an organization save by doing this or by how a lot would this scale back their carbon emissions by, for instance?
“Now operators talk in much more specific terms about how they can meet the requirements of clients. In the past they had more of a ‘we’re all things to all men’ [approach to marketing their facilities] whereas now it’s a case of, ‘if you’re an HPC user, this is what we can do specifically for you’.”
Risk averseness
Another main downside operators needed to overcome is the danger averseness of enterprise IT patrons, who are inclined to favour datacentre areas which might be in straightforward attain of their very own headquarters, continues Wallage.
“It’s psychological, really,” he says. “People like to be able to visit the datacentre housing their IT or feel like they are reasonably close to it.”
And in the event that they did handle to persuade an organization elsewhere in Europe to relocate their functions and workloads to a datacentre in Denmark, Finland, Iceland, Norway or Sweden, for instance, there have been no ensures the operator can be allowed to publicly title the consumer as a reference buyer anyway.
Mainly as a result of enterprises don’t need to run the danger of sign-posting to nefarious third events the place their business-critical information is being saved.
“There has always been a lack of case studies for operators to point to because many clients are not willing to talk about their [datacentre strategies] publicly. So the lack of real-world examples for operators to talk about did not make things easier either,” he provides.
Building on the sustainable attraction of the Nordics
A combination of authorities intervention, operator funding and abroad advertising has served to bolster the area’s attraction to sustainability-conscious enterprises in the course of the intervening years, although.
Concerns concerning the high quality and efficiency of community connections between some of the Nordic international locations and the foremost colocation hubs of Western Europe are recognized to have postpone some potential shoppers prior to now. So some of the work to spice up the attraction of the Nordics has centred on addressing that.
As such operators throughout the area have launched into quite a few initiatives and initiatives which have sought to extend the quantity of high-quality community connections that feed into their datacentre campuses.
Iceland is an instance of a Nordic nation that has made a concerted effort lately to construct out its community connectivity in help of its push to turn into a thriving datacentre hub, as Tate Cantrell, CTO of Icelandic colocation supplier Verne Global, tells Computer Weekly.
“Iceland has been developing its datacentre industry since the mid-noughts, and when we [Verne] came in and started working on the concept of bringing international capacity datacentres to Iceland in 2007, there was only one viable fibre cable system there,” he says.
“There is no way you’re going have a datacentre industry if you only have one cable system; so we got the second and the third built even before we had gone live with our first product in 2012.”
HPC functions
That 12 months additionally noticed Verne Global join BMW Group as a reference buyer, with the automotive big signing a contract that might see it migrate an unspecified quantity of power-hungry, excessive efficiency computing (HPC) functions to its renewably-powered datacentre.
There at the moment are cables techniques connecting Iceland to North America, Scotland, and Denmark, and a further one is now deliberate that can finally join the nation to Dublin, dwelling to Europe’s second-largest datacentre hub, sooner or later too, continues Cantrell.
“That [last] cable system has always been on the roadmap, and we’re at the point now where the Iceland government has looked at the exponential growth of the Icelandic datacentre industry and said, ‘the time is now’. They see the opportunity and know the best way to promote Icelandic datacentres is by funding this additional cable system.”
Speculate to build up
As properly as investing in community connectivity, governments in a number of Nordic international locations – together with Norway, Sweden and Finland – have additionally launched monetary incentives lately to encourage operators to construct datacentres of their respective international locations.
The Swedish authorities launched a tax break in 2017 that sought to chop the electrical energy tax fee by 97% to encourage extra hyperscale datacentre developments, for instance, whereas Norway has had a system in place now for a number of years that enables operators to assert tax reduction on their power utilization.
When these measures have been initially launched, they have been greeted with a level of scepticism and nearly mistrust by the datacentre neighborhood, says Wallage.
“There was a little bit of uncertainty about quite how long-standing these offers would be and whether they would be removed over time,” he says. “But there’s been a clear long-term commitment to [maintaining these incentives] and secondly, they continue to improve on them.”
And they’ve performed a giant half in successful attracting enterprise and hyperscale datacentre shoppers to the Nordics, which isn’t any imply feat provided that each group usually favour tried and trusted areas to host their workloads, continues Wallage.
“It’s a virtuous circle, really,” he says. “As they get more clients talking about the Nordics and setting up shop there, it becomes an even more credible location, and more people follow suit.”
World occasions have additionally conspired to provide enterprise IT patrons pause for thought concerning the sustainability of their know-how provide chains and setups, in addition to the place and who they select to outsource their IT necessities too.
Particularly as headlines about local weather change-related excessive climate occasions turning into ever extra prevalent, and more and more widespread.
At the identical time, demand for colocation capability inside the 4 main European datacentre hubs of Frankfurt, London, Amsterdam and Paris (FLAP) is forecast to hit report ranges throughout 2021 in opposition to a backdrop of issues about how way more server farm progress these cities can accommodate.
Both these conditions have introduced a possibility for Nordic datacentre operators to restate and refine their worth propositions to enterprises who might need neglected the area’s charms prior to now, says Compute Nordic’s Riise.
“Each of the countries together and separately has been on a learning curve these last few years, and we’re reaching a level of maturity now where [the region] can compete, and attract clients who have previously relied on fossil fuel-powered datacentres,” he provides.
Proof of that is evident in a 2021 report by design and engineering consultancy Arcadis, which set out to list the top 50 countries on the planet for enterprises and hyperscalers to construct datacentres in, primarily based on a spread of regulatory and infrastructure-related elements.
Of the highest 10, practically half of the international locations that made the lower are inside the Nordic area, with Sweden, Norway and Denmark in fourth, fifth and sixth place, respectively, adopted by Finland in eighth and Iceland in 36th.
Energy safety
The power safety supplied by Sweden, Norway and Denmark are flagged within the report as the explanation why these three international locations all ranked so extremely, together with how available renewable energy is to operators that determine to setup store in them.
The availability of high-speed web connections inside all three international locations was additionally flagged as a plus level, however it’s this mixed with Sweden’s standing as a member of the European Union that seems to have seen it ranked larger than some other Nordic nation.
“A growing share of renewable energy sources and reliable infrastructure adds to the country’s attractiveness as a datacentre investment destination,” the report states. “It’s EU membership [also] means Sweden is also a gateway into the largest economic zone in the world.”
These elements all go some strategy to explaining the excessive quantity of hyperscale cloud corporations Sweden has managed to draw to its shores lately, with Facebook opening the primary of three datacentres it now operates within the nation again in 2013.
Since then, Microsoft and Amazon Web Services (AWS) have additionally established a datacentre presence inside the nation, and Google not too long ago secured the environmental permits wanted to do the identical.
It can also be price noting that Denmark is – like Sweden – additionally an EU member, with the Arcadis report flagging its “proximity to large EU countries” as an vital think about its skill to lure in operators, nevertheless it seems to have misplaced marks as a result of of how costly the nation’s electrical energy prices are.
That has not deterred the hyperscalers from constructing out their presence in Denmark although. Facebook opened its datacentre in Odense, Denmark, in September 2019, and a 12 months later Apple adopted swimsuit with a facility of its personal Viborg. Several months later, in November 2020, a €600m datacentre that Google had beneath improvement for 2 years went reside. In addition to this, Microsoft set out plans in December 2020 to construct a renewably powered datacentre area in Denmark by 2024.
Datacentre areas
Norway has been no slouch both when it comes to attracting the hyperscalers, with Microsoft opening two datacentre areas within the nation in November 2019, with information additionally rising round this time that Google had additionally acquired a 481-acre website to develop right into a datacentre too.
According to actual property consultancy CBRE, the Norwegian datacentre market is heading in the right direction to develop by practically 100MW between now and 2024, having skilled 36MW of take-up within the final two years.
As is the case for a number of different Nordic international locations, Norway stays a vacation spot of alternative for organisations that need someplace to run their extra energy-intensive HPC workloads, whereas additionally attracting curiosity from the hyperscalers too.
“Historical latency issues are becoming less of a constraint, and the continued investments from datacentre operators is placing Norway in an extremely competitive position with neighbouring markets,” says Henry Gray, datacentre options consulting analyst at CBRE Europe, Middle East and Africa (EMEA).
“Power is still the main attraction to the market where cost saving and environmental, sustainability and governance (ESG) targets can be met with ease. Our figures are just starting to tell the story of the real importance of green energy in the datacentre industry.”
Overall, Ed Galvin, CEO and founder of datacentre-focused analyst home DC Byte, says there may be mounting statistical proof to counsel the Nordic area is basically coming of age now, and establishing itself as a mainstream datacentre hub.
“From a statistical perspective, if we look at the megawatts of power added from 2016-2021, we can report that Sweden has grown 258% (108-387MW), Norway by 180% (59-165MW) and Denmark by 123% (221-493MW),” he tells Computer Weekly.
Hyperscale cloud and web giants
Much of this exercise is being pushed by the hyperscale cloud and web giants, with Microsoft, Google, Apple and Facebook all recognized to be in numerous levels of constructing out their datacentre presence inside the Nordics.
“I think the Nordics look set to have its day in the sun after several years of falling short of meeting expectations,” says Galvin.
“Consider that Microsoft now has three hyperscale datacentres under construction in Sweden [Malmö, Gravle and Sandviken], while Google is forging ahead with planning permission in Horndal, as well as land-banking a new site in Skien, Norway.”
For this motive, after a number of false begins and unmet expectations, the Nordic area seems heading in the right direction to turn into the internationally famend datacentre hub its operators have at all times talked about it turning into.
“Denmark may well have taken the bulk of the hyperscale activity since 2017 with Google, Apple and Facebook but now it looks like Sweden and Norway are catching up. One notable absence is AWS, however they do seem to be building more in continental Europe beyond the traditional markets,” he provides.
Investor curiosity in Nordic datacentres on the rise
Beyond the discuss of take-up charges and rising demand for compute capability, one other signal the Nordic datacentre market is coming of age could be seen within the rising quantities of investor curiosity the area is attracting, provides Galvin.
As proof of this, he factors to the latest acquisitions of two Norwegian datacentre builders, DigiPlex and Green Mountain, by separate funding corporations, with each offers happening in July 2021.
Verne Global additionally made headlines in September 2021 with the information that it was acquired for £231m by digital infrastructure funding fund, Digital 9 Infrastructure. “These deals certainly reflect an increasingly international interest [in Nordic datacentre assets],” provides Galvin.
On this level, Computer Weekly understands that DigiPlex obtained greater than 100 expressions of curiosity from potential traders when information that it was up on the market emerged.
From a worldwide perspective, there may be much more curiosity in datacentres as an asset class proper now than there was beforehand, remarks Danseb Consulting’s Wallage.
“There is an awful lot of interest in the Nordics, and some of the valuations coming through have taken some people in the industry by surprise because of how high they are, but some of the companies have done very well so far [on their own] and investors are looking at how much better they could do if they had more investment,” he says.
Power provide constraints
As beforehand talked about, the surge in demand for datacentre capability in a number of of Europe’s main colocation hubs – together with Amsterdam and Frankfurt – has led to issues being raised about energy provide constraints in these areas. This has resulted in interventions to make sure there may be adequate energy being provided to native properties and companies, because the quantity of datacentres plugging into the grid in these has risen markedly.
Another space the place this development is enjoying out is in Dublin in Ireland, which is now dwelling to Europe’s second largest datacentre hub. Its progress has been fuelled lately by the hyperscale cloud and web giants, and their seemingly insatiable calls for for compute capability.
The nation’s utility regulators have raised issues concerning the impression that is having on the nation’s power safety profile, with warnings this might result in the onset of blackouts for Ireland’s properties and companies within the years to come back. For this motive, regulators and authorities policymakers have put ahead options that might serve to safeguard present power provides, whereas shopping for the nation extra time to deliver on-line different sources of energy to plug the hole attributable to datacentres.
These options embody introducing a moratorium that might ban datacentre operators from constructing grid connections for brand new datacentres for an unspecified quantity of years, or prioritising planning software approvals for operators that conform to construct websites exterior of Dublin.
This, once more, presents a progress alternative for the Nordics. An rising faculty of thought on this subject is that operators with datacentres in Dublin, Amsterdam and Frankfurt, for instance, may purchase extra capability within the Nordics, and encourage their customers emigrate their extra energy-intensive workloads there.
It is an thought being championed by numerous members of the Nordic datacentre neighborhood, together with Compute Nordic, who specialises within the provision of carbon impartial colocation companies.
“If the data centres in Dublin, London, Amsterdam, Frankfurt, think they’ve got a problem now with power, there are bigger challenges coming down the line that will exacerbate the issues they’re seeing now,” Tim Connolly, nation supervisor for UK and Ireland at Compute Nordic, tells Computer Weekly.
Reliance on fossil fuels
Aside from the very fact demand for hyperscale or colocation datacentre capability is predicted to maintain on hovering for the foreseeable future, governments internationally are pushing their populations to transition over to electrical autos, whereas taking steps to wind down society’s reliance on fossil fuels, he says.
All these actions have the potential to introduce new and extra strain on electrical grids in some of the foremost colocation hubs which might be already creaking beneath the strain. This is why it is smart now for enterprises to think about making provisions to outsource their energy-intensive workloads to the Nordics.
“This is not a problem that’s going to go away,” says Connolly. “That’s why taking a strategic view now – to shift what we can to those parts of the world where it makes sense to run these workloads because there is an abundance of sustainable electricity [there] that can translate into sustainable compute – is a good decision.”
And it’s a notion that has turning into more and more compelling for enterprises within the wake of efforts to improve the standard and velocity of the community connections between the Nordic international locations and different components of Europe, it’s claimed.
“We’re challenging people to say: why does your colocation site have to be within 50 miles [of where your business is]? It isn’t necessary,” says Connolly. “It’s [about] putting the right compute power and compute challenge in the right place, and this is requiring clients to rethink what and how they do their compute, and it’s happening.”
Connectivity and latency issues
As an instance, Connolly cites conversations Compute Nordic has had with potential shoppers within the monetary companies area, who’ve beforehand shied away from the thought of transferring workloads out of London, Frankfurt and Amsterdam as a result of of connectivity and latency issues.
“These clients have a preference for wanting [their data to be as] close to the financial exchanges as possible, because they have low-latency trading [platforms] that need to be on the exchange to achieve millisecond response times,” he says.
“We’re not suggesting they move [those workloads] out of these expensive datacentres in Docklands or the financial services capitals of Europe, but the workloads and applications they have that need to be ultra-lower latency make up a very small part of their [overall] compute. Around 85-to-90% of their compute isn’t ultra-low latency, and can be down anywhere.”
He provides: “People are realising that now. Yes, it’s a little bit more complicated and it means you’re dealing with two datacentres instead of one…but we’re all dealing with and learning how to work from a distance these days. So having a datacentre that’s a few 100 miles away is not such a big deal.”
While there’s a tendency for enterprises to draw back from shaking up their datacentre methods, on resiliency and latency grounds, their behaviour and preferences are additionally being formed by the event plans of the hyperscale neighborhood, provides Verne Global’s Cantrell.
“Over the last two decades, we’ve seen this build-up of cloud computing and, in order for it to be a viable business model, we had to put a huge engine of compute that had the ability to serve effectively all applications,” he says.
“Amazon, Google and Microsoft, for example, went to the largest city centres, with the most eyeballs and built these structures to house the cloud computing in these major regions.”
Long-term sustainability
As time has gone on, although, specialist functions and workloads have emerged that don’t essentially should be housed inside these giant, “one size fits all” datacentre areas and could possibly be hosted in much less congested, and power-constrained components of the world, he continues.
“Particular applications, especially when you have something that’s going to be continuously churning data and consuming a lot of energy, those are the ones that companies should start to think about the long-term sustainable impacts of running in these regions,” he says.
“If you might be an enterprise with a synthetic intelligence-based software, and you’ve got the choice of placing that load in Ireland – the place all of your information is – which will look like the best approach of doing issues as a result of it’s only a matter of including extra capability.
“Meanwhile, there a high capacity, 100 terabit per second cable that connects Ireland directly to Iceland, by the way, and there is accessible capacity in the Nordics that can take that application too. That is an easy option too.”
As is usually the case the place datacentre methods are involved, the largest problem usually is convincing enterprises to push again in opposition to their desire in the direction of doing issues the best way they’ve at all times been finished.
Where the Nordics are involved, although, it does seem as if the tide is popping within the area’s favour, as local weather change-related climate occasions more and more dominate headlines and sustainability issues begin have much more of a sway on enterprise IT buying choices.
