Eclipse Digital - Fotolia

UK datacentre growth trends: Why are users shunning inner-city facilities?

Research suggests inner cities are falling out of favour with datacentre developers, with cost-sensitive users willing to look further afield for co-location services

The amount of space and power consumed by European datacentres is tipped to grow by nearly 20% between now and 2020, fuelled in no small part by the region’s growing demand for cloud-based services and applications.

Based on the findings of Tariff Consultancy’s recent Datacentre Europe Pricing report, it’s fair to assume a sizeable portion of the capacity needed to deliver these services will be built out in the UK, reinforcing the country’s position as the continent’s largest datacentre market.

However, whereas the bulk of new datacentre investments have been traditionally channelled into major cities, operators are increasingly favouring sites that are further afield, the report states.

Alex Rabbetts, CEO of colocation provider MigSolv, backs the report’s findings, saying there are many reasons why cities are no longer the first-choice location for operators.

“The first reason is big cities are not very secure places to have datacentres. Why would you put your data in a place that is potentially a terrorist target?  In the case of Paris and Amsterdam, there’s also a risk of flooding,” he says.

“Also, real estate and employment costs are higher in cities and power security can also be a big issue.”

This has led to growing clusters of datacentres emerging on the outskirts of London - particularly in areas such as Hayes, Slough and Kent - as well as on the periphery of Leeds, Sheffield and Manchester in the north of the country, says Anthony Day, an intellectual property and technology lawyer at legal firm DLA Piper.  

“The datacentres still tend to be relatively close to the big cities, because you still need to have the latency and connectivity to connect to the bigger corporate clients. This is really important for firms in financial services, for example, as they’re involved with high-frequency trading,” he says.

“Also, particularly for colocation clients, if they have designated IT partners, they’ll need easy access to the site to fix any hardware problems. If the datacentre is too far away, it’s going to increase the potential time it takes to resolve any problems.”

User demands

Rabbetts claims latency is not as big a consideration for users – aside from those in the financial services and similar industries – as it was in days gone by, as they’ve become more tuned into what their precise datacentre requirements are.

“The datacentre operator used to be able to blind the customer with science and say, ‘You can’t afford to be even 10 miles out of London as you’ll get terrible latency.’ Customers are much savvier and more sophisticated than they used to be and realise that’s not true anymore,” he says.

As a result, they know they don’t need to seek out the services of inner-city datacentres to get the level or range of services they require, which in turn is fuelling interest from operators in more out-of-town locations.

“There used to be this attitude that people had to be right on top of the internet exchanges or they would suffer from latency problems, but technology has moved on and customers are realising they don’t need to be right on top of an internet exchange to achieve low latency. We can get it anywhere,” says Rabbetts.

Read more about datacentre investment trends

The datacentre remains a top investment priority for the enterprise, with 87% of North American and European operators setting out plans to maintain or increase spending in this area.

The European infrastructure-as-a-service (IaaS) market will enjoy a compound annual growth rate (CAGR) of nearly 40% between now and 2019, as enterprises look to wind down their on-premise datacentre investments.

This is a trend he claims to have witnessed first hand in recent times during the marketing of his firm’s Norwich-based colocation facility.

“We’ve secured a multimillion-pound deal with a company who, when we told them we have a datacentre in Norwich, thought it was fantastic,” he says.

“A couple of years ago, the reaction would have been more along the lines of, ‘Why not London?’ There has been a definite shift away from that now as users don’t want to be paying the premium to be in a major city when they really don’t need to be.”

In terms of datacentre investment trends, DLA Piper’s Day said the bulk of the growth is being driven by technology firms that need dedicated datacentre space to deliver cloud-based services.

Rarely a week goes by at the moment without news of Amazon, Facebook, Google or Microsoft, for example, investing in new datacentre capacity in Europe. It’s becoming rarer, Day adds, to see enterprises building out their own facilities because of the large capital outlays involved.

“You get the odd big corporate – a big bank or pharmaceutical company – that will build their own, but that’s usually for niche regulatory or security reasons,” he says.

“We’re seeing a number of clients looking to move a lot of their IT infrastructure that was in physical datacentres into the cloud to reduce operating costs and capital outlay in the future.”

These trends combined are fuelling user confidence in using datacentres that aren’t so close to home, claims Rabbetts, when it comes to moving more of their IT off-premise.

“What has helped customers is things like Google putting its datacentre in Finland. When you’re sat at your desk doing a Google search, do you find the speed of that search is so slow because it’s being performed in Finland? For the vast majority of people the answer is no,” he says.

Therefore, if Google is able to achieve low latency when delivering services to UK users from overseas, users realise – he argues – that stressing about using a nearby datacentre isn’t really worth it.

Datacentre costs vs location

Another reason why users are seeking out alternatives is simply that inner-city operators tend to charge more for their services, says Tariff Consultancy research director Keith Breed.

The Tariff research bears this out, as it shows datacentre pricing in London tends to be around 27% higher than that offered by facilities outside the M25 motorway.

Virtus is a good example of a datacentre operator in this bracket. They’ve got sites in Enfield and Hayes, and their rates are considerably cheaper even though they’re not that far away from the centre of London,” says Breed.

In the case of newly-opened facilities, he says, it’s not uncommon to see providers offer additional discounts to entice new customers to make use of their capacity.

“As soon as a datacentre is established it has to do discount pricing to get a number of anchor tenants and this has been a common trend we’ve seen over a number of years,” he says. “When Equinix started out in Slough, for example, they discounted quite heavily to get people in.”

However, users may come in for a nasty shock when it comes to renewing their contracts, as this is when providers will often revoke any introductory preferential rates they previously offered. Depending on how price sensitive customers are, this can prompt some users to jump ship to an even cheaper provider who may be even further away.

“As the contracts come up for renewal there tends to be some migration of price-sensitive customers out to other areas, such as Reading or even Manchester,” says Breed. “It’s a continuous evolution that’s contributing to a general creep of datacentres across the UK.”

This was last published in July 2015

CW+

Features

Enjoy the benefits of CW+ membership, learn more and join.

Read more on Datacentre capacity planning

Start the conversation

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

-ADS BY GOOGLE

SearchCIO

SearchSecurity

SearchNetworking

SearchDataCenter

SearchDataManagement

Close