By: Mark Kidd, Executive Vice President & General Manager, Iron Mountain Data Centers & Asset Lifecycle Management
2024 will build upon data center’s exceptional growth in 2023 but will supply new and more creative approaches. Power will continue to be the primary focus, with pressure on electrical grids driving new investment in generation components, hubs and energy sources. Geopolitics will enter the equation, combining with climate reporting legislation to make granular reporting of everything from raw materials to CUE an urgent task.
Early investment in power-hungry generative AI drove phenomenal growth last year, with as much as 50% in additional global capacity delivered in a single year. A lot of negative economic forecasts failed to come true and business fundamentals are still strong. An 8% uptick in IT spending is forecasted after a sluggish few years, which will drive hardware consumption while organizations look towards practical benefits from AI like streamlining and productivity. Particular growth sectors to monitor include government, defense and healthcare, which for the first time accounts for over 10% of global GDP.
The Great Power Grab
Continued demand for AI capacity will lead to design impacts on data centers, plus new patterns of development where large-scale more remote AI training sites contrast with AI inference (delivery) sites close to users. New entrants are looking to take advantage of the opportunities presented by this continued demand. Meanwhile, established operators are managing to increase or expedite opportunities from their portfolio. Powering land has attracted some speculators as the demand and returns are high. This will likely lead to the identification of new capacity zones outside the most developed markets.
Major new global fiber routes will come online, accelerating performance and creating opportunities. New cable projects are underway to add higher performance and redundancy and lower costs in the Middle East, particularly for backup around the Suez Canal, a well-known connectivity pinch point. The completion of the Africa-1 and 2Africa subsea cables will speed up traffic between Africa, Europe and the Middle East. New data handling hubs are bound to pop up around multiple landing points.
Temperatures continue to rise and there is a long way to go to reduce emissions. Renewables are expected to increase by 11% but will only account for 14% of global total energy use. Four trillion dollars per year will be required to upgrade the electrical grid as the global transition to low-carbon electricity speeds up. The need for data center power is now creating competition for key power-generation components including utility scale transformers.
Considering this pressure on the green grid, some data center operators may be tempted to select transitional solutions such as gas, but these delay addressing the core problem of total decarbonization. The long-term solution is to move beyond the Virtual Power Purchase Agreement to round-the-clock direct use of zero-carbon power (#247CFE), which will take time to implement fully. This is all the more reason to start early; if we don’t restructure power sourcing site by site, measure, track and improve it, we will never get there. The gulf between short-term and long-term power strategies will widen in 2024, raising questions for the industry and its customers.
Geopolitics Meets Green Reporting
Geopolitics will add weight to a new sheaf of global, US and EU climate reporting requirements to demand much higher levels of transparency in 2024. Alongside critical components like semiconductors and GPUs, geographical provenance will be required right down to the raw material level for government contracts, and the industry will diversify its supply chains fast in areas like Vietnam, Eastern Europe, Mexico, and India. The rare-earth mining and processing industry will experience significant changes, as these elements are critical to national security, energy independence and the environment, and demand for recovery of rare-earth minerals will continue to rise. Greater transparency will be required to meet new climate reporting regulations across the full asset lifecycle, from production to retirement to reuse, as environmental impact targets broaden to take account of Scope 3 emissions.
Conclusion: Opportunism with an Eye to the Long Term
An exciting 2024 is anticipated, with lots to play for and developments that will change the data center landscape. Creative site selection and speed to market will have major impacts on the bottom line, while geopolitical considerations and new regulations put both forward and reverse supply chains under the spotlight. For infrastructure operators, getting the balance right between short-term opportunism and long-term systemic improvements will be key.
Mark Kidd Bio
Mark Kidd is executive vice president and general manager of the Iron Mountain Data Centers and Asset Lifecycle Management (ALM) business units. Mark has led the data center organization since its inception in 2013 and additionally took over the ALM organization in early 2023. Mark is responsible for driving growth across the data centers and ALM platforms, including setting strategic direction, leading commercial efforts, and developing expansion opportunities.
Prior to his current role, Mark was senior vice president of Enterprise Strategy where he worked alongside the executive team to shape the overall company strategy, directed various internal consulting projects to enhance business unit planning, and managed the Office of the CEO. Over his 19-year tenure with Iron Mountain, Mark has held four additional positions in strategic planning, portfolio management, capital investments, and financial analysis.
Prior to joining Iron Mountain, Mark worked at Thomas Weisel Partners, a boutique investment banking firm. Mark graduated with his A.B. in economics from Harvard University.
Mark Kidd does not have an X account. You can connect with Iron Mountain on X @IronMountain.