The Data Center of the Future: Creating New Jobs in Europe New data centers will create hundreds of thousands of new jobs for Europe by 2020. But there is work to be done to capture this opportunity fully. 1
Companies have long managed their data centers with a focus on cost, provided they could guarantee a certain level of stability. But today, as digitization takes hold, data centers are becoming a far more strategic area not just for IT management but also for the business as a whole. Indeed, data centers provide the backbone for a company s digitization, helping secure long-term business success while making an immediate on costs and revenues. To learn more about the expectations for data centers through the end of this decade, A.T. Kearney recently surveyed 50 IT executives in Europe and the Middle East about which trends will affect data centers in coming years, and how delivery models will change. The findings indicate major changes that could have a significant on Europe s economy. Companies are creating budget space for improvements to data centers, including new operations, and as a result new data center jobs are being created in Europe. Through 2020, European data center spending will increase 6 percent annually (see figure 1). This growth in demand could lead to as many as 340,000 new jobs in Europe. However, based on data about today s labor pool, as much as half of those jobs could go unfilled without significant investment in training and skills. Figure 1 European data center spending will increase 6 percent yearly through 2020 Spending ( bn) >6% 270.4 % CAGR 2014-2020 189.9 118.0 6% Services 81.6 31.1 6% Software 22.5 46.4 4% Hardware 37.0 Personnel 48.8 74.9 7% 2014 2020 Sources: PAC, IDC; A.T. Kearney analysis Rising Demand and Budget for Data Centers Digitization is having an on both the personal and professional worlds. As enthusiasm for big data, cloud computing, and digital services and products continues to grow, data centers are being asked to do more, which creates the need for more bandwidth, computing power, and live and offline storage. The demand for new data centers has skyrocketed in recent years a trend that will certainly continue into the next several years. 1
Figure 2 Four trends are driving change in the data center market Demand: Changing requirements New technologies Big data Big data technology Cloud Digital products and services Internet of Things Social media Industry 4.0 Wearables Security technologies In-memory storage Virtualization technology Internet of Things Power-efficient cooling Augmented reality Rack on a chip Low Medium High Supply: Changing delivery models Cloud (14% to 39%) Public Private 4% 11% 16% Data Center 2020 Low Medium More budget for investment Higher data center budgets Willingness to pay more for security High Standard Outsourced (37% to 36%) Customized Standard Internal (49% to 27%) Customized 19% 18% 28% 21% Today 23% 24% 12% 18% 9% 2020 150% budget compared to today Same as today Less than today 49% 44% 7% 50% more 20% more Not prepared to pay more 20% 64% 16% Source: A.T. Kearney analysis While demand increases, data centers requirements are also changing. Mere cost competitiveness and stability are no longer enough; survey respondents indicate that security, scalability, and energy efficiency will be key features of data centers in the future. Clearly CIOs and IT operations executives have their work cut out for them in bringing data centers up to speed. The good news is that most are being given the necessary funds to make changes; half of respondents expect their data center budgets to increase by as much as 50 percent through 2020 (see figure 2). Standardization and virtualization will also be critical to the data center of the future. More than 90 percent of the survey respondents expect that standardization will increase significantly and that virtualization for servers and storage will nearly triple. Of course, achieving these massive changes in data center capabilities will require a host of new technologies. Nine out of 10 IT managers say they will invest at least 25 percent of their data center budgets in new technologies, and almost half say they plan to spend more than half of their available budget for this purpose. Big data technologies such as Hadoop or schema-less databases, Internet security technologies, and in-memory storage will all have a major on tomorrow s data centers. Finally, digitization is moving much of data center service delivery to the cloud. Our survey responses indicate that the share of data center services delivered via the cloud will nearly triple in the next five years from 14 percent today to 39 percent by 2020. This flight to the cloud makes security a crucial issue. More than 80 percent of executives say they are willing to pay a premium of at least 20 percent to ensure a high level of security; one in five executives is prepared to pay a 50 percent premium. 2
All Eyes on Europe Europe is the destination of choice for 65 percent of the IT decision makers surveyed, a strong indication that companies are less inclined to locate data center operations offshore. Europe s attractiveness as a data center location is driven in part by the failure of many offshoring efforts to generate the anticipated savings. Its political stability and new laws governing data security such as the European Union General Data Protection Regulation, expected to go into effect in 2016 are also helping increase demand for data centers in Europe. As Europe becomes the locus for new data centers, new jobs will be created we estimate 341,000 across Europe by 2020. Nevertheless, as data center technology changes, so will the job profiles and skill requirements for those who manage them. For example, as data centers consolidate and their physical footprints shrink, facility engineers and similar positions will be less in demand. Automation and virtualization will mean fewer people will be needed for monitoring and operational activities. On the other hand, companies will be on the lookout for trend scouts to stay on top of the latest technologies, as well as architecture designers and project managers to embed these new technologies in existing data center environments. Security experts and virtualization professionals will be highly coveted, too. Importantly, European companies must attract more people or develop the skills of existing employees, otherwise they will face a significant shortage. We project that companies may be able to staff only 264,000 of the 513,000 positions that will need to be filled by 2020, due to a combination of skills gaps and retiring personnel (see figure 3). Without a concerted effort by enterprises, governments, and educational institutions to close these gaps, Europe may miss a significant opportunity. Figure 3 Barely half of new data center positions can be staffed by 2020, and Europe could miss a big job opportunity New jobs available in data centers 513,000 Job vacancies in data centers due to retirement Number of IT graduates entering data center segment 327,000 418,000 341,000 Jobs gap 239,000 277,600 264,000 217,000 156,000 159,000 76,000 50,600 25,600 103,600 52,300 80,300 109,600 140,200 172,000 2015f 2016f 2017f 2018f 2019f 2020f Sources: Eurostat; A.T. Kearney analysis 3
Preparing for the Data Center of the Future To succeed in the future, companies and in particular IT executives need to work to balance cost efficiency with speed, flexibility, and availability. This means considering the entire ecosystem, including demand and supply, technology, and financial aspects. Demand and supply. On the demand side, it is important to understand business trends and how they affect data center operations. To perform effective capacity and footprint planning, collaboration with the business side is crucial, with IT managers and staff providing insights on how to use data center services effectively to support the business strategy. On the supply side, data centers can take advantage of new technologies to become more secure, scalable, and power-efficient. Continuously assessing the operating model will help enable more efficient supply of data center services, and a shift to the cloud can make service delivery more flexible. As big data, cloud computing, and digital services and products rise, data centers are being asked to do more. Technology. Standardizing the infrastructure and application landscape will lead to leaner data center operations. Continuous review and enhancement of security technologies to reduce the risk of cyber attacks will become increasingly important. A commitment to building and updating employees skills is crucial to using new technologies effectively, particularly in analytics and security. Finances. Finally, despite the growing demand and increasing importance of data centers, they are not a financial free-for-all; frugal management remains key to success. For example, optimizing outsourcing contracts is one way to keep operational costs at a reasonable level. This is especially relevant given the fact that a significant price decline for a variety of data center services is expected. The money saved on services can be invested in bandwidth and live storage, as well as in new technologies that meet the requirements of evolving business models. Preparing for the data center of the future will require careful planning and increased development of both infrastructure and human capital. Companies that fail to make the needed investments to upgrade their data center capabilities risk falling behind as the digital world forges ahead. Authors Marcus Eul, partner, Düsseldorf marcus.eul@atkearney.com Alexander Menke, consultant, Munich alexander.menke@atkearney.com 4
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