Today we continue our Data Center Executive Roundtable, a quarterly feature showcasing the insights of thought leaders on the state of the data center industry, and where it is headed. In today’s discussion, our panel of experienced data center executives weighs in on the outlook for enterprise IT spending as the COVID-19 pandemic extends into 2021. Our panelists include John Sabey of Sabey Data Centers. Intel’s Jeff Klaus, Maricel Cerruti from Infrastructure Masons, Chatsworth’s Todd Schneider, Ben Stewart of NTT Global Data Centers, Nortek’s Kris Holla, and Michael DeVito of Iron Mountain.
The conversation is moderated by Rich Miller, the founder and editor of Data Center Frontier. Each day this week we will present a Q&A with these executives on one of our key topics. Today’s topic is how enterprise spending is faring through the pandemic.
Data Center Frontier: Gartner says many enterprise customers are holding off on major IT spending during the pandemic. Will that continue in 2021? Or will the “digital shift” from COVID-19 prompt enterprises to invest in retooling their infrastructure?
Michael DeVito: It’s a natural reaction for many businesses to wait and see how a sudden shift like this one plays out before making significant investments in their digital transformation journey. However, history also seems to suggest that enterprises who are continually investing and enhancing their infrastructure for future success, enable themselves with a competitive edge.
Many enterprises already had to make a shift with investments in their IT services, with remote working for instance, and as more aspects from this pandemic will stay part of the ‘’new normal’’, additional investments could well be necessary if they want to keep up or win in their respective industries.
Todd Schneider: The data center industry is always evolving to keep pace with the demands of emerging technologies. Pandemic-related initiatives have served more as a catalyst for accelerating digital transformation than as the root cause. With the welcoming news of vaccines on the horizon, enterprises will begin to reassess their IT budgets with the understanding that they must be prepared for future technologies as well as unexpected events.
Businesses will continue to evaluate and prioritize what must remain on-premise, what must be upgraded; and when appropriate, what can shift to the cloud. They can then make the necessary business decisions to proceed accordingly.
Companies will also exercise caution in managing investments until there is more certainty on the pandemic, but given continued progress thus far, I’d expect 2021 to see a renewed interest in infrastructure buildouts and retrofits. Of course, most enterprises will continue to have to spend part of their budgets on cloud or software services for video conferencing, server space, VPN capabilities and the like, all to help further support a remote workforce, which will continue well into 2021 and beyond.
John Sabey: As a data center company, we don’t share Gartner’s vantage point; from our perspective, enterprise demand for data center space was either unaffected or stimulated by the pandemic, or perhaps simply shifted from certain verticals to others.
While the service industries were significantly affected by COVID policies, less affected industries saw surging IT budgets as they flexed their entire workforces to a work-from-home model within weeks. Spending on hardware, software, connectivity, and network security all rapidly increased, and I would think that the infrastructure “retooling” has already largely taken place.
Jeff Klaus: More organizations will see the benefit of their 2020 investments in online, cloud and virtual workplace or learning.
We may see this continue into ’21 as organizations see the ROI (return on investment) from these moves and make some initiatives permanent.
There is also thought about “when this happens again” we’ll be more prepared, which could lead to additional investments. We also see 5G continuing to drive investment as many industries begin to learn about edge computing benefits.
Kris Holla: I’m not in total agreement with the Gartner study. Yes, enterprise customers have not recently invested in infrastructure as they have in the past. However, the digital revolution has still created demand for more capacity. Therefore, enterprise customers still have to upgrade their capacity, but the trend is to defer the investment to colocation facilities, versus investing in their own facilities. Infrastructure is still being upgraded, but enterprise customers are relying on colocation and cloud providers to invest in it.
COVID-19 has had a negative health and economic impact, but its positive effect on spurring the digital revolution is monumental. COVID-19 has accelerated the digital revolution that was predicted to progress over a 10-year period, but now it suddenly appears to have unfolded amazingly in just two years. COVID-19 has accelerated everything from facility space needs, equipment spending and cooling capacity, the latter which is becoming increasingly critical for the data center industry to maintain pace.
So, the enterprise customer still has more IT capacity demand, but infrastructure-wise they’re deferring the cost to colocation. Therefore, I see enterprise infrastructure investment shifting toward colocation and cloud service providers such as Microsoft Azure, Amazon AWS Cloud Services and Equinix Cloud Exchange. The investment is still there, because data center infrastructure is expected to grow to well over $200 billion in 2021.
Ben Stewart: We have not observed this reduction in IT spend. The dramatic transition to work from home alone has resulted in higher IT spending, which may not swing back even post-pandemic.
We now realize that the pandemic, which is the forcing function for the “digital shift,” has not and will not be a short-term event. The work-at-home shift has gained momentum and is apt to be more permanent than previously thought. Retooling operations, procedures, and policies are ongoing for many businesses and may become the new normal.
Maricel Cerruti: COVID-19 highlighted the importance of digital readiness and the ability for businesses to react, recover, and adapt swiftly. Although IT spend will vary across different industries, businesses will need to invest in technologies that will allow agility to continue to function in a digital world.
With the uncertainty of the future and as companies shift to allow more remote work, IT spend will be prioritized to continue to support this effort such as such communication and collaboration tools. Other investments include security, privacy, data protection, risk management tools, disaster recovery solutions, and infrastructure /cloud solutions.
NEXT: Will the data center and cloud sectors continue as sustainability leaders?
Keep pace with the fact-moving world of data centers and cloud computing by following us on Twitter and Facebook, connecting with me on LinkedIn, and signing up for our weekly newspaper using the form below: