The data centre industry has long been a critical pillar of the digital economy, driven by advancements in technology, changing business models and powering cloud services to edge computing.
However, recent trends toward consolidation, driven by mergers and acquisitions, are reshaping the landscape. In a conversation with iTNews Asia, Diarmid Massey, CEO of Data Centres at ESR Group, shared his perspective the implications of this trend for competition, innovation, and how emerging markets are reshaping the future of data infrastructure across the Asia-Pacific (APAC) region.
The double-edged sword of consolidation
Consolidation in the data centre industry, while offering potential benefits such as economies of scale, efficiency gains, and enhanced service offerings, also brings risks that need to be addressed. As larger players absorb smaller operators, there is growing concern about the creation of monopolies or oligopolies, where a few dominant players control a significant portion of the market.
“On one hand, consolidation can bring about economies of scale, driving down operational costs and allowing for more significant investments in technology and infrastructure,” explained Massey. “However, the downside is that smaller businesses could struggle to compete, and customers could face fewer choices, which could ultimately drive prices up.”
As large operators take over smaller competitors, the competitive landscape narrows, and the risk of reduced innovation becomes a real concern. Smaller companies, often at the forefront of technological advancements, may find it harder to innovate when facing the pressure of being acquired or outpriced by industry giants.
Emerging markets are showing strong promise
Despite the consolidation trend, there are bright spots in the Asia-Pacific (APAC) region, where demand for data centre infrastructure is growing rapidly. Emerging markets, particularly in Southeast Asia and India, are poised for substantial growth.
“Markets like Johor in Malaysia are attracting significant interest from investors,” Massey noted. “Southeast Asia, with countries like Indonesia and Thailand, is advancing quickly, leveraging best practices from developed markets to bolster their digital economies,” he added.
The key drivers behind this growth include the rollout of cloud computing, the rise of 5G, and the rapid adoption of AI technologies. These developments are placing increasing demands on data centres, creating unique opportunities for emerging markets.
"Many data centres in the region are not yet equipped to handle AI workloads, creating a unique opportunity for emerging markets to capture this demand," said Massey.
This growth, combined with lower energy costs and access to greener power sources, is enabling data centres in these regions to expand at a rapid pace.
As data centres concentrate in large cities and technology hubs, risks associated with data sovereignty, natural disasters, and geopolitical instability become more prominent.
Massey emphasised the need for careful planning, resilient infrastructure and importance of having local expertise on the ground to mitigate these risks. "For example, data centres in areas prone to natural disasters must be built with reinforced structures to ensure durability," he noted.
“We are closely monitoring these risks, especially as companies expand into new regions.” ESR, with its strategic focus in APAC, monitors potential supply chain disruptions and regulatory changes to ensure its data centres remain resilient, Massey explained.
The impact of AI on the future of data centres
As businesses increasingly rely on infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS) models, traditional data centre ownership is giving way to new revenue streams. Massey noted that he is also seeing a shift from businesses owning and managing their own data centres to leveraging cloud services and hybrid strategies to reduce capital expenditures and enhance performance.
With increasing demand for cloud services, edge computing, and AI, Massey also pointed out that hyperscalers and AI-driven data centres will likely drive much of the future growth, with AI-related computing demand expected to account for a significant share of total growth in data centre power requirements over the next several years.
“Edge computing is particularly interesting,” Massey said. “It will require localised processing power to reduce latency for real-time applications. As this trend grows, data centres will need to adapt by decentralising their infrastructure.”
At the same time, the focus on energy efficiency and sustainability is intensifying. In response to rising energy costs and environmental concerns, data centre operators are integrating renewable energy sources, such as rooftop solar panels, and investing in advanced cooling technologies to reduce their environmental footprint.
AI and machine learning technologies are transforming the way data centres operate. AI is also expected to drive demand for more computing power, as AI workloads place heavy demands on infrastructure.
AI has the potential to optimise cooling systems, automate energy management, and even predict maintenance needs before issues arise. But there are challenges in integrating AI, especially regarding cost and interoperability.
- Diarmid Massey, CEO of Data Centres, ESR Group
Despite the complexities, AI-driven solutions are seen as a critical factor in improving the sustainability and performance of data centres.
Looking ahead, data centres must remain adaptable to emerging technologies like quantum computing and blockchain. "Future-proofing data centre infrastructure is essential," said Massey. "We can accommodate new technologies by designing flexible and scalable systems, without costly retrofitting."
Modular data centres, which allow for incremental upgrades, are expected to become increasingly common as operators prepare for the next generation of computing demands. This approach ensures that data centres can handle both traditional and emerging workloads, providing a seamless transition as new technologies evolve.
Massey emphasised that the future of the data centre industry lies in its ability to balance consolidation with competition, sustainability with growth, and efficiency with innovation.
As data centre operators continue to invest in both infrastructure and innovation, the key will be to maintain a flexible, forward-thinking approach, he added.
