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The future of data center investments: building at scale for better returns

While private equity will remain a major driver in data center build-outs, fuelled by the AI revolution, establishing the right partners is vital to deliver both value and returns, writes Rob McKernan, President, Cloud & Service Provider Segment, Schneider Electric.

Updated May 07, 2024 / Original May 07, 2024

Rob McKernan, President, Cloud & Service Provider Segment, Schneider Electric

The Tech Capital

By Rob McKernan

President, Cloud & Service Provider Segment, Schneider Electric

7 Mins

May 07, 2024 | 12:44 AM BST

The pace of growth in data centres has drawn much attention from all areas of the world.

Estimates are that the total capacity of hyperscale data centers will grow almost threefold in the next six years, with analysis from Synergy Research Group stating that while the trend has always been for the IT load of hyperscalers to grow at size and scale over time, the impact of generative artificial intelligence (AI) has provided an added impetus to the need for substantially more powerful facilities.

This growth trajectory has not escaped the private equity (PE) market either. According to S&P Global, amid the AI “goldrush,” “private equity remains the dominant force in data center M&A, drawn by a growth trajectory expected to persist through both good and bad economic times, and now supercharged by the proliferation of AI.”

To ensure the return of investment desired and de-risk operations, PE firms must be diligent in selecting the right partners to design, deliver, and operate the AI data centers of the future. Global reach, resiliency and efficiency of the supply chain, along with sustainability front of mind is imperative. There are just a handful of global organisations that can deliver this pace and scale.

AI impact
The current rush towards AI leads to specific considerations around power density, cooling, and racks, due to the greater utilization and density of processors and graphics processing units (GPUs). Schneider Electric has conducted extensive research into how the AI disruption presents new challenges for data center designs and forged alliances with GPU manufacturers such as NVIDIA to co-develop new reference architectures to solve them.  

During the process, we have mapped the relevant attributes and trends of AI workloads, providing guidance to address these challenges across each area of physical infrastructure category including power, cooling, racks, and management software. Our reference designs also include the ability to leverage liquid cooling, effectively dealing with the additional heat of these high-density applications

This ensures that investors and operators can be assured that their new facilities will not only handle AI-driven workloads, but can be optimised for them from the outset, with scalability for future needs in mind.

Time to market
Speed to market is a critical factor in bringing data center investments to fruition. However, there are several risks and challenges. Requirements for power connections to new facilities, as well as land, can be compounded by lack of access to equipment and local technical expertise – during both build out and operation.

By leveraging digital design capabilities, reference designs, modular data center solutions, and a global install base, customers can ensure that procurement, delivery, and implementation are fast and efficient, reducing exposure to fluctuating prices, supply chain disruption, and geopolitical instability.

For example, through extensive capabilities in design and capacity planning, which ensures that bespoke data center solutions leverage industry-leading best practices, customers can utilize the most energy efficient power and cooling equipment from day one.

Speed of deployment must also be matched by industry-leading quality across the entire facility. This includes power distribution and physical security systems, rack and enclosures, and cooling, all managed by the latest in data centre infrastructure management (DCIM) tools and services.  

A perfect example of this is partnerships such as Schneider Electric’s $3 billion multi-year agreement with Compass Datacenters that builds upon our existing relationship, integrating our respective supply chains to manufacture and deliver prefabricated modular data center solutions at-scale.

With factory locations across the Americas, Europe, the Indian subcontinent, and the far east, combined with smart distribution centres across each region, we have the global reach to provide timely procurement for data center operators seeking to scale.

Sustainability considerations
With sustainability being crucial for many organisations in the data center sector and with customers demanding for green credentials, it is imperative to partner with an ecosystem that has sustainability embedded in their business practices. Schneider Electric has several recognitions on this topic, as evidenced by consistent recognition by independent bodies. Supported by circular economy measures including Product Environmental Profiles, and a dedicated sustainability advisory team, our prefabricated solutions open the way to green finance, easing the path to access.

Today we have carried out extensive research into sustainability practices required to properly assess and understand the environmental impact of data center operations. Our recent white paper on data center sustainability metrics, for example, includes 28 metrics, covering energy, greenhouse gas emissions, water, waste, and the local ecosystem, alongside 17 relevant sustainability frameworks and standards to help data center operators set ESG targets and report against them.  

Partner assurance
In conclusion, investors and operators must recognise that their efforts should be undertaken with partners who have a complete value proposition and likeminded ethos for sustainable returns.

By focusing on building the data centers of the future with sustainability front of mind, and by working with the right ecosystem, investors can not only capitalise on the AI opportunity, but de-risk investments and be assured of better and more sustainable returns.


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Rob McKernan

President, Cloud & Service Provider Segment, Schneider Electric

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