The rise of mini data centers

The wheel is turning full circle. When the cloud computing trend began, data centers took away the load from corporate premises to distant but large facilities, as computing demands and data flows are gushing at higher speeds, the need for local data centers has risen too.

Just prior to the outbreak of Covid-19, a wide number of startups were planning to build mini data centers for edge computing. The reasoning for such deployments is relatively simple – small, unmanned data centers in modest cities would be the only way to provide super low-latency services to residents in such locations. Otherwise, their Internet traffic would have to travel all the way to bigger data centers, adding precious milliseconds to services like streaming virtual reality that basically needs to be instantaneous.

Prior to the pandemic, some companies began investing in the physical construction of those far flung mini data centers, while others pursued investments into the software necessary to run them and tie them into broader cloud computing operations. And then, in the early part of 2020, coronavirus put all those hopes on hold.

Mini data center is an important evolution in the industry, which helps organizations in managing their data at a low cost within the limited space. Typically, a factory-built air-conditioned cabinet with a protective shell, it has a single or double air-conditioned server rack inside, and its own uninterruptible power supply (UPS) and power distribution unit (PDU). Some of these mini data centers sit in cases that look like gun lockers. Others are mini racks with integrated systems. Mini data centers are cost-effective, compact, flexible, and require less deployment time, thus easing data handling for enterprises.

While the large data centers offer economies of scale, they are extremely energy-hungry. As the world becomes more connected, the amount of data to be managed is growing exponentially. Not all regions and countries can afford to set up gigantic data centers.

Often in former shipping containers, or in purpose-built modules, these prefab data centers – including the rack cooling, air-conditioned cabinets, and air-conditioned server racks as in a large data center – can be built and deployed far faster than traditional data centers (within a few months rather than a year or more for a traditional data center).

As small as a few racks of servers, these can be located inside an office or in a neighborhood building. Other advantages of small data centers are their flexibility, can be scaled up and consume less energy. And for densely populated markets, small data centers are more suitable than large server farms.

A standard micro data center container or locker normally houses less than 10 servers and 100 virtual machines. These are standalone systems containing features typically found in traditional data centers. Within these small containers, one can find a cooling system, security, humidity sensors, and a continuous power source. The smaller versions of these systems are unobtrusive to office settings and can even be mistaken for regular office furniture. Because many of these systems are also passively cooled, they are quiet and would not disturb the workers.

Moreover, locating the data centers closer to users in business districts, rather than remote regions, has a big advantage. Data centers that are close to users can offer reduced response time, which is often measured in milliseconds. Real-time data computing demands the lowest level of latency to minimize delays in information flows.

In some ways, the wheel is turning full circle. When the cloud computing trend began, data centers took away the load from corporate premises to distant but large facilities. However, as computing demands and data flows are gushing at higher speeds, the need for local data centers has risen too.

The global market for mini data centers, estimated at USD 3 billion in the year 2020, is projected to reach a revised size of USD 8.6 billion by 2027, growing at a CAGR of 16.5 percent over the period 2020 to 2027.

Micro data centers, one of the segments, is projected to grow at a 15.5 percent CAGR to reach USD 1.1 billion by 2027. Growth in the containerized data centers segment is readjusted to a revised 16.6 percent CAGR for the next 7-year period. This segment currently accounts for an 86-percent share of the global mini data center market.

The demand for data centers in the Asia-Pacific is the highest in the world. There is a growth in data traffic, owing to initiatives, such as work from home and lockdown, which propels data center services, such as VON services, video gaming, cloud computing, internet exchanges, content-delivery networks, and other online services. This has compelled data center companies to improve their infrastructure, which, in turn, is anticipated to drive the market growth.

China and India lead the pack. IBM, Oracle, AWS, Microsoft, and Google are investing in data centers in India, especially since the rollout of 5G networks is imminent.

AWS has announced a major expansion of its original set of 16 local zones to 48. Worldwide AWS local zones will now be available in over 30 new locations globally, providing customers with a powerful new capability to leverage cloud services within a few milliseconds of hundreds of millions of end-users around the world. These are small data centers adjacent to major population centers that provide core cloud features for applications like gaming, video streaming, or machine learning inference that require low-latency connections.

These new zones will be located in cities across 26 countries – Amsterdam, Athens, Auckland, Bangkok, Bengaluru, Berlin, Bogotá, Brisbane, Brussels, Buenos Aires, Chennai, Copenhagen, Delhi, Hanoi, Helsinki, Johannesburg, Kolkata, Lima, Lisbon, Manila, Munich, Nairobi, Oslo, Perth, Prague, Querétaro, Rio de Janeiro, Santiago, Toronto, Vancouver, Vienna and Warsaw. Until now, local zones were only available in the U.S. The promise is that developers will be able to give their users in these cities single-digit millisecond performance for their applications.

Even government organizations are playing a huge role. RailTel plans to set up more than 100 mini data centers across the country. Most of these will be set up in Tier-II and Tier-III towns in India to take data processing facilities beyond the mega cities. The PSU is expanding its 60,000-km optical fiber network laid along railway lines. The edge-computing data centers will be linked to the optic fiber network.

The market is fragmented, and the degree of fragmentation is expected to accelerate. Canovate Group, Eaton Corporation Plc., Hewlett Packard Enterprise Co., Inspur Group, Legrand SA, Rahi Systems, Rittal GmbH & Co. KG, ScaleMatrix Holdings Inc., Schneider Electric SE, and Vertiv Group Corp. a Schneider Electric, Hewlett, Rittal, Vertiv, IBM, Eaton, Delta Power Solutions, Orbis, Vapor IO, Canovate, IDC, Altron, Cannon Technologies, Huawei, Sicon Chat Union Electric, and KSTAR are the leading players.

Micro data centers and edge computing are often confused as the same, but there is a difference between the two. They are connected in a means-to-an-end sort of way. A micro data center helps edge computing get to its end goal. One can think of a micro data center as the how edge computing is going to work.

With that being said, edge computing brings the processing power closer to the data source. Edge helps improve the speed and overall performance of the data transport. And it improves the performance devices using the edge as well.

Because these systems bring the power closer to its users, and the user closer to the server, latency will be lower than in a traditional data center. This may be one of the main reasons companies decide to go with a micro data center and edge computing.

Uses for the real world. Micro data centers are a good fit for office spaces. These scaled-down data centers can help run corporate apps locally while supporting connectivity. Many micro data centers deployed in an office setting only require one cabinet (about 2–3kW each). This is low enough that these cabinets do not require dedicated cooling. This means offices will receive the power and connectivity they need without any hassle.

Retail stores are also another good place to deploy a micro data center. These systems can help run security systems, cash registers, and other systems your store may use. Retail businesses are also starting to use more data analytics to help with advertising and marketing to their customers. A micro data center on premises can help with this as well.

Micro data centers can also help modern banks. These systems can help create a smoother financial customer experience, helping banks become more power and technology efficient. Fintech experts believe that the future of banking will be more centered around IT. Just like the rest of the world, banks will also be looking to harness the power of edge computing, the Internet of Things, and data centers.

Banks have slowly adopted cloud-based technology into their operations, but the cloud does come with its limits. These limitations include bandwidth and latency. Edge computing and micro data centers can bring the computational power closer to its users, and make the banking experience better for its users.

Micro data centers are complementary to the cloud in many cases. A micro data center can handle compute for localized data from devices, sensors, and customers without shuttling it back and forth from the cloud. Costs are less expensive, and latency is better.

Nonetheless, there is plenty of skepticism surrounding the sector. For example, an unmanned mini data center for edge computing might make sense in parts of the US, but leaving USD 100,000 worth of computing equipment without some kind of guard is untenable in places like India.

And one of the biggest concerns related to edge computing is whether someone will be able to tie a rope around a mini data center in a rural location and just drive away with it.

As micro data centers go mainstream, they are likely to help power the next wave of high-performance computing including artificial intelligence, analytics, and 5G. For an increasing number of businesses, these small but powerful and versatile data centers, are likely to be the ideal home for their growing data infrastructure.