Australia's data centre blitz: If you build it, will they come?

Sydney

Sydney has by far the most data centres, both in square metres of floor space and in kilowatts of power available, largely due to the presence of Global Switch and Equinix. What has that meant for capacity in the harbour city?

“Sydney? My God, there’s a glut,” says Simon Cooper, chief operating officer at NextDC.

“Right now, I would say that in the short term there’s an oversupply of facilities in the market,” says Michael Gunton, general manager of data centre facilities at Fujitsu. “In the medium term, I’m reasonably sure it’ll get filled.”

Every provider CRN spoke to said customer demands were driving them to build data centres. For customers, there seems to be no single reason behind all this space in Sydney. Rather, it’s a combination of factors that all conspire to make Sydney a preferred location.

Sydney is the landing point for multiple inter-continental communications cables, which provide the bandwidth that global companies require to move data in and out of the country. That can be important for global organisations that want to minimise the latency between their international offices.

Sydney is also roughly midway between Melbourne and Brisbane, the second and third most populous cities in Australia. If you’re looking for somewhere to place your first set of servers, right in the middle makes a certain logical sense.

Many organisations have their headquarters in Sydney, and for those that don’t, Sydney is a large market into which they’re bound to expand if national growth is part of the plan. “If you’re a successful Australian enterprise, you need to get into Sydney at some point,” says NextDC’s Simon Cooper.

Finally, Sydney enjoys the dubious honour of being the only Australian city many foreigners know. It is, therefore, top of mind when choosing between more-or-less equal other choices, and that could be enough to tip the balance.

Melbourne

Melbourne is, in some ways, playing second fiddle to Sydney. It’s not quite as large – by population or market – and isn’t as famous internationally as its more photogenic cousin with the fancy white theatre and coat hanger bridge. 

Global Switch has foregone a Melbourne location completely, and Equinix only commissioned its first facility this year after building three in Sydney (with a fourth announced). Both providers are decidedly more globally focused, and if their capacity is removed, Melbourne and Sydney are on a far more even footing. Melbourne is still a major market domestically, and that tends to be the focus of customers choosing Melbourne for their data centre.

“The reality is that they [Sydney and Melbourne] are both similar, from a tech perspective,” says Digital Realty’s Damian Spillane.

Canberra

Canberra tends to be chosen for two major reasons: to be close to a government department, and as a disaster recovery location from Sydney. Canberra is just close enough to Sydney to drive to, and far enough away to provide good geographical separation. “Canberra is highly government department-led,” says NextDC’s Simon Cooper. Again, if we exclude the presence of Global Switch and Equinix in Sydney, Canberra has close to the same data centre capacity as Melbourne. 

Perth

Perth is the other major landing point for inter-continental communications cables, apart from Sydney, but its distance from the major population centres of Australia means few organisations set up shop there unless they have a compelling local reason to be there.

Perth tends to be the choice for mining and resources companies, and those who want another diverse path out of Australia, but still want to be close to the cable landing point.

“Perth has lots of the resources sector, and serving the solutions side of the market,” says Cooper.

Brisbane

Brisbane is our third largest capital, but there isn’t as much call for hosting as in other capitals, beyond the few locally focused organisations with enough IT needs that they want to maintain locally. Think Suncorp and Flight Centre.

Based on the sample data for this report, Brisbane makes up less than 2 percent of total data centre capacity in Australia.

Market growth

The market is well supplied with enough capacity to serve existing and forecast demand. There is spare capacity in Sydney, which is leading to some discounting, but other cities seem to have capacity matching demand quite well.

The overall market for data centres is definitely growing, driven by corporate demands to store ever increasing amounts of information, and the continued growth of cloud computing in public, private, and hybrid modes. But if a provider is not already in the data centre market, the advice is to stay out or get eaten alive by companies that are bigger and better at it.

“My concern in the cloud space, competing with AWS and Azure, you’re competing with a utility product. That forces you into a niche offering,” says Chris Deere from Vocus.

Over the next 18 months, it’s likely that smaller providers will either become heavily focused on higher-margin, full-service offerings, or be acquired by larger players better able to play the return on assets game. 

Consolidation is already taking place: Vocus has grown its data centre network to 20 sites through its $600 million acquisition of Amcom as well as the smaller deal for two data centres from Enterprise Data Corporation (EDC). It would be fair to assume that Vocus will look to consolidate these dispersed workloads.

Older facilities will get refurbished or sold off, and much of the ‘internal’ data centre capacity inside office buildings will be migrated into newly built, modern facilities. CIOs everywhere can get rid of the headaches of managing physical space and make it someone else’s problem while they focus on trying to be relevant to the businesses they serve.

“Capex is more difficult for companies than ever before,” says Michael Gunton, general manager of data centre services at Fujitsu. “People want to move to a just-in-time opex model.”

“Digital transformation is a revolution, happening now. Companies out there are saying, ‘I don’t need to run my own kit, pay licence fees, buy my own servers and pay people to run them. I can run it in the cloud. I can just pay a monthly fee.’”