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Education and Healthcare Industries Could Drive Additional Data Center Demand

With more activities moving online, education and healthcare service providers might need a lot more cloud storage.

Although the technology industry has taken the lead in moving data to cloud computing facilities, two other sectors seem set to increase their investment in data center solutions: healthcare and education industries.

“A lot of times [healthcare and education] investments are focused on either patients or student project and activities. So, you’ll see some of the most prominent education or healthcare institutions in the world not have as modern of IT infrastructure as regular corporations do,” says Jackson Metcalf, global critical facilities practice leader with architecture firm Gensler. “Where we see the future is that you’re going to have multi-pronged approaches to where they’re going to need to invest in their networks. If you’re a major institution that has pretty good funding, whether it’s a private or public institution, it’s likely those are the type of industries that are going to invest more in traditional enterprise critical facilities, like data centers or research computers.”

The healthcare and education sectors lag other industries in IT, but Metcalf says the COVID-19 pandemic has accelerated the demand for modern infrastructure. Since the outbreak has caused a mass shift to remote working and learning, the need for data centers to handle the increased internet usage has become apparent.

“Companies in the healthcare and education space are shifting more of [their] platforms to digital technology, facilitating the need for stronger networks. This need will not fade following the COVID-19 pandemic, either. It will only grow stronger,” says Amanda Ortiz, director of national industrial research at real estate services firm Colliers International.

In addition, the shifting supply chain structures in the industrial sector could also strengthen the need for data centers going forward, Ortiz notes.

Healthcare and education have not historically been big drivers of data center demand (that role continues to be filled by cloud service providers and financial services firms), according to Pat Lynch, senior managing director for data center solutions with real estate services firm CBRE. Now, however, “these sectors do represent potentially larger growth engines for data center demand in the years ahead,” he says.

Ortiz says universities and other education providers have expanded and diversified their resources, including IT services. This reliance on stable networks is expected to continue as more education-related activities shift online.

“We are aware of universities needing to upgrade both network and IT infrastructure to support current demand and Covid-19-related remote education,” says Lynch. “I am not specifically aware of budget increases, but can assume spending has increased to support this. In some cases, we have helped clients improve their networks, while maintaining, and sometimes lowering, their costs.”

The market is divided into three different types of data centers: enterprise, colocation and cloud, according to Metcalf. Healthcare tends to be one of the industries that has been a little more traditional, so many of those institutions will want to stay with enterprise properties, he notes. Enterprises are owned and operated by the company that occupies them. Metcalf says, “It’s a question of whether [healthcare] can afford to stay with enterprise,” as profits are down in the sector and the industry is dealing with layoffs. For this reason, colocation facilities—where a colocation provider leases floor space and power for the servicers—are a possible solution for the healthcare industry, Metcalf says.

“A purpose-built colocation facility for healthcare really seems like an appealing type of solution for a lot of the hospitals out there,” says Metcalf. “It offsets their capital expenditure costs significantly. Many have wanted to move to colocation, but have struggled to wrap their heads around how to do it in a way that makes them comfortable as an institution.”

Meanwhile, the medical industry is increasingly focused on data-driven healthcare, fueling the need for reliable networks, says Ortiz. She mentions that Nautilus Data Technologies, an American company developing floating data centers, recently commissioned a colocation center in Stockton, Calif. The project is expected to be complete in the fourth quarter of 2020.

Metcalf expects to see more public private partnerships, in both education and healthcare, such as the Georgia Tech and DataBank partnership. Georgia Tech partnered with DataBank, a colocation provider, to design, build and then lease space to the institution to house its supercomputer. The shift to colocation and cloud services was already happening before the pandemic and has continued over the past several months, with COVID-19 expediting this adoption, according to Lynch.

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