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11 May 2022
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Test of Strength: What Awaits the Russian Data Center Market in the Crisis

While international vendors and manufacturers are leaving Russia, the need for computational capacity is growing continuously. According to the latest research by Gartner, the digital revolution has achieved unprecedented growth: 2022 is destined to be the year of data center infrastructure development, the costs of which will grow globally by more than 11% compared to the previous year. Let us find out what are the prospects for data center inthe new reality, and whether it is possible to identify a number of anti-crisis measures.
Key global data center trends in 2022
After the start of the pandemic in 2020, the global business outlook was very volatile, with many CIOs and data center directors fearing serious staffing issues, supply chain problems, budget shortfalls and a major recession. Now, two years later, IT sentiment and trends are more positive. The rapidly changing environment has spurred businesses to learn to take (and offer) the right IT solutions just as rapidly. Data centers have become a service that is in particularly high demand: in Russia, only in 2021, the number of racks increased by over 1,000.

The market is undergoing significant changes. Advances in chip technology will lead to significant energy efficiency improvements for providers of the largest data centers. Those who cannot take advantage of the improvements or achieve higher utilization through workload consolidation will struggle to remain competitive.

The green data center segment is gaining momentum in several areas at once. Various businesses have expressed interest in installing green data center solutions, and corporations have begun implementing ecometers for their day-to-day IT operations to save money. Essentially, environmentally friendly data centers are one of the most visible initiatives today.

The clean data center market is projected to grow due to long-term savings and return on investment. As electricity consumption, bills and CO2 emissions from data centers increase, the demand for green data centers will grow. Energy from renewable sources, cooling technology, energy-efficient equipment and control systems—a new «industrial revolution» is probably to come in the near future. At the same time, a stricter environmental policy will cause a rift between industry stakeholders. Faced with increasing government and commercial pressures, operators will be frustrated with how to assess and report sustainability.

The significant simplification of data center architecture should be mentioned as well. Technology variety and capacity are growing every year, and connecting to computational capacities is now becoming a simpler process. Due to the modular design and new technological standards, data centers today are transforming into powerful infrastructure platforms capable of handling computational loads of any company. The future is now: in only a little while, next-generation data centers will most probably work with any hardware. The key factor will be accurate compliance of functional parameters of the hardware with the actual computational loads.

Finally, this is where the trend towards the globalization of data centers originates. Specific resources increasingly tend to merge, which sooner or later will lead to an integral conglomerate of computational capacities without reference to geography. Step by step we are moving toward truly global public cloud storage anyone can be part of in terms of resources by building their own «local» platform with access to the World Wide Web.

What the Russian market has faced subject to restrictions
Against today’s environment, Russia owns a good deal of high-performance computing equipment, which resulted from the first wave of «digitalization». Therefore, in the short run, Russian digital assets will be brought back home quite successfully. In the medium term, however, the development of the digital industry will be much constrained unless delivery of the hardware covered by the sanctions to the Russian Federation will be ensured. Those taking time returning their digital assets to Russia, when forced to leave the Western-based clouds, will probably not find a «landing ground» back home.

Distributors supplying equipment to Russia will find themselves in a challenging situation, since the vast majority of their logistics and financial chains are now adjusted to working with a very specific set of products by specific manufacturers. An ability to quickly adapt to new logistics and sales/retail channels will be a priority. What is more, data center providers are most likely to revise the cost of their services—not only due to the increasing complexity of delivery, but also based on the equipment procurement costs. Companies will be bound to think through all foreign policy scenarios in advance and prepare Plan B (or even C, D and E) in such a stressful environment of inconstancy and uncertainty. Players who are able to establish the supply of banned products in the shortest possible time will run things in the Russian market for years to come.

In particular, 2022 has greatly emphasized the importance of information security for intellectual property protection. With ongoing hostile rhetoric against everything «Russian» with impunity, no expert can guarantee the owners of computing algorithms with Russian citizenship protection from potential theft of such cyber assets when they are outside the Russian Federation.

Apart from direct theft, there is still a threat to data security even if the data is removed from data centers in jurisdictions unfriendly to Russia. Today, digital assets must be placed based on many criteria with the level of security being the main one. For that reason, one of the data center providers’ immediate priorities will be comprehensive security assurance of the assets stored.

As for businesses’ preference for cloud services, the trend remains as relevant as it was before 2022. PaaS solutions (SQL as a service, etc.), computing resources (IaaS model) and SaaS models are as relevant today as they ever were to companies and individual professionals and teams.

What to do?
The governmental support of the data center market became a great advantage for Russian IT companies in the current circumstances. In March 2021, the government of Russia proposed to prohibit government entities from spending public funds for the purchase of their own data centers without proper justification. Such a measure may be a promising tool for the support and development of the industry. Eventually, in order to buy data storage services, government entities will approach commercial data centers.

The Russian market is very diverse in terms of «IT awareness» and varies significantly depending on the industry. It is very difficult to tell exactly what data centers should be implemented at a nationwide scale for the decent functioning of businesses in Russia. It depends on the goals and objectives of each company and its specifics in the market.

Today, the Russian IT market needs a package of data management standards more than ever. Data center operators need to gain more potential for «educating» customers, who currently lack knowledge of all the tools necessary for the proper use of data centers.

As for import substitution and/or finding temporary alternatives to Western-based solutions, one should realize that many vendors have not actually left the Russian market (especially in the cloud segment), but it is impossible to use their services after the expiration of the subscription due to the blocking of payment systems in Russia. The best option here is to pick a service that makes it possible to preserve mutual economic interests.
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