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As the use of the cloud accelerates, it is said that the so-called “return to on-prem” movement, in which in-house systems that were once cut out to the cloud are returned to on-premises, is becoming apparent.

Last year, the Rakuten Group decided to return to on-prem. We are expanding the environment of the private cloud “One Cloud” and promoting the integration of the IT infrastructure used by the various businesses of our group companies. In principle, many systems currently running on public clouds will be shifted to One Cloud. In addition to improving cost efficiency by promoting the consolidation of IT infrastructure into a private cloud for the entire group, the company plans to accumulate IT infrastructure know-how for stable operation and enhanced security.

Private clouds will also be used as the basis for IT services for corporations that are planning to enter the market. The plans include eKYC for identity verification, website access analysis, and electronic payment functions. Both technologies were developed for use in the Group’s business, and preparations are underway to sell them externally as pay-as-you-go public cloud services.

With the advent of cloud first, it is said that opportunities to introduce on-premises servers are definitely decreasing for many companies. However, if you turn your attention to the server market, the movement is still strong. At first glance, it seems contradictory, but what is behind this?

Background of “on-premise regression”

The server market seems to be growing favorably in 2022, with a year-on-year increase of 10-20%.

Even in the early 2000s, when server virtualization began to become popular, it was said that servers would not sell as a result of server consolidation. However, in reality, this is not the case. Virtualization has made it easier to procure servers, and conversely, the introduction of various systems has become more active, leading to the demand for more servers.

Currently, with the tailwind of DX, IT investment is becoming active, and system utilization that was not possible before is spreading. Given the rapid increase in server resources required by the cloud, the expansion of the server market is rather natural.

On the other hand, one of the reasons behind the recent boom in the use of on-premise servers by general companies is that misunderstandings about the cloud have been cleared after actually using it. In retrospect, the cloud has attracted great expectations for its ability to use resources at extremely low cost and to reduce the workload by cutting out operations to the outside.

However, in reality, there are many cases in which unexpectedly high charges are billed as a result of using the cloud without understanding the characteristics of the cloud in terms of cost.

Also, in terms of operation, the hardware amulet is gone, but the operation of the system itself still remains. Cloud management requires different knowledge than on-premises, and in the current situation where many companies have systems on both on-premises and in the cloud, dual management will inevitably occur. This is no small burden for busy IT departments.

There are also security issues. Existing legacy systems that handle highly confidential data cannot be abolished on-premises because they cannot be operated on public clouds. As a result, IT operations become more complex, leading to problems such as increased operational management loads.

As the understanding of these “realities” has progressed, there is a swing back to the style of coexisting with the cloud, returning the systems that were once cut out to the cloud and returning them to the on-premises, starting with those that were judged to be “not suitable”.

On-pre regression will progress in the present progressive form. However, companies that have experienced the cloud know its advantages. Is the conventional on-premise IT infrastructure that such companies should aim for?

There are two approaches to the current “on-premise regression”

There are currently two approaches to on-premise regression. One way is to leave the server-related data in the cloud and return only the key data in DX to the on-premises. Another is to bring the whole system back on-premises. The problem is the latter method.

It is clear that it is not a 3 Tier type (a system configuration in which a group of servers and shared storage are connected with a network fabric) designed with SPOF (single point of failure) that emphasizes only cost. However, It doesn’t mean that the 3-tier model is bad for all proposals. Even after considering appropriate measures to address issues, the larger the scale, the more complex it becomes. No one wants to go back to a situation in which each time a review is made, discussions between the people in charge of servers, storage, and networks lead to long lead times, and issues such as hardware generations cause high replacement costs.

What we should aim for is the adoption of a cloud-like virtualization platform. From that point of view, HCI (Hyper Converged Infrastructure), which realizes a cloud-like system infrastructure, is currently attracting attention. It seems that this HCI has greatly improved the evaluation. HCI, which implements pre-verified server, storage, and network functions in software and stores them in a single box, and is provided together with virtualization middleware, greatly simplifies the configuration of the IT infrastructure. Even without specialized knowledge, resources can be easily expanded by adding nodes, achieving scalability close to that of the cloud.

HCI, which can maintain a simple configuration, is likely to continue to attract attention in the future, in contrast to the 3-tier configuration, which increases in complexity as it grows in scale.

Irish government restricts data center development

Ireland’s The Commission for Regulation of Utilities (CRU) has decided to limit the impact by imposing a de facto moratorium on new data center development in the Dublin metropolitan area.

Ireland’s national transmission operator EirGrid said in response that it would only consider new applications for grid connection on a case-by-case basis. The restrictions could reportedly last until 2028.

Martin Shanahan, CEO of Ireland’s Industrial Development Authority (IDA), recently said that new data centers “are unlikely to occur in Dublin and the East Coast at this time.”

Google has asked such Irish regulators not to impose a moratorium on data center development in the country.

In The Commission for Regulation of Utilities (CRU) filing, the company said search and cloud companies must “absolutely” avoid a moratorium on data center development.

Google said such a ban would send a “wrong signal” about Ireland’s digital economy ambitions, and would affect the country’s infrastructure, according to a Freedom of Information request first reported by The Irish Times. It adds that it makes further investment “impossible”.

In the filing, Google called for more transparency about where the Irish network has existing power capacity, as well as being clearer and more open about EirGrid’s projections of data center power usage growth. I think you need to.

Growing Demand for Cloud Computing, Google’s Proposal

Google, which launched its first data center in Ireland in 2012, has proposed a new pricing structure for data center operators who reserve more capacity than they ultimately need or grow to that capacity too slowly. bottom.

“Transmission tariffs can be designed so that consumers who are not seeing increased demand towards maximum reserved capacity will be charged more than consumers who are demonstrating an increase each year.” says.

EirGrid and politicians have previously suggested moving data center development to the west of Ireland (away from Dublin’s constrained areas and closer to renewable energy sources), but Google says this is not a viable solution. I point out that it is not.

“The demand for cloud computing in Dublin is growing. We are unable to provide services.”

Another AWS filing says Ireland has missed opportunities in the past to address supply issues.

“Over the past decade, we have had opportunities to do reinforcement work, prepare the grid for growth and investment, and prepare the grid for more intermittent integration of resources,” he said.

Both the Social Democrats and the People Before Profit parties have been calling for a nationwide moratorium on future data center projects for the past 12 months. The PBP bill was an absolute ban on data centers, liquid natural gas plants and new fossil fuel infrastructure.

In Dublin last month, South Dublin County Council (SDCC) voted to block future data center construction in the county as part of a new development plan.

What is the background behind the Irish government’s moratorium on data center development?

Irish Government Behind Data Center Development Moratorium

The Irish government’s achievement of emissions and renewable energy targets is behind this.

According to EirGrid, data center energy usage is projected to increase by 9TWh by 2030, ranging from 23% to 31% of Ireland’s grid supply in 2030. This comes at a time when the government wants to reduce emissions by 60-80% by increasing the share of renewable energy. At the same time, governments want to decarbonise by moving heating and transportation to electricity, further increasing demand on the grid.

According to The Irish Times, EirGrid has agreed to connect an additional 1.8GW of data centers to the grid, with current peak demand of around 5GW, and a further 2GW of applications ready. That’s it.

The Government Statement on the Role of Data Centers in Ireland’s Enterprise Strategy 2018, published in 2018, emphasized the positive role of data centers in the country’s economic performance. However, it will now be “aligned with sectoral emissions caps and renewable energy targets, concerns about continued security of supply, and demand flexibility measures currently needed. In order to secure it, it will be reviewed. “In addition, further tightening of regulations will be considered,” it is reported.

Will it work or will it backfire?

The Irish government imposes a moratorium on data center development, which is in high demand worldwide. It seems that the moratorium continues while receiving a warning from Google. Will this decision work or will it backfire? We will keep an eye on trends.

The Kansai region, centered on Osaka, is a rapidly growing market for data center businesses, second only to the Tokyo metropolitan area, which is the largest in the Asia-Pacific region. As corporate DX (digital transformation) progresses, there is a wide range of demand not only from local companies but also from domestic and foreign companies.

New data center rush

In 2019, NTT Communications (NTT Com: NTT Com) opened the largest data center in the Kansai region in Ibaraki City, Osaka Prefecture.

In February 2023, MC Digital Realty, a data center joint venture between Mitsubishi Corporation and Digital Realty, will open a new data center in Osaka.

In the past two months, Asian real estate company ESR Group has started construction of a 19.2MW data center in the Osaka area. Optage Inc. has announced plans to build a 14-story carrier-neutral data center, scheduled to open in January 2026.

Kansai Electric Power Co., Ltd. and U.S. company Sarai One for data center development

U.S. data center developer and operator Cyrus One has partnered with Kansai Electric Power Co., Inc. (KEPCO), a Japanese energy company, to develop new data centers in Japan.

On May 22nd, Kansai Electric Power announced that it would establish a joint venture with Cyrus One to develop data center business in Japan. Invest at least 1 trillion yen ($7 billion) over the next 10 years to build large-scale data centers called “hyperscale” with a “power receiving capacity” of 50,000 kW or more per location, which indicates power consumption, in the Kansai and Tokyo metropolitan areas. We are planning to start development and operation in the summer.

In 10 years, we aim to achieve a total power receiving capacity of 900,000 kilowatts or more, a scale that uses almost as much electricity as a single nuclear power plant.

Representative directors of the new company will be dispatched from both companies. The Kansai Electric Power Group will bring together the strengths of both companies, including know-how related to power supply to data centers and real estate acquisition, and Cyrus One’s sales capabilities to IT (information technology) companies that are data center customers. We have already secured the construction site for the first project in Kansai and plan to start construction as soon as possible.

Attention to the data center industry in the Kansai region

New data centers in the Kansai region continue to see a rush to build new facilities, and demand for these facilities is expected to continue to grow.
Kansai Electric Power’s hyperscale data center operation is likely to attract more attention to trends in the data center industry in the Kansai region.

With an increasing reliance on digital technology, the data center industry is experiencing impressive growth, is relatively immune to continued economic uncertainty, and is being viewed by investors and financial institutions as a strong alternative asset class. It’s getting attention.

Expansion of market size

According to a report published by Global Market Insights Inc., the global cloud data center market is estimated to be worth 20 billion USD in 2022, progressing at a CAGR (compound annual growth rate) of 10% from 2023 to 2032. It is projected to surpass the 70 billion USD valuation by 2032.

Efforts to promote the development of cloud computing technology are expected to be the main driver of market expansion. Projects powered by cloud computing offer integrated management, including automated problem resolution, end-to-end security management, and budgeting based on actual data usage.

Improving cloud computing infrastructure for e-administration practices has become a priority for governments of several countries, including India. These governments have also launched projects to expand their skill sets to advance digitization.

According to deployment models, the public cloud data center market will be valued at over 5 billion USD in 2022 and is expected to grow profitably through 2032.

Remarkable growth, even in Japan

Japanese telecommunications company Nippon Telegraph and Telephone (NTT) has announced plans to invest 8 trillion yen ($59 billion USD) in data centers, artificial intelligence and other “growth areas” over the next five years.

Of that, at least 1.5 trillion yen ($11 billion USD) will be spent on expanding and upgrading data centers, while at least 3 trillion yen ($22 billion USD) will be invested in digital businesses, including AI and robotics.

The company said the spending is expected to boost earnings before interest, taxes, depreciation and amortization for the fiscal year ending March 2028 by around 20% compared to the previous fiscal year, which amounts to about 4 trillion yen ($29.4 billion USD).

The Nikkei Shimbun reports that President Akira Shimada said at a press conference, “We will invest in growth areas and expand our cash-generating capabilities.”

Despite this market expansion and growth forecast, there are also challenges that weigh heavily on us.

Ukraine War, Labor Shortage and Challenges Weighing Down

Supply chain constraints, which have eased from the peak of the pandemic but have not fully resolved, are at risk of further flare-ups due to geopolitical tensions in Europe and the Asia-Pacific region.

For example, the war in Ukraine has limited the supply of neon, which is essential for semiconductor manufacturing. This supply pressure is causing delays in production. This is also due to a labor shortage, which is particularly serious in the data center field, where the problem of lack of skills and human resources is becoming more pronounced.

Employers are not only finding it difficult to find talent, they are also struggling to retain talent, with many reportedly being hired by their peers in a hot labor market. .

Another challenge hindering data center growth is the broader global economic problem. Data centers are among the top three asset classes expected to see the most growth in debt balances over the next 12-24 months, as they rely on debt to finance construction and acquisitions. Profit margins are shrinking as interest rates rise. Higher interest rates and economic instability could make it harder for businesses to make large deals.

Market expansion continues; expectations are high for initiatives in each country

Despite many challenges, the market size of the data center industry continues to expand. There is growing interest in the efforts of countries around the world to see how they can further expand while facing challenges.

As competition in data center investment and development intensifies, DC operators, DC developers and investors involved in data center business (hereinafter referred to as “DC operators, etc.”) It is desirable to utilize the CRE strategy in order to optimize the earnings of the data center business while eliminating competition with other companies as much as possible.

■ What is the CRE strategy?

“CRE” is an abbreviation of “Corporate Real Estate,” which began to attract attention in the United States in the 1960s. It refers to real estate owned by a company, and in addition to real estate such as offices, factories, and warehouses necessary for conducting business, it also includes recreation facilities, company housing, welfare facilities, and idle land.

The CRE strategy is a medium- to long-term management strategy that aims to improve corporate value by effectively utilizing such real estate.

As a specific CRE strategy, we will review current offices, rent surplus offices to third parties, and utilize idle land to develop and construct real estate for various purposes to generate stable long-term rental income. secure, etc.

In 2008, the Ministry of Land, Infrastructure, Transport and Tourism issued the “Guidelines for Implementing CRE Strategy”, which triggered the CRE strategy to attract attention in Japan. The guideline defines the CRE strategy as “a way of thinking about maximizing the efficiency of real estate investment by reviewing corporate real estate from the perspective of management strategy from the perspective of ‘improving corporate value.'” I’m here. Although the data is a little dated, the scale of CRE in Japan is said to be 490 trillion yen*, which is expected to grow further when converted to current real estate prices.

Based on the 2006 Basic Land Survey.

■ CRE strategy past and present

Before the CRE strategy was clearly recognized, it seems that corporate real estate owners chose only schemes of (1) passive abandonment, (2) simple sale, and (3) simple lending (land or building). Part of the reason could be the lack of active use of balance sheet strategies within companies and the fact that corporate property owners are not real estate professionals.

The CRE strategy has gradually been recognized, and up to now, real estate companies (developers, etc.) and construction companies have been actively approaching corporate real estate. We have successfully commercialized a large number of businesses based on CRE strategies through proposals for effective utilization and proposals for joint ventures. It is also noteworthy that the enforcement of the Financial Instruments and Exchange Law (2007) facilitated the liquidation of real estate and the entry of investors into the market.

■ Role of CRE strategy in data center investment and development

By applying the CRE strategy to data center investment and development, DC operators can enjoy the following benefits.

Understanding the intentions of corporate property owners

In addition to knowing whether you want to sell the property, whether you want to rent it, whether you want to make effective use of it yourself, whether you want to do a joint business, etc., you can also grasp the timing, so you can communicate with the owner based on trust. increase.

Avoiding Opportunity Loss and Lost Profits

Compared to real estate for other purposes, it takes a considerable amount of time to conduct a preliminary survey to determine the suitability of a data center site. For example, when participating in a real estate auction, etc., it may not be possible to make a decision within the consideration period. In addition, there may be cases where real estate investment is executed while accepting the risk of unconfirmed items. On the other hand, based on the CRE strategy, the decision-making process of the parties involved will make it easier for DC operators to select properties suitable for data centers, thereby reducing investment risk.

Optimizing investment efficiency

Data center development requires not only land acquisition funds but also huge investment funds for buildings and equipment. By utilizing the CRE strategy, the timing of funding will be advanced through discussions among the parties concerned, making it possible to avoid the problem of inefficient investment funds associated with prior acquisitions. In addition, in the SPC formation scheme for joint investment, it is possible to carefully consider the financing method and loan terms and formulate the optimal financing strategy.

Alignment of Interests of Stakeholders and Exit Strategies

The development of a data center requires a huge amount of investment funds and a considerable period of time from the completion of the DC to its stable operation. By repeating discussions that match the expectations of each of the parties concerned, the CRE strategy realizes the separation of the development party, ownership and management, and enables the construction of a final exit strategy scenario.

As mentioned above, utilizing CRE strategy in data center investment and development can be considered a beneficial approach to maximize profitability while minimizing risk.

NTT DATA Co., Ltd. is working to remote/automate equipment inspection work using robots at the data center “NTT Shinagawa TWINS DATA Building” (hereinafter referred to as “Shinagawa Data Center”) operated by the company. announced that it has confirmed that it is possible to reduce the equipment inspection work that was previously done by about 50%.

From April 2023, NTT DATA will proceed with the introduction of robots to data centers nationwide.

Background of robot introduction

NTT DATA explained that the building management industry, including data centers, is facing a serious manpower shortage, and that facility management work, in particular, is facing a shortage of skilled workers, and that there is a need for labor savings and more efficient work implementation.

Among facility management operations, the company believes that inspection work is highly effective in reducing manpower and that remote/automated operations are feasible through the use of digital technology, and has been conducting verification for practical application at its Shinagawa Data Center.

Overview of Robot Introduction and Changing Checking Tasks

In this initiative, a robot automatically patrols a predetermined inspection route, taking pictures of meters, lamps, and facility exterior, and acquiring environmental data such as odors using sensors, thereby replacing the work of measuring meters, checking lamps, and checking for abnormalities in appearance and unusual odors that had previously been performed by humans.

In this method, a single camera or sensor can be used to inspect multiple locations, and there is no need to modify the current equipment in operation, making it cheaper and simpler to achieve remote/automated operation than other methods such as installing IoT cameras and sensors for each inspection target or converting to smart meters.

The robot used in this project is a next-generation avatar robot “ugo Pro” modified for facility inspection work in collaboration with ugo Corporation, a manufacturer of business DX robots.

In order to capture detailed meter readings, the robot is equipped with a 4K camera with higher image quality than the standard model, and multiple devices such as an odor sensor, microphone, and thermo camera can be mounted on the ugo itself to expand its applications depending on the inspection items.

The robot can be operated using only a PC, and its travel route can be set with no code, making it easy for on-site personnel to use the robot. The robot can switch between automatic traveling and remote control, and can be used not only for automatic inspection work, but also for multiple applications, such as work support from a distance.

These features not only allow the robot to handle a variety of inspection items, but also to expand its applications to include remote work support and construction attendance.

By using robots and sensors to remotely/automatically perform inspection work, not only can work hours be reduced, but also the threshold values for determining abnormalities, which used to rely on human senses, can be quantified to enable detection of abnormalities without relying on skilled workers.

In addition, by making it possible to remotely perform tasks that could only be performed onsite, including work support and construction attendance, it is expected to support flexible work styles and secure new workers.

About the future

In the future, NTT DATA aims to expand the scope of automation to include recording and reporting work that currently requires personnel to perform, and to reduce the time required for inspection work by up to 80% by promoting linkage with meter reading systems and abnormality detection AI.

NTT Data will also work to enhance facility management operations, such as advanced abnormality detection and predictive maintenance of facilities, utilizing data acquired by robots and sensors.

Starting in April 2023, the initiative will be rolled out sequentially to 15 data centers nationwide.

Furthermore, based on the knowledge gained from these efforts, the company aims to offer the service commercially as a remote/automated service for facility inspection operations by the end of FY2023.

For commercial provision, ugo will utilize the new robot “ugo mini” developed by making use of the knowledge obtained through joint verification with NTT DATA to develop remote/automation solutions for facility management operations, from consulting for introduction. NTT DATA provide one-stop support from system construction to operation to solve customer problems.

The day of full-scale deployment of robots for facility inspection operations at data centers is eagerly awaited to help resolve the serious labor shortage.