Building and investing in data center capital projects
The digital infrastructure boom
The convergence of technology and business is accelerating demand for digital infrastructure—including data centers—on a scale never seen before.
For one thing, the appetite for instant network access, computing resources and big data has spread to almost all areas of the economy, with a corresponding demand for configurable servers, storage, applications, and services.
Adding to this demand are advancements in artificial intelligence, the Internet of Things, and 5G broadband, which are set to cause an upsurge in data traffic as our lives become more interconnected through smart devices and real-time access to products, services, and information.
The scale of data center development today has become increasingly competitive and complex. But by taking a mature capital project management approach, enterprises, developers, and investors may find opportunities—and gain a competitive gain in the data center market.
Video: Data center construction soars — how to manage the explosive growth
How competitive is the data center market?
Data centers today are expected to come to market 2-3 times faster, along with improved efficiency, innovation, and security.
“The way things have been done in the past—the fast and loose approach—isn’t going to cut it with the larger more complex [capital project] programs and the increased competition in the [data center] market as well.”
A mature data center capital project management approach
As data center capital projects grow exponentially in size and complexity, so, too, must capital project management techniques evolve—esp. to drive speed, efficiency, and innovation.
"Data centers are fundamental to meeting the exponential growth needs of next generation workloads in the global economy."
Project excellence: Where stakeholders find their competitive edge
Examples of how project excellence capabilities may help stakeholders successfully construct a large-scale data or deliver multiple data centers include:
Challenges:
- Need to ramp up data capacity under tight timeframes and budgets
- Need to decide on lease/build/buy; on-premise vs. cloud strategy
Project excellence solutions:
- Ask developers for robust reporting/relevant metrics around critical paths
- Schedule integrity checks
- Use probabilistic modeling for predictive forecasts
- Use capital portfolio management techniques to weigh factors for decision making (e.g., disaster recovery, interconnection needs, security, latency, data sovereignty and capabilities)
Competitive edge:
Having robust project governance and controls mitigate the risk of losing quality in favor of speed to completion.
Challenges:
- Customer base has increasing sophistication and demands
- Construction tempo has accelerated from 12-18 months to 6 months
Project excellence solutions:
- Employ sophisticated capital program techniques
- Project Execution Plans (PEP)
- Quantitative Risk Analysis (QRA)
- risk monitoring/mitigation
- cost/schedule forecasting
- performance management with KPIs
- Integrate project technologies and data analytics
- for improved visibility into project performance
- for enhanced information accuracy
- for improved project team collaboration
Competitive edge:
Being able to demonstrate mature project management capabilities tends to increase customer and lender confidence.
Challenges:
- Growing cost structures make it important to evaluate risk profile data center deals
- New lending approaches (e.g., Project Finance vehicles) require greater understanding of developers’ program capabilities
Project excellence solution:
- Shore up risk assurance to ensure the project has
- sound governance and controls
- the right risk analysis tools for risk management
- systems allowing draw schedules, value forecasts, milestone reports
- Retain a third-party risk monitor to provide broad-based development audits and project reviews on a recurring and ad hoc basis
Competitive edge:
The right expertise, benchmarking standards, and reporting ensures delivery of large and complex projects with predictable and moderate downsides—even in new or diverse markets.
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Principal, Capital Projects & Infrastructure (Technology, Media and Telecommunications), PwC US
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