UK Data Centers Face Energy Price Spikes, Brexit Effects

Higher energy costs have bolstered ESG initiatives as providers deploy additional measures to stem their emissions, ISG Provider Lens report says

Soaring energy costs and the continued fallout from the United Kingdom’s decision to leave the European Union have had a major impact on that country’s private/hybrid cloud data center outsourcing market, according to a new research report published by Information Services Group, a leading global technology research and advisory firm.

AiThority Interview Insights: How to Get Started with Prompt Engineering in Generative AI Projects

“Enterprises in the U.K. are seeking transformation solutions that reduce operational expenditures while improving their sustainability and compliance with government regulations”

The 2023 ISG Provider Lens™ Private/Hybrid Cloud – Data Center Services report for the U.K. finds that due to Brexit the country has lost its broad market access to other EU member states. At the same time, repercussions from the Russia-Ukraine conflict have led to a sharp spike in energy costs, forcing service providers to seek other ways to alleviate their rising operational expenditures.

“Data centers in the U.K. are struggling to offer services at the same price as they did before Brexit,” said Ola Chowning, ISG partner, North Europe. “A number of them have sought to renegotiate their contracts with end users in an effort to pass on some of these additional costs.”

In the leadup to the finalization of Brexit in 2020, companies from a variety of industries relocated to other EU member states, anticipating the resulting loss of market access, the ISG report says. Not surprisingly, this exodus has had an adverse impact on the U.K.’s digital competitive edge. In fact, according to the 2022 IMD Digital Competitiveness Ranking, the U.K. dropped two positions from its 2021 ranking to 16 out of the 63 countries. Yet despite Brexit, many companies are still co-locating close to London’s financial trading houses to reduce latency, ISG says.

Meanwhile, sharply increasing energy prices, due in part to the Russia-Ukraine conflict, have led to consolidation of data centers across the U.K., while others have been nearshored to Dublin, the ISG report says. In response to this market volatility and to cut costs, some enterprises in the region are navigating away from well-established service providers toward smaller specialists for their cloud transformation requirements. According to the ISG report, enhanced automation capabilities can serve as a powerful equalizer, leveling the playing field between large, established providers and smaller, regional ones.

Read More about AiThority Interview: AiThority Interview with Brigette McInnis-Day, Chief People Officer at UiPath

“Enterprises in the U.K. are seeking transformation solutions that reduce operational expenditures while improving their sustainability and compliance with government regulations,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Service providers are constantly innovating to address these needs and more.”

The report also examines how both the COVID-19 pandemic and the Russia-Ukraine crisis have brought FinOps to the forefront for enterprises as service providers grapple with higher operating costs.

The 2023 ISG Provider Lens™ Private/Hybrid Cloud – Data Center Services report for the U.K. evaluates the capabilities of 62 providers across five quadrants: Managed Services for Large Accounts, Managed Services for Mid Market, Managed Hosting for Large Accounts, Managed Hosting for Mid Market, and Colocation Services.

The report names Rackspace Technology as a Leader in four quadrants, while Fujitsu is named as a Leader in three quadrants. Atos, Claranet, DXC Technology, Ensono, Kyndryl, Telefónica Tech and T-Systems are named as Leaders in two quadrants each, while Accenture, BT, Capgemini, Computacenter, Digital Realty, Equinix, Global Switch, HCLTech, Hexaware, Infosys, Lumen, NTT GDC, Pulsant, TCS, Telehouse, Unisys and Wipro are named as Leaders in one quadrant each.

 Latest AiThority Interview Insights : AiThority Interview with Abhay Parasnis, Founder and CEO at Typeface

 [To share your insights with us, please write to sghosh@martechseries.com]