The Edge: Are you ready for a new age of edge infrastructure?

Authors: Olivier Wolf, Dwayne Gibson-White, Ulrich Loewer, Gordon Bell

The rise of edge computing is an undeniable megatrend. It will redefine the world of data transmission and storage, unlock new user demands and disrupt traditional industry value chains.

This is the first in a series of articles where we will explore the edge infrastructure opportunity– what it is, the size of the opportunity and the implications for the different entities in the data centre ecosystem.

Understanding the strategic implications of edge, the associated opportunities, and threats, is essential to maximise value capture in this rapidly evolving market.

Edge infrastructure demystified

Edge computing, in broad terms, refers to the processing or analysing of data closer to an end device, system or user. This brings a range of benefits. It enables the lower latency that is critical to the next wave of applications such as augmented reality to function at scale, brings down bandwidth costs and enables real-time data insights. There are also security benefits: less data being transferred across longer distances, often across borders, means that less data can be intercepted whilst in transit and reduces regulatory challenges.

While edge as an overarching infrastructure megatrend is undeniable, it is important to see the edge phenomenon as part of a broader data centre technology evolution.

While cloud computing heralded the shift away from on-premise computing towards remote, regional data centres and public cloud platforms, edge computing signals the need for more distributed data centre footprints with infrastructure located closer to end users and devices. This new frontier that spans from a centralised ‘core’ to end users and devices can be referred to as the ‘edge’.

Ultimately, edge enables data processing to take place where it makes most sense by efficiently distributing the workloads between local and more centralised facilities depending on the application requirements.

The push to the edge is driven by three key demand and supply dynamics:

• The emergence of new low-latency use cases among consumers and enterprises – think augmented reality and cloud gaming that necessitate ever more efficient data processing with lower latencies.
• The continuing cloud migration journey – the share of enterprises using cloud computing grew 10%-20% annually between 2016 and 2021 across Europe and Americas.
• Constraints in land and power availability driving rising costs forcing data centre providers to move beyond regional hubs (like FLAP markets Frankfurt, London, Amsterdam or Paris) to cheaper locations.

A new data centre landscape

Taken together, these factors have spurred the appearance of a new breed of infrastructure: edge data centre facilities that are smaller and closer to the end user, typically serving smaller population clusters in urban areas. They often function as part of a broader connectivity ecosystem that allow seamless distribution across various endpoint and regional facilities. This differentiates the facilities from traditional retail colocation offerings.

EY-Parthenon classify edge facilities into three segments:

Metro Scale refer to?deployments between 3-10MW, typically providing local content storage and delivery to cloud providers or content players with minimal interconnectivity requirements. Meanwhile Metro Edge are smaller than Metro Scale deployments. Typically between 1MW and 3MW, they support applications ranging from social media to streaming and video gaming, acting as peering points between them. Last Mile Edge is the most nascent form of edge infrastructure, featuring smaller deployments located extremely close to end users that support the most latency-sensitive use cases. These include specialized applications such as augmented reality, virtual reality, and real-time advertising.

Over the next decade, widespread adoption of edge reliant-applications and use cases will be as transformational for the telecom, media, and technology sector as the shift to the cloud has been in the last ten years. By 2033, edge infrastructure demand in the US, Europe and Asia-Pacific is set to hit ~18 GW (~US$45b), growing 12% annually from ~ 6.5 GW (~$14B) in 2023.

By 2033, edge infrastructure demand in the US, Europe and Asia-Pacific is set to hit ~18 GW (~US$45b), growing 12% annually from ~ 6.5 GW (~$14B) in 2023.

Crucially, the pervasive shift to edge infrastructure will have major implications for all entities involved in data centre, cloud, and connectivity provision, including:

• Cloud service providers who have workloads comprised of different edge use cases at varying stages of adoption, from social media and augmented reality to Internet of Things products and services.
• Tech start-ups playing in latency sensitive spaces (e.g., cloud gaming, augmented or virtual reality and, increasingly, AI-based players) who rely on edge infrastructure to widen their addressable markets and drive mass customer adoption.
• Content delivery networks (CDN) whose business models can take advantage of content stored closer to its source and end users, particularly as dynamic content provision becomes an important differentiator.
• Third party data centre operators who are augmenting their strategies from solely building large campuses to also addressing the appetite for edge, which in turn requires new infrastructure, product, and sales capabilities.
• Telecom operators who can combine their connectivity capabilities and ecosystem relationships with brownfield data centre facilities that can be converted into edge infrastructure.

Regardless of your position in the data centre value chain, understanding the magnitude of the opportunity is critical. Sharpening your understanding of edge infrastructure is a first step. Getting granular on the use cases that will drive the market is also essential and will be the focus of our next article.

In the meantime, reach out to me or my EY-Parthenon colleagues Dwayne Gibson-White, Ulrich Loewer and Gordon Bell if you would like to know more about what edge infrastructure can do for you.