Saturday, June 15, 2024

Digital infrastructure: three waves, three opportunities | Macquarie Group

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The first wave, the internet and the cloud

Burley says that when many investors think of digital infrastructure, their minds still turn to the ‘hard’ traditional assets such as mobile towers, cables and wires. These, he explains, provided the initial means for digital disruption to occur by allowing the internet to develop and expand.

“With these types of traditional infrastructure assets, we’re looking at a long time frame that stretched back to as early as the 1970s for fibre and lasted up until the 2010s for 4G towers,” Burley says. “So, people have had time to understand how they work and the role they might play in a portfolio.”

While the hard assets of digital infrastructure are still necessary, Burley says that cloud computing and AI have combined to create a different-looking digital environment.

“It’s only in the last five years that we’ve seen cloud computing become mainstream and it has already transformed the front office functions – such as sales, invoicing, payments and even customer service – of most businesses, even the smallest ones.”

And yet, Burley believes that this trend still has a long way to go.

“We’re only about 20 per cent of the way there,” he says. “80 per cent of government and enterprise processes still need to be migrated. When this happens, it will create so much more data that needs to be transmitted, captured and stored.”

Burley says the sheer volume of data being created – and the infrastructure needed to support it – can be seen in the rapid growth of Asia’s data centres. In 2016, Asia had just 1/16th of the installed data centre base of the United States in term of megawatts. Now, just five years on, the data centre market is bigger than the US in terms of megawatt demand and the installed base of data centres is still catching up.

“We’re only really still at the start of the cloud revolution. The ongoing structural demand for new data centres and other critical digital infrastructure remains acute.”

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