Hyperscalers must prep for increase in government regulation and taxation, warns Uptime Institute

The operating practices of the hyperscale internet and cloud giants will come under even closer government scrutiny in 2019, as concerns about the power they wield over society grows.

That’s according to the Uptime Institute, who claim governments across the world are becoming increasingly concerned about how much influence and power the hyperscale technology community collectively holds.

“In recent years, governments viewed ‘Big IT’ and the wholesale of adoption of IT generally, as a positive force in almost every way. IT promotes innovation, productivity, and a positive trade flow (for some), and creates jobs, wealth, and investment in infrastructure,” states the Uptime Institute in its 2019 Top 10 Datacentre Industry Trends report.

“Any downside, on privacy, on monopoly power, on energy use or carbon emissions, on employment practices, or on tax avoidance, had been largely downplayed. But the pendulum has swung.”

For proof of this, one only needs to look at the action governments have taken to ensure the hyperscale cloud giants pay their fair share of tax in the countries they operate in, and the regulations that have been introduced to ensure their growth is achieved in a sustainable way, the report states.

“The internet giants in particular – but many other operators too – can expect a more resistant, sceptical, and occasionally frosty climate in the years ahead,” the report continues.

“These regulations are necessary, the argument goes, because large IT companies playing key societal and economic roles have been granted too much freedom, strain local infrastructure and lack sufficient procedures to ensure the availability of the necessary services they provide.”

In the UK, chancellor Philip Hammond set out plans at the recent Conservative Party Conference to unilaterally impose a UK tax on large technology companies, which he claims could raise an additional £400m a year for the economy.

At the same time, a global effort – led by the Organisation for Economic Cooperation and Development (OECD) – to increase the amount of tax the web giants pay is also underway, while EU lawmakers are understood to be working on a similarly intentioned initiative as well.

And it is the Uptime Institute’s view that more measures of this nature will be introduced throughout 2019 and beyond.

The report also goes on to discuss how the growing demand for colocation space from the hyperscale cloud giants can be better managed to ensure the datacentre community is better equipped to cope.

In an attempt to make their facilities as attractive as possible to hyperscale clients, a number of colocation providers have rejigged their business models, but will need to undertake more work to ease the migration path for the cloud and web giants into their facilities, according to the Uptime Institute.

“In 2019, we expect operators and suppliers to focus on more standardisation – of datacentre and equipment designs, of build approaches, of incremental power requirements, and so on,” said the report.

“Meanwhile, the bigger suppliers are pushing for earlier and better visibility into the expected future demand from hyperscalers. Smaller suppliers will still thrive – but they will find that their margins are pushed down as they must accept a limited role, with bigger companies getting stronger across the supply chain.”