When we landed at Daniel K. Inouye International Airport in Honolulu, we touched down to soaring alarm bells of a global recession greater than the Great Depression, spiraling interest rates, and an ongoing power crisis affecting some of the world’s largest digital infrastructure markets.
During PTC’22, although inflation, as well as supply chain shortages, were already a topic in the wake of COVID-19, the industry was at the time seen very much as the linking bond of humans, businesses, and families throughout the pandemic, and the conference vibe was one of reunion, nostalgia, and mission accomplished. But following the end of the gathering in Hawaii, the macroeconomic and geopolitics landscape shifted dramatically, and while we still dealt with the aftermath of the health crisis – which is still recognized by the WHO as a pandemic – the world entered a delicate period, especially as Russia invaded Ukraine on 24 February 2022.
The economic scenario upon which PTC’23 took place this past January had everything to turn this edition into a “doomsday” get-together, where crisis conversations could have taken over and fear of bankruptcies and job losses could have downgraded the experience, especially as Big Tech continues to lay off dozens of thousands of staff across the world. Yet, the opposite happened.
The 45th PTC Annual Conference brought together a record-breaking number of participants, and with it, a much-needed breath of fresh air in what is surely one of the most delicate periods in history for decades. While not taking away from the serious landscape affecting capital markets, different industries, and especially consumers, the digital infrastructure community showed a united front of positivism and stewardship which would have sent a calming note to Wall Street.
Some of the world’s largest players and investors including DigitalBridge, Digital Realty, EdgeConneX, GIC, IFC, KKR, Equinix, Zayo, STT, Oracle, and Google, all remained positive in their messaging throughout their stay in Hawaii.
There is indeed a notion that capital is more expensive and M&A might slow down slightly during 2023, yet this will also allow the market to focus on consolidating more regionally and finalize the many acquisitions announced last year – some of which are still in the process of integrating teams. Expansionary capital – especially greenfield – is not expected to be impacted.
In fact, teams, or should I say talent, was potentially the major concern on and off stages across the event. I might dare say the concerns around attracting new talent to this sector were for the first time probably greater than the conversations around sustainability – they were certainly more vocalized. That is in part because the industry has given itself an A+ in climate-friendly approaches and deployments as several initiatives cross-regions focus on reducing carbon footprints but also contributing to local communities can be an example to outside industries.
But back to the capital conversation, what was interesting to also hear from several executives, is that we are now entering a new phase of industry evolution – especially within the data center segment which is set to face its first economic recession this year. Private equity now represents some of the largest portfolio footprints, with more and more investors and funders pushing ahead with their commitment to an industry that is poised to continue to grow at double digits, even when the world’s economy might push back.
Yet, like with everything, there is a small “caveat.” Those who think that despite this growth, access to capital will be easier, it won’t. There is always money for the right thing, and the “right thing” – and people – will now be subject to much more stringent due diligence and portfolio valuations. One person told me, for instance, that the days of 20 to 30 times multiples are now over. And this shouldn’t be seen as a bad omen. It is just the nature of an evolving, maturing, and adjusting market that over the last 20 years has become the very own foundation of all we do in our daily lives.
Once more, PTC’s Annual Conference set the tone for the next 12 months. They will be challenging to many, but for the digital infrastructure community, the world will continue to support its growth as high demand for cloud and hosting infrastructure as well as a C-level “recession” generation that has powered through the 2001 and 2008 downturns put some reassurance around investing in digital infrastructure and their performance through to 2024.
If we look at January of next year, some of the main topics to pay attention to at the 46th Annual Conference will be how people behave and businesses adapt indeed around talent attractiveness, public education, sustainability, emerging markets, expansions – bring in the worries around securing land and power – but also very importantly, regulation.
Regulation is set to be a big game changer this year and it will certainly take a very visible stance at PTC’24 as new frameworks are pushed out by government bodies across all continents. Security of assets – as in, actual physical security – is also becoming a more pertinent topic as threats against infrastructure increase. This will undoubtedly force stronger collaboration between operators, governments, and intergovernmental military alliances all over the world ushering in a new era for this critical infrastructure.
We look forward to landing in Hawaii in just under 12 months to grasp once more how the digital infrastructure community has weathered 2023 and what new headwinds of opportunity scattered all around us have to offer.