Brazil’s Data Centers Supporting Demand for GenAI Testing

Rhea-AI Summary

The 2024 ISG Provider Lens™ report highlights Brazil's growing demand for data centers to support GenAI testing and development. Key points include:

1. Enterprises are moving away from on-premises data centers to managed hosting and colocation facilities.
2. GenAI requires significant energy, prompting plans for solar and wind farms.
3. Hybrid approaches allow data distribution across locations with private links.
4. Market expansion includes new providers, increased floor space, and international investment.
5. Colocation sites offer connectivity to major cloud providers and the Brazilian internet exchange.
6. Software-defined networking (SDN) enables virtual data centers across multiple locations.

The report evaluates 43 providers across four quadrants, naming several Leaders and Rising Stars in the Brazilian market.

Positive

• Growing demand for data centers to host GenAI servers
• Robust market expansion in providers and new data centers
• Increase in available floor space and international investment
• Integration of software-defined networking (SDN) tools by colocation providers
• Direct connectivity to major cloud providers (AWS, Azure, Google Cloud, OCI) at most colocation sites

Negative

• clean energy from hydroelectric sources for GenAI requirements
• Need for significant additional data center capacity in Brazil

Market Research Analyst

The surge in demand for GenAI testing in Brazil is driving significant changes in the data center landscape. This trend presents both opportunities and challenges for the industry and investors.

Key insights:

• The shift from on-premises to external data centers is accelerating, with managed hosting and colocation facilities seeing rapid growth.
• GenAI's massive energy requirements are prompting colocation providers and hyperscalers to invest in renewable energy sources, particularly solar and wind farms.
• A hybrid approach, combining cloud technologies in managed hosting and colocation facilities with direct links to public cloud providers, is gaining traction.
• The market is experiencing robust expansion, with an increase in providers, new data centers, available floor space and international investment.
• Software-defined networking (SDN) integration is becoming a standard offering among colocation providers, enabling virtual data centers across multiple locations.

For investors, this evolving landscape presents several opportunities. The increasing demand for data center services, particularly those catering to GenAI needs, could drive growth for companies in this sector. However, it's important to consider the substantial capital expenditure required for expanding and upgrading facilities, as well as the potential regulatory challenges around energy consumption and data privacy.

The market's competitive dynamics are also shifting, with several companies emerging as leaders across multiple service categories. This consolidation could lead to increased market power for top performers but may also result in pricing pressures as competition intensifies.

Overall, while the growth trajectory appears strong, investors should carefully evaluate companies' ability to meet the evolving technological demands, manage energy costs and navigate the competitive landscape.

Tech Expert

The Brazilian data center market's evolution in response to GenAI demands highlights several critical technological trends that investors should monitor closely.

Key technological considerations:

• GenAI infrastructure requirements: The massive computational power needed for GenAI is driving data center expansions and upgrades. This trend favors providers with scalable, high-performance computing capabilities.
• Energy efficiency innovations: With GenAI's substantial energy consumption, data centers implementing cutting-edge cooling technologies and energy management systems may gain a competitive edge.
• Hybrid cloud architectures: The growing preference for hybrid approaches underscores the importance of seamless integration between on-premises, colocation and public cloud environments. Providers offering robust interconnection services and multi-cloud management tools are well-positioned.
• Edge computing advancements: As GenAI applications demand lower latency, the push towards edge computing is accelerating. This shift could benefit companies with distributed data center networks and edge-specific solutions.
• Software-defined networking (SDN): The widespread adoption of SDN in colocation services indicates a move towards more flexible, programmable network infrastructures. This trend could drive demand for SDN-compatible hardware and management software.

From an investment perspective, companies at the forefront of these technological trends may offer significant growth potential. However, it's important to assess the long-term viability of their technological strategies, particularly in areas like energy efficiency and edge computing, which are still evolving rapidly.

The integration of GenAI capabilities into data center offerings could also become a key differentiator. Investors should look for providers that not only offer the infrastructure to support GenAI but also provide tools and services to help enterprises develop and deploy GenAI applications effectively.

Lastly, the cybersecurity implications of hosting GenAI workloads should not be overlooked. Data centers with robust security measures and compliance certifications may command a premium in this increasingly sensitive market.

A steady move away from on-premises data centers has led to rapid growth in managed hosting and colocation facilities, ISG Provider Lens™ report says

SÃO PAULO--(BUSINESS WIRE)-- Enterprises in Brazil looking to incorporate GenAI into their business operations can use external data centers to experiment and develop use cases, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2024 ISG Provider Lens™ Private/Hybrid Cloud — Data Center Services report for Brazil finds a growing demand from Brazilian companies of all sizes for data centers that will host GenAI servers. GenAI is widely available on the cloud with all hyperscalers offering large language models (LLMs) that startups and large enterprises can employ to develop GenAI use cases, the ISG report says.

“GenAI requires a massive amount of energy,” said Anay Nawathe, ISG cloud delivery lead in the Americas. “Because clean energy from hydroelectric sources is limited, colocation providers and hyperscalers are planning to build or expand solar and wind farms in Brazil to ensure the future supply for GenAI.”

Although Brazilian enterprises have been steadily reducing their on-premises data centers, not all their data is ending up in the public cloud, the ISG report says. Companies can opt for cloud technologies in managed hosting and colocation facilities that offer direct link connections to public cloud providers, the report says. According to ISG, adopting a hybrid approach enables enterprises to distribute applications across several locations and exchange data over private links without exposing any data on the public internet.

In response to this data migration, there has been robust market expansion in the number of providers and new data centers, a rise in available floor space and an increase in international investment in data center infrastructure, the ISG report says. The need for additional data centers in Brazil is considerable, driven not only by GenAI requirements, but also by organic growth, driven by increasing demand from content providers and hosting providers, the report says.

All colocation sites are connected to the Brazilian internet traffic exchange network and most sites have direct connectivity to AWS, Azure, Google Cloud and Oracle Cloud Infrastructure (OCI), allowing managed hosting providers and content creators to leverage these highly available and hyperconnected data centers to offer their services, the ISG report says. According to the report, all colocation providers have integrated software-defined networking (SDN) tools into their services.

“Enterprises in Brazil can use SDN to create virtual data centers spanning several locations,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “It is important to compare SDN costs and functionalities to select the most suitable colocation provider.”

The report also examines how low-latency demands required by GenAI are driving Brazilian computing to the edge.

For more insights into the private/hybrid cloud and data center services challenges that enterprises in Brazil face, including reducing public cloud consumption and developing a GenAI roadmap, along ISG’s advice for addressing them, see the ISG Provider Lens™ Focal Points briefing here.

The 2024 ISG Provider Lens™ Private/Hybrid Cloud — Data Center Services report for Brazil evaluates the capabilities of 43 providers across four quadrants: Managed Services for Large Accounts, Managed Services for Midmarket, Managed Hosting and Colocation Services.

The report names Edge UOL, Equinix, SBA Edge and T-Systems as Leaders in three quadrants each, while Kyndryl and TIVIT are named as Leaders in two quadrants each. Accenture, Ascenty, Capgemini, Dedalus, EVEO, inov.TI, ODATA, Scala Data Centers, Skymail, Under and Wipro are named as Leaders in one quadrant each.

In addition, HostDime is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in two quadrants, while Elea Data Centers, Takoda and V8.Tech are named as Rising Stars in one quadrant each.

In the area of customer experience, Green is named the global ISG CX Star Performer for 2024 among Private/Hybrid Cloud – Data Center Services partners. Green earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.

Customized versions of the report are available from DataEnv, Elea Data Centers, EVEO, inov.TI, SBA Edge, Takoda and Under.

The 2024 ISG Provider Lens™ Private/Hybrid Cloud — Data Center Services report for Brazil is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of insights to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Mexico, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including AI and automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724197495/en/

Press Contacts:



Will Thoretz, ISG

+1 203 517 3119

will.thoretz@isg-one.com



Thábata Mondoni, Mondoni Press for ISG

Mobile: +55 11 98671 5652

thabata@mondonipress.com.br

Source: Information Services Group, Inc.

FAQ

How are Brazilian enterprises adapting to GenAI requirements in data centers?

Brazilian enterprises are using external data centers to experiment with and develop GenAI use cases. Colocation providers and hyperscalers are planning to build or expand solar and wind farms to ensure future energy supply for GenAI, which requires massive amounts of energy.

What factors are driving data center growth in Brazil according to the ISG report?

Data center growth in Brazil is driven by GenAI requirements, organic growth, increasing demand from content providers and hosting providers, and the steady reduction of on-premises data centers by enterprises.

How does the hybrid approach benefit enterprises in Brazil's data center landscape?

The hybrid approach allows enterprises to distribute applications across several locations and exchange data over private links without exposing data on the public internet. This enables companies to leverage cloud technologies in managed hosting and colocation facilities with direct connections to public cloud providers.

What connectivity options do colocation sites in Brazil offer according to the ISG report?

Colocation sites in Brazil are connected to the Brazilian internet traffic exchange network, and most sites have direct connectivity to AWS, Azure, Google Cloud, and Oracle Cloud Infrastructure (OCI). This allows managed hosting providers and content creators to leverage highly available and hyperconnected data centers.

Who are some of the Leaders in the Brazilian data center services market according to the ISG Provider Lens report (III)?

The ISG Provider Lens report names several Leaders in the Brazilian data center services market, including Edge UOL, Equinix, SBA Edge, and T-Systems as Leaders in three quadrants each. Kyndryl and TIVIT are named as Leaders in two quadrants each, while companies like Accenture, Ascenty, Capgemini, and others are named as Leaders in one quadrant each.