Data Centre Leadership Crisis?
It's time to look at analogous sectors to bring in business expertise Apr 24, 2024“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.”
— George Westerman, MIT Sloan Initiative on the Digital Economy
It was probably always going to happen this way.
AI appeared as if by magic. Despite it having been in the wings for decades, no one paid proper attention until it was a little too late and a little too powerful – in more ways than one.
I’m not talking about the ‘threat’ of AI, the idea that it is going to overtake humanity in some Matrix-like dystopian future.
I’m talking about the thing not many people think about at all.
Namely, the data centres and systems that AI and, indeed, a vast amount of our technology needs to exist. What we call Digital Infrastructure (DI).
And I’d go a step further to say that, in particular, I’m talking about the people we need to economically and environmentally ensure this market matures and develops into the butterfly we know it can become.
The scale of the world’s DI is already … well, huge.
The DI landscape has always been rapidly evolving. From mobile to cloud and now scalable AI, the global market size projected to grow from USD 120.14 billion in 2022 to USD 655 billion by 2030.
But leaders now face the challenge of not only keeping up with the current trends but also anticipating the future direction of the industry in a way that is less clear, especially from an investment POV.
This is now business critical as across most of DI as demand for leadership talent is outstripping supply.
As a result, we have some problems on our hands
I’m saying this now for a few reasons.
First, having been in DI leadership search for 18 years and worked with leaders across executive levels for my whole career, it feels like DI leaders right now are young adults. What we need is experience to support growth into full market maturity.
Second, the problems are manifest around the impact of the green transition. Even the big players are struggling to bring on green solutions at the speed that’s needed and this is going to cause *significant* problems down the line.
Third, the market mapping has not yet been fully understood and is scaling (dare say this!) too quickly. Speed in all things does not make for good strategic planning – the mop up from making a quick buck is often messy.
So, what are the key issues we need to deal with as a priority?
1. Data Centre leaders are being ‘over promoted’
As Data Centre Operators (DC)s) mature, they need a different type of leadership to the ones who have successfully landed them to this point. While we have navigated the exponential growth in the market, mostly driven by AI, it is widely accepted now that there has been a level of ‘over promotion’.
By this I mean people who have not spent ‘time served’ in leadership roles that we see in other major, more mature mission-critical industries, such as life sciences, pharmaceutical, mining and metals or energy and infrastructure.
And we could write an entirely new feature on the level of remuneration that is being deployed to attract these individuals – but let’s for now just say, it’s unsustainable.
2. Current Data Centre leadership is based in ‘technical’ skills
Many of the current DCO leaders developed through engineering or construction, so while extremely technically talented, broader business leadership skills this level of market acceleration requires is missing.
For example, some of the most sought-after roles are Chief Operating Officer, SVP Global Operations, and SVP Regional Operations. The key strategic purpose of these roles is to enable the CEO/regional leader to focus on securing Investment, working with those investors, spend quality time with customers and thinking about the future.
Take it from me – they do not exist in any scalable number.
But lack of leadership quality is not exclusive to this role. Increasingly in development, design and construction, we are being asked to find leaders who are able to stretch beyond the normal parameters.
These new leaders must also be able to collaborate across different functions, to achieve shared strategic goals – usually a difficult task for individuals who developed through a specific technical route or operated in a siloed environment.
Also, increasingly, the use of technology in the Data Centre market itself is leading to a requirement for these businesses to seek a strong Chief Technology or Chief Information Officer.
This is an individual who understands the direction of travel for the industry and can implement technology that increases returns for the DCO.
Also, a number of these DCO’s are a combination of new acquisitions with increasing expansion programmes so implementation of technology that allows standardisation particularly where possible across the supply chain, in collaboration with procurement.
Without this standardisation acquisitions and increasingly regions/countries operate in a standalone manner which is not what the customer base wants to see.
So, what is the answer?
“One of the factors that I believe is the biggest obstacle to transformation is the fear of cannibalisation.”
— Ganesh Ayyar, Mphasis
Investors must think laterally about leadership now
We have looked (and looked) and trust me when I say there are simply not enough qualified people currently operating in the DI market to fill the required positions. This is the case now, but it is also the case for next-gen leaders.
This message is not getting through fast enough to the decision makers – the CEOs, FDs. CHROs, the CxO in general. There is a willingness to consider candidates who come from analogous sectors – from energy and infrastructure, real estate and other vertical sectors – but when we get to the crunch point we are too often hearing, ‘ yes, but we need someone who understands the industry’.
The benefits of looking at more established sectors is that we can attract and retain experienced progressive business leaders who are able to use hard won battle scars from the front line for the benefit of this emerging market.
Having a closed mindset means time is being wasted and the talent market is moving on. We are speaking more and more with investors, rather than the company boards, about who will be best in post to create transitional programmes. This speaks volumes as to the conundrum being faced.
And we are not by any space in the imagination suggesting the invaluable and necessary involvement of leaders already driving huge change at unbelievable speed, it is just clear that some areas are clearly missing – and it is these are gaps we need to fill.
Timing is everything
In conclusion, as the DI asset class continues to grow exponentially, we need to embrace the wealth of leadership talent other mission critical sectors have developed and attract them into the industry that is shaping our future.
And the time is now for these areas and more to be looked at by both existing models but also investors. Remuneration for some of the current roles is eye watering– something the market will not be able to sustain for any significant period of time.
Put this together with the rise in the level of actual power and resource these facilities need, and headlines are already starting to show that data centres and their future leaders will have to come out from behind their protected scenes.
It would be such a waste that, after all this time of talking about digital transformation, the very frameworks which hold it together let down this next exciting stage. And, in more ways than one, the world really does need this sector to change into something spectacular, rather than just becoming a very fast caterpillar.
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