Study: Data centers generate 250 billion euros in additional added value

Contents

The economic importance of data centers is often not adequately recognized by the public. Scientists from the Cologne Institute for Economic Research (IW) have come to this conclusion. On behalf of the Alliance for Strengthening Digital Infrastructures, which is part of the eco Association, they therefore conducted a survey to explore the role of data centers as the "backbone" of the "revolution" associated with artificial intelligence (AI). The team was particularly interested in innovation potential and transfer effects to other sectors.

According to the initial results of the study, data center use, including indirect "spillover effects" to third parties, results in additional gross value added of around 250 billion euros for the German economy. This is reflected above all in the impact on employment in Germany: in 2024, a total of around 5.9 million employees will be working in companies whose business model would not be possible without the cloud, which is supported by data centers. Two years ago, this figure was just over 2.8 million. This corresponds to a monthly increase of 126,000 employees.

In general, the role of a "powerful ecosystem of digital infrastructures" can hardly be overestimated, the researchers emphasized. Such an ecosystem is "not only a technical necessity, but also an essential factor for economic growth and international competitiveness". An increase in investment in data centers and other digital hardware to the level of the USA could generate around 410 billion euros in additional added value in this country.

Data centers in Germany are important for local companies

For the study, IW Cologne surveyed 499 randomly selected companies in Germany in August and extrapolated the results to be representative of the German economy. According to the results, Germany and Europe have some catching up to do when it comes to expanding infrastructure. As a result, many local companies use computing capacities in the USA, which is a cause for concern due to the "strategic importance of data sovereignty". 45 percent of respondents said it was important that data centers were located in Germany. Locating data centers in Germany would also counteract data protection concerns. Just under half of the companies cited this as a reason why they avoid the cloud.

Furthermore, geopolitical challenges ("deglobalization") must be taken into account, the experts point out. These make it more difficult to rely on international capacities. Microsoft, Google and AWS (Amazon) have therefore recently announced investments in Germany totaling over 14 billion euros, a large proportion of which is to flow into data centers.

Without an efficient ecosystem of digital infrastructure, new technologies cannot be used, the researchers explain. AI in particular has the potential to increase productivity growth by around 1.3 percent per year at its peak. This would increase gross value added in Germany by 330 billion euros. 34 percent of companies that use data centers also use AI. On the other hand, this only applies to 10 percent of companies that do not use data centers. The modeled potential is already being leveraged in the economy today: 82% of companies have registered "productivity-enhancing effects through AI". While SMEs are at the beginning of the curve here, corporations are already further ahead.

A good half of the economy is building on data centers

Companies and administrations are using generative AI to increase efficiency, the report continues. The working time saved can be used to create value elsewhere, for example for innovations. The development of new business models based on large amounts of data is at the heart of this.

The IW Cologne reports that 51% of companies currently use data centers. Compared to two years ago, this is an increase of a good 25 percent. 69% of all large corporations with over 250 employees rely on the cloud and 22% of them operate their own hardware in a third-party data center. The figures for small and medium-sized enterprises (SMEs) are 47% and 10% respectively.

Companies most frequently use the cloud for virtual storage (78%), office software (68%), databases (65%) and video conferencing (60%). Computer clouds are also important for security software (48%), virtual computing power (32%), process automation (26%) and AI (18%).

Data centers compensate for spatial disadvantages in rural areas

According to the analysis, the greater innovative power of AI also has an impact on the competitiveness of companies located in rural areas. On average, they have a lower level of digital maturity and use the cloud and AI less frequently. While 24 percent of companies in cities used generative AI, only 17 percent in rural areas did so. However, when the latter used the services of data centers, they used AI just as frequently as their counterparts in urban areas, at 35%. The "rural digital avant-garde" can thus use data centers to compensate for their distance disadvantages to the cities.

Over 40 percent of data center users also see their cloud commitment as increasing their company's resilience to "external shocks". A high level of resilience is an expression of a combination of higher scalability, greater cost and energy efficiency, a pronounced ability to innovate and more powerful data security.

Based on the results, the researchers are calling for "right of way for data centers": What is needed, they say, is a change of heart among some decision-makers so that the required data center capacity can be built at the necessary speed. This would require "a new land and approval policy".

The study does not include any estimates on energy requirements or climate impact. AI is considered a key driver of big tech's hunger for electricity. Another study commissioned by eco and Arthur D. Little shows that digitalization levers in the areas of industry, cities and rural areas in Germany could enable CO₂ savings of 163 megatons by 2050. That would be a reduction of 30 percent.

(nie)