The Rise of Private Data Center Services: A Strategic Shift in IT Infrastructure

By Anutosh Yadav, SVP Technology at Material

Growing at a CAGR of 5.03%, the global data center market is estimated to reach $290 billion by 2028. Accompanying that growth is increasing demand for private data centers. Hosted on a company’s own infrastructure, typically as part of a hybrid IT strategy, private data centers offer greater data privacy and security, as well as a more customizable architecture, than third-party public cloud services.

Those aren’t the only attributes, however, that have led to private data center services such as SUSE and VMware gaining traction. Below, we’ll explore some of the reasons why more enterprises are implementing them, as well as how this trend will affect the industry going forward.

Reasons Behind the Shift to Private Data Centers

1. Data De-Globalization. As global companies increasingly rely on cloud services and AI platforms, concerns about data sovereignty and misuse are rising. Some enterprises fear tech giants – which host their sensitive data – could leverage that data to create competitive advantages for themselves. This has fueled a trend toward data de-globalization, with organizations seeking localized, sovereign solutions to retain control.

2. Data Privacy and Compliance Requirements. Stringent global data privacy regulations such as GDPR and CCPA have organizations prioritizing privacy and security like never before. Private data centers enable companies to monitor data access directly and ensure that sensitive information remains on premises or in tightly controlled environments. By managing their data environments directly, organizations reduce the risk of data breaches and compliance issues sometimes associated with third-party public cloud services.

3. Performance and Latency Control. Industries such as finance, healthcare and gaming sometimes find it difficult to meet their performance and latency requirements with public cloud services. Because private data centers can be geographically closer to end users or company headquarters than public clouds often are, they minimize latency and improve application performance. For enterprises running mission-critical applications, the guaranteed performance and reliability provided by private data centers are crucial.

4. Cost Predictability and Optimization. While public cloud services provide flexibility, they can also result in unpredictable costs due to data transfer fees, storage scaling and computing usage spikes. Private data centers, on the other hand, offer more predictable operational costs, with a clearer up-front capital expenditure model and lower long-term operational expenses for consistent workloads. This cost stability appeals to companies with steady or high-resource demand, where managing infrastructure internally can lead to long-term savings.

5. Customizable Infrastructure and Greater Control. A significant advantage of private data centers is their customizable infrastructure, which enables companies to design, configure and optimize resources based on specific operational requirements. Organizations can employ specialized hardware, configure network settings and enforce security protocols tailored to their needs. Tools like SUSE OpenStack Cloud and VMware’s virtualization solutions provide flexible, open-source and virtualized environments, enhancing control over applications and allowing businesses to adapt their infrastructure to meet evolving demands.

6. Centralized Control Planes. As private and hybrid data centers grow in complexity, having a centralized control plane becomes critical. This control plane acts as a unified management layer, providing visibility and governance across diverse environments, including private data centers and public clouds. Control plane solutions, such as those offered by VMware, allow enterprises to monitor workloads, manage resources and administer security policies from a single interface, ensuring consistency in policy enforcement and governance. This centralized management capability is especially valuable in hybrid models, where seamless operations across private and public infrastructure are essential for efficient workload management and security.

7. Hybrid IT Strategies and the Role of Edge Computing. As more companies adopt hybrid IT models, private data centers serve as an anchor, allowing organizations to effectively manage workloads across private and public environments. Hybrid architectures let businesses keep sensitive data on premises or within controlled data centers while taking advantage of the public cloud for scalable, less-sensitive workloads. The rise of edge computing – where processing is done closer to data sources to reduce latency – has further underscored the need for private, distributed data center networks to support real-time applications and services.

Impacts of the Shift

The rise of private data center services comes as companies reevaluate their infrastructure strategies, moving from a public-cloud-first to a hybrid or multi-cloud approach. As a result, cloud providers are now investing in hybrid solutions to meet evolving customer demands. For example, VMware’s offerings integrate with leading cloud providers to create a unified management experience across environments, while SUSE’s container solutions facilitate agile, scalable deployment across private and public infrastructures.

Industries such as government and healthcare that rely on data sovereignty see enhanced control as a competitive advantage, giving them confidence to innovate without compromising compliance. The increase in private data centers also affects job roles in IT, shifting demand from cloud engineers to hybrid specialists who understand both cloud and on-premises management. Similarly, the emphasis on private data centers contributes to a growing need for cybersecurity expertise, as organizations require specialized skills to safeguard sensitive information stored within these facilities.

The sustainability aspect of private data centers is also noteworthy. Private data centers can take advantage of localized cooling solutions, energy-efficient hardware and renewable energy sources to reduce their power usage. Some large companies even build private data centers near renewable energy resources to offset their carbon footprint – a trend that aligns with corporate sustainability goals and environmental regulations.

An Evolved Approach to IT Infrastructure

Private data centers are not just a counter-trend to the public cloud; they represent an evolved approach to IT infrastructure that balances control, compliance and customization. With centralized control planes, organizations can achieve unified management across complex, hybrid environments, streamlining operations while ensuring policy enforcement. As hybrid and edge computing models become mainstream, private data centers will continue to be a vital part of the IT ecosystem, allowing organizations to optimize their resources, control costs and meet regulatory demands. For enterprises striving to secure sensitive data and streamline operations, investing in private data center services such as SUSE and VMware can provide the agility, security and reliability required in today’s fast-evolving digital landscape.

Interested in exploring whether private data center services are a fit for your organization’s IT needs and business goals? Reach out today for an expert consultation.