Digital transformation investment levels will reach $6.3 trillion between 2022-2024, according to the global research firm International Data Company (IDC).
According to IDC, the digital transformation shift began before the COVID-19 pandemic saw governments around the world implement their lockdowns. However, these lockdowns escalated the rate of transformation when companies realized they had to transition away from traditional spaces to direct-to-consumer channels.
Transforming to a Digital Economy
“Digital transformation” is a buzzword that simply means a shift to a digitally-driven economy. Private and public sector entities are transforming how they deliver products and customer experiences, and are increasing spending on cloud-based computing, virtual servers, and software instead of infrastructure.Consequently, when retailers closed their doors during the lockdown, companies didn’t have a way to get their products into consumers’ hands.
In a last-ditch effort to save her company, Blueland’s CEO, Sarah Paiji Yoo, convinced O'Leary to star in an advertisement on the benefits of Blueland and the ability for their products to be shipped directly to consumers’ doors.
“She cut 15 different versions of this commercial … and rolled it out 100 million times in 60 days. Guess what? Sales exploded. … She went from zero sales to 50 million direct-to-consumer,” O'Leary recalled.
He added, “[Blueland’s CEO] doesn’t even care about retail anymore. The margins [for direct-to-consumer] are three times higher. Our cash flows are through the roof. She’s not the only one who did that.”
Increasing Need for Data Centers, Energy
O'Leary’s Blueland story is an example of what’s happening across the broader economy.However, while data centers are lucrative once built, they require a substantial upfront investment.
Inconsistent Policies
Because of the above, and because data centers store sensitive information, they often have to comply with not only environmental management standards, but also privacy laws, health information laws, security standards, and energy-efficient design requirements. According to O'Leary, that’s when partisanship and lack of leadership become a problem.Instead, individual states dictate policy and can choose to adopt friendly or hostile governance. In general, O'Leary said that Republican-controlled states are attracting interest from data center companies, while Democrat-controlled states are repelling the potential investment. Further, states with inconsistent leadership direction are off-putting for companies as there’s a potential for hostile policy with leadership swings.
“Funds flow to the path of the least resistance,” O’Leary said. “The dollar bill doesn’t vote. It only looks to where it can get a good return with the least risk. It’s not political. It’s really smart. And it knows where to go.”
Pointedly, because data centers are a growing need and contribute a fair amount to a state’s gross domestic product (GDP), O'Leary believes states with data centers will experience stable economies, and states without data centers will miss out.
“Data is the new oil. Any state that has policy that promotes data centers will be okay economically. We need stable policy!”