State of the Colocation Data Center Market

Posted by Instor on Feb 27, 2018 9:01:00 AM

There’s no mistaking that 2017 was yet another banner year concerning data center growth as a continuation from 2016 and 2018 is continues with greater momentum for both the U.S. and more so internationally. According to the latest JLL 2018 Data Center Outlook, the trends to watch include edge markets, hybrid model-centric add-on services and outsource data center expertise, foreign investments, M&A and data center complexities.   

 

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Are Colos Growing? You'd Better Believe It.

In the U.S., there are 2,250 data centers, 50 fabrics, 2,031 cloud service providers, and globally, there are 6,212 colo data centers.  Of those colos within the U.S., the top five states include California, Texas, New York, Florida, and Illinois (http://www.datacentermap.com/). Data center providers other four different kinds of services: wholesale colocation, retail colocation, and hosting. 

According to Gartners’ “Top Strategic Predictions for 2018 and Beyond: Pace Yourself, for Sanity’s Sake” reports that global IT spending will approach $3.5 Trillion. As a reaffirmation of this prediction, 451 Research projects that global colo and wholesale market revenue will peak at $48 Billion by 2021and Synergy Research predicts that 59 percent of the worldwide colo market  is focused by the top 26 percent markets belonging to London, New York, Shanghai, Tokyo, and Washington, D.C. where 70 percent of the world’s Internet traffic flows through Northern Virginia.

To add to all of these predictions, many market watchers are forecasting the colo data center industry market to grow to $54.8 Billion by 2020 with a Compound Annual Growth Rate (CAGR) of 15.4 percent for the period of 2016-2020 according to a BCC Research study. The purpose of the study was to determine overall global market and demand during this period. The top 5 percent leaders in the colo market is includes Century Link (Cyxtera), Cyrus One, our partners at Digital Realty, Equinix, and NTT Data.  

What is driving these predictions? Some speculate that increased concerns with reductions in costs, physical security improvements, and cooling efficiencies are the major factors along with data storage advancements and the limited strategic locations being key factors. As a result of colo deployment, enterprises are able to reduce maintenance costs while increasing safety and greater bandwidth availability all of which strengthens business operations through higher standards in management services. In 2018, colo providers must integrate with customers’ cloud environments with higher quality delivery models.

In addition to the more typical influencers and drivers is the need to off-load workloads from on-premise to the cloud. Results from LogicMonitors’ survey show that 83 percent of enterprise workloads will be in the cloud by 2020 – this breaks down to 41 percent running on public cloud platforms such as Amazon AWS, Google Cloud, IBM Cloud, Microsoft Azure, and others to 20 percent in private cloud platforms.

Building on many of these predictions and forecasts is the increase in U.S. Federal Government IT spending. The Government continues to consolidate date centers in an attempt to reduce costs and vulnerabilities with many containing antiquated technologies through the Federal Data Center Consolidation Initiative (FDCCI) and the The Office of Management and Budget is the largest office within the Executive Office of the President of the United States (OMB) Memo M-16-19 “Data Center Optimization Initiative” (DCOI).

The Federal Government has identified four key attributes of scaling and supporting IT infrastructure:

  • Improvements in uptime  
  • Compliance mandates
  • Lower capital and operating expenses
  • Support the growth explosion of sensitive, government data

Security and compliance weighs heavily on many CIO and data center managers’ minds and meeting customer expectations means establishing a reliable partnership while providing exemplary service and robust colo solutions. Compliance typically includes containing data and equipment including disaster recovery and regulatory requirements such as The Federal Information Security Management Act (FISMA), the 2002 The Sarbanes-Oxley Act, Health Insurance Portability and Accountability Act (HIPAA), and DoD 5400.11-R otherwise known as the  Department of Defense Privacy Program (PII). The Government IT initiatives involve evolutionary acquisition process towards future-proofing IT operations with minimal costs and risks.

There is no doubt that 2018 will not disappoint – colo data centers must focus six key objectives:

  • Cost effectiveness
  • Disaster recovery with redundancies
  • Strong customer service
  • Multi-layered physical security
  • Scalability
  • Data protection and monitoring

 

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Topics: Colocation