DATA CENTER COLOCATION MARKET ANALYSIS

The global data center colocation market size was valued at USD 54.65 million in 2021 and is anticipated to witness a compound annual growth rate (CAGR) of 15.6% from 2022 to 2030.  The market growth is fueled by the increasing demand for data center colocation facilities, driven by the growth of OTT and streaming platforms, video games, and social media platforms. Cloud service providers and social media companies are aggressively leasing colocation facilities in the U.S.

Global Data Center Colocation Market: Regional Insights

The global data center colocation market is geographically divided into North America, Latin America, Europe, Asia Pacific and Middle East & Africa.

North America among regions is expected to witness highest share in the global data center colocation market during the forecast period, owing to presence of major market players in the countries across the region such as the U.S. and Canada leading to higher adoption of data center colocation solutions in government, retail, healthcare and BFSI sectors. Moreover, the region is witnessing increased adoption of cloud computing and Artificial Intelligence for creating greater amount of data.

Furthermore, Asia Pacific is also projected to witness strong growth in the global data center colocation market over the forecast period. This growth can be attributed to increasing investments in data center colocation in countries such as Indonesia, China, Japan and India across the region, increasing development in IoT and 5G network infrastructure, and growing demand for data colocation in the region resulting from advent of high-end technologies. For instance, in June 2021, Tencent Holdings Co. a Chinese tech company announced the launch of four new data centers in Tokyo, Hong Kong and Frankfurt to step up its expansion across the region.

Figure 1. Global Military Aircraft Market Share (%), by Region, 2021

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Global Data Center Colocation Market Drivers:

Cost affordability of IT operations is expected to augment growth of the global data center colocation market during the forecast period. As the competition in industry vertical is increasing, the restriction on yearly expenditure of companies are growing. Due to limitation on IT budgets, organizations are considering leasing services for needs of their data centers instead of installation of in house data center facilities, as it is a costly option. Thus, cost affordability of data center colocation services are leading to increased demand, which is driving the market growth.

Moreover, growing demand for reliability, scalability and security of data center infrastructure is also projected to fuel growth of the global data center colocation market over the forecast period. The demand for reliable and flexible IT resources has been increasing ever since the advent of big data analytics, the Internet of Things and industrial 4.0 revolution. Moreover, the increasing penetration of cloud computing along with growing digitalization is also driving the market growth.

Global Data Center Colocation Market Opportunities:

The adoption of cloud and virtualization is increasing all over the world, which is expected to offer various growth opportunities to the market players in the global data center colocation market during the forecast period. The use of data center colocation is estimated to increase due to increasing shift towards digitalization and increasing penetration of cloud infrastructures in various industries. The use of cloud-based data center offers data processing and storage tools to companies in any industry. Thus, the growing adoption of cloud services is creating growth opportunities in the market.

Furthermore, increasing investments in advanced data centers throughout the COVID-19 pandemic is also offering several growth opportunities in the market. During the COVID-19 pandemic, the data traffic increased significantly, along with the requirement of storage volumes, due to increasing advent of technologies such as Internet of Things (IoT), Artificial intelligence and big data. And this is expected to drive investments in data centers around the world.

Global Data Center Colocation Market Trends:

Rise in capital expenditure in owning and maintaining large computing facilities is gaining traction in Europe, which is also expected to propel growth of the global data center colocation market during the forecast period. The modular data center services are witnessing increasing market value in the region due to rise in adoption of novel technologies such as cloud-based applications, and AI in companies, and increasing investment in the IT industry across the region.

The adoption of structure and unstructured data and demand for cloud computing are increasing, which is expected to propel growth of the global data center colocation market during the forecast period. For instance, in June 2017, NTT announced the launch of its 10Gbps large-volume network for connecting its Enterprise Cloud for companies collocated at more than 30 data centers across the globe.

Global Data Center Colocation Market Restraints:

High cost of long term leasing and initial manufacturing of data center colocation is likely to obstruct growth of the global data center colocation market during the forecast period. The cost required for erection of data center colocation is considerably high due to which it requires large funding from investors or loans from banks. Colocation services can be cost effective and beneficial for small and medium-size companies requiring short time lease, ranging from 5 to 7 years. However, it becomes costly, when the colocation service leasing is required for longer than that for large companies. Thus, high cost of colocation services is likely to hamper the market growth.

Moreover, issues related to network band width of data center colocations is expected to hinder growth of the global data center colocation market over the forecast period. Colocation services are remote by nature and they require internet or WAN connectivity. Most of the colocation service providers through supporting competing telecom providers, offer customer to engage the services of multiple Telco providers. The colocation services are based completely on internet bandwidth for connectivity in data centers and users. Moreover, high expenditure linked to use of high bandwidth data services leads to lack of interest of SMEs in colocation services, and this is limiting the market growth.                        

Figure 2. Global Military Aircraft Market Share (%), By Location of Deployment, 2021

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Global Data Center Colocation Market Segmentation:

The global data center colocation market report is segmented into Type, Enterprise Size, Industry Vertical, and Regions.

Based on Type, the market is segmented into Retail Colocation and Wholesale Colocation. Out of which, Retail Colocation segment is expected to dominate the global market over the forecast period and this is attributed to the various benefits of colocation services for small-scale companies. With retail colocation companies can rent a space in a data centers, which offers flexibility to small-scale organization. Moreover, it also offers benefits to companies with limited budget yet plant to leverage benefits of the colocation services.

Wholesale Colocation segment is also expected to witness significant growth in the near future and this is owing to the increasing inclination of hyperscalers and cloud service providers towards wholesale colocation. Large-scale organizations need to create significant data volumes and commercial space to accumulate servers due to wider customer base, which increases the demand for wholesale colocation.

Based on Enterprise Size, the market is segmented into Small and medium size enterprise and Large scale enterprise. Out of which, Large scale enterprise segment is expected to dominate the global market over the forecast period and this is owing to high demand for managing and maintaining efficiency of data. Large-scale organizations generate greater data volumes that need high storage capacity infrastructure. With data center colocation, large-scale enterprises can lease bigger floor space and also scale up infrastructure depending on the requirement from the specific region.

Small and medium size enterprise segment is also expected to witness significant growth in the near future and this is attributed to the growing number of SMEs as well as startups in emerging economies such as China and India. Due to financial limitations, there is lot of cost reduction in SMEs, which driver the growth of this segment.

Based on Industry vertical, the market is segmented into BFSI, IT and Telecommunication, Manufacturing, Energy & utilities, Retail & E-commerce, Healthcare, Media & Entertainment, Government & Defense, and Others. Out of which, IT and Telecommunication segment is expected to expected to dominate the global market over the forecast period and this is due to rising use of mobile internet and development of new software and applications in the industry. As per the GSM Association, nearly 3.8 people around the world were using mobile internet in 2019, which was a 250 million increase in users from the previous year. Government and public sector is also witness significant growth in the near future.

Global Data Center Colocation Market: Key Developments

In May 2021, China Telecom in partnership with Zijin Cloud Data Center, announced the opening of Tianyi Cloud Big Data Center, a new data center in the northwestern Chinese province of Gansu, in Jinchang city. The data center is likely to support the development goals of Jinchang and make it a smart city and a digital hub.

In May 2021, CoreSite Realty Corporation in collaboration with IDG Communications, introduced the 2021 State of the Data-Center report for providing the high performance interconnection solutions and cloud access in the U.S.

Global Data Center Colocation Market: Key Companies Insights

The global data center colocation market is highly competitive. This is attributed to continuous launch of new technologies due to ongoing R &D and efforts by value chain participants. Moreover, key players are adopting various business growth strategies in order to expand their presence on regional as well as global basis.

Some of the key players in the global data center colocation market are CHINA TELECOM CORPORATION LIMITED, CoreSite Realty Corporation, CYRUSONE INC, CYXTERA TECHNOLOGIES, INC., DIGITAL REALTY TRUST, INC., EQUINIX, INC., Global Switch, KDDI CORPORATION, NTT Communications Corporation, and Verizon Enterprise Solutions, Inc. (US)

*Definition:

Data center colocation is a cost-effective way to host enterprise information. Businesses can easily expand their IT infrastructure and benefit from the large bandwidth of a data center. Colocation facilities have expert technicians and engineers on staff to help businesses with all their needs. These experts will be able to troubleshoot and support major pieces of equipment in the data center, saving businesses money.