Data Center Colocation and Managed Hosting Services Market - In-depth Evaluation of the Drivers of the Market

As businesses are expanding their operations globally, the need for data storage solution is increasing at an extraordinary rate. The expenditure for setting up and maintaining a data center with perfect security, environmental and performance conditions is significantly high for any given small or medium sized organization. In addition, the energy consumption of data center is high and depends upon their size. Thus, companies also want to decrease their energy consumption in order to reduce their carbon footprint. Due to limited IT budget and increasing requirement of high operating bandwidth, companies are showing interest in outsourcing their in-house data center to third party service providers.

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With colocation of data center managed by hosting service provider, companies are able to focus on streamlining their business operation and revenue generation. A hosting service provider offers computing servers, storage space and power for companies apart from providing advanced networking facilities. A colocation facility managed by service provider and owned by a company can be termed as managed hosting service facility. These help to reduce spending on IT infrastructure and have ownership control over data. Companies also colocate their equipment with colocation service provider to avail the benefit of higher bandwidth in their operation.

Colocation can be classified as wholesale and retail colocation services depending upon leasing of space by the customers. In wholesale colocation service, a company leases a whole colocated data center for operation. Whereas, in retail colocation service, a company only leases a limited part of space or rack within a colocated data center. As cloud-based services are increasingly becoming popular in IT businesses, colocation service providers are partnering with cloud service providers by offering cloud-based solution with data server to the companies.

Some colocation service providers also offer data analytics solution apart from simply providing data center solution. As colocated servers are remotely located, the need for firewall, remote access and system monitoring tools becomes prominent. Thus, most colocation sites provide video surveillance and biometric access for constant monitoring of colocated data centers to the companies.

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The demand for colocation data center is estimated to increase in coming years as companies would need to cut down their operational cost in order sustain in the market. Colocated data center provides better speed, efficiency and reliability which help companies perform faster in critical operations. An off-site data center also helps companies to protect their data and create a backup in case of a disaster in in-house data center. The increasing use of cloud computing is expected to spur the adoption of colocated data center in coming years.

The major challenge faced by colocation service providers is the issue of regulatory compliance with its cloud based end customers. This can be overcome by adopting a standardized compliance system which is expected to emerge in the near future.

The availability of a strategic location for a colocation data center is an important parameter for any company. Most of the colocated data centers are setup in North America followed by European region. However, the issue of higher power consumption and limited space is forcing colocated service provider to shift their data centers to Asia Pacific and Latin America regions. This will help the companies to balance and limit their power consumption in respective operating countries thereby saving on operation costs. Colocated data center finds its application in areas of telecommunication, information technology, government organization, healthcare, energy and banking, insurance and other financial services (BFSI).

Some of the key colocated hosting service providers are AT&T, Inc., Coresite Reality Corporation, Digital Reality, Interxion, CyrusOne LLC, Windstream Communications, C7, Zayo Group LLC, Steadfast, Inc., CenturyLink, Inc., Equinix, Inc., Telecity Group, Internap, NTT America, Inc. and Verizon Communications, Inc.

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