Data Center Colocation Market Size worth $47.34 Billion by 2023 | CAGR: 10.85% | Global Key Players – AT&T, IBM, China Telecom Corporation, China Unicom, Cyrusone

The global data center colocation market was valued at USD 25.52 billion in 2017, and is expected to reach a value of USD 47.34 billion by 2023, at a CAGR of 10.85% over the forecast period (2018 - 2023). Colocation is a data center facility, where a corporation can rent space for servers and other computing hardware. Colocation facilities provide space, power, cooling, physical security for the server, storage, and networking equipment to interconnect them to a variety of telecommunications and network service providers at low cost. Server workload continues to grow with each passing year, which shows an adverse effect on IT operations.

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It is estimated that there is an increase of 35% data growth rate per year, and this has resulted in many organizations doubling their on-premises storage over a three-year period, leading to over-builds that drive to wasted capital across infrastructure, power, and staffing costs. Colocation acts as an attractive solution, as it allows organizations to solve a problem without substantial upfront costs, which is one of the reasons that is expected to drive the growth of this market. Many developing countries have emphasized on the digitization of existing products and services. Many services, such as bill payments, records of people recipient of government services, are all being digitized, further fueling the need for data center colocation. The acceleration in the overall cloud adoption is expected to double the size of data center colocation. The need for separately owned data centers has been reduced with the onset of cloud, fueling the growth of data center colocation.

Increased Adoption of Cloud and IoT is Driving the Market

Cloud computing is one sector that has been estimated to be a significant driver of the data center colocation industry. Cloud computing has been proliferating over the past few years, owing to lower operational expenses faced by enterprises. Currently, the cloud market consists of large global companies, like Amazon Web Services, Microsoft Cloud, as well as companies in provider segment. Regarding infrastructure, global corporations, and third-party vendors have been identified to support their services with hyper-scale data centers and rent spaces at colocation service providers. Combining colocation with the cloud can help reduce latency, increase security, and create cloud interconnection opportunities. Cloud provider companies require private networks with high levels of bandwidth and resiliency, and support from a robust data center provider.

The major players include –

AT&T INC., IBM CORPORATION, CHINA TELECOM CORPORATION LIMITED, CHINA UNICOM, CYRUSONE, DIGITAL REALTY, SOFTBANK, EQUINIX, FUJITSU, AND NTT COMMUNICATIONS, amongst others.

Key Developments in the Market
• October 2017 - Digital Realty and Mitsubishi Corporation announced a joint venture In Japan. This joint venture will benefit Mitsubishi by establishing a new data center in Tokyo
• October 2017 - China Unicom and Alibaba Group announced business cooperation to mutual open-up of cloud computing resources. This relationship involves three main businesses public cloud, dedicated cloud, and hybrid cloud
• June 2017 - AT&T acquired Vyatta network operating system and associated assets of Brocade Communications Systems. This platform includes the vRouter product line. Brocade employees associated with that business were also hired. Financial terms were not disclosed.
• May 2017 - IBM acquired Timetoact Group’s XCC to launch IBM Connections Engagement Center, a single destination for internal communications, collaboration, and employee engagement.

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Healthcare is the Fastest Growing Sector

Many healthcare departments are facing pressure, to reduce the cost structure of a company, and deliver full regulatory compliance and efficient solutions, with constraints about the increasing amount of data being generated. Data center collocation provides the best alternative, to enable cost saving means for any firm. Digitization of consumer health records, in the form of electronic medical records (EMR), contributes to data increment. Latest innovations in the medical equipment, modernization of legacy operating systems, such as management of personnel, improvement in the patient response systems, etc., generate a multitude of data, further necessitating the need for data center colocation.

Asia-Pacific to Grow at a Faster Pace

Asia-Pacific is a hub for major IT outsourcing destinations for the major market players, across the industry verticals. Power, space, and IP transit cost more in China, emphasizing the difficulties in maintaining a data center. China has 50 internet users per 100 people, indicating the scope for immense development and the connectivity ecosystem is made up of 73 colocation data centers and 52 cloud service providers. Japan has 93 internet users per 100 people, showing high internet literacy in Japan. Japan has a high density of colocation, owing to such generation of data. Digital Realty has launched its first data center in Japan, named u2018Digital Osaka 1’, indicating increasing investment in the region. Singapore is considered one of the largest shipping ports in the world, ensuring connectivity. With its stable government committed to driving prosperity through economic development and innovation, Singapore continues to attract major investments from the technology industry.

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