Data Center Colocation: an Efficient Solution for SMEs
Small and medium-sized organizations prefer colocation because it offers more dependability, availability, and efficiency at a low cost. Colocation data centers have the most up-to-date techniques, and the pace of innovation would not slow down. Many businesses will benefit from data center colocation as it offers a redundant power supply, improved network security, and better connectivity while enabling the firms to focus on their core business segments.
Edge computing and other cutting-edge data center technologies will benefit enormously from data center colocation. Edge computing can be deployed easily with the help of colocation facilities. It is an ideal combination for edge architectural installations as there is more colocation infrastructure than public cloud data centers.
The global data center colocation market is expected to grow at a CAGR of approximately 14.3% during the forecasted period.
The market will expand due to a spike in the volume of SMEs adopting sophisticated technologies to stay competitive. Advanced technologies create a large volume of data, which necessitates a large data center infrastructure. As organizations expand, so do their IT specifications, emphasizing the need for better data management solutions. These firms are unable to construct data centers due to the limited funds and space.
The reduced prices of cloud data centers are projected to become more popular, which will slow down the industrial growth of data center colocation. Cloud services are becoming more popular among small businesses as they provide scalability, low prices, reduce the need for IT employees, and have lower overheads.
A Cheaper Alternative than On-site Data Center Infrastructure
The management of a data center infrastructure hosted on-site necessitates the use of qualified IT personnel. On-site hosting also entails a variety of costs for server management and infrastructure upkeep. Further, establishing a new data center facility requires an initial cost and raises the enterprise's overall capital expenditure. As a result, businesses pay more attention to the capital expenditure on establishing mission-critical data center facilities and searching for methods to cut costs and enhance ROI.
Based on the company’s size and demand, businesses are turning towards data center colocation suppliers for continuous power supply, storage, connectivity, and value-added services (VAS), such as interconnection services, internet solutions, and professionally managed IT services.
Disaster Management Expedites Data Center Colocation Services
Data center users are concerned about disaster recovery. Earthquakes, security breaches, fire losses, and other unforeseen incidences drastically impact IT infrastructure facilities. Businesses must have adequate disaster management procedures to avoid subsequent losses.
Data center colocation facilities are less vulnerable to catastrophes as they are located distantly from the users' premises. Remote management of these facilities improves their emergency response capability. As a result, colocation services are liable to become a prominent backup and recovery option, as these services allow businesses to store sensitive data in a safe environment. Colocation services promote business continuity due to a secure platform. As a result, these facilities are expected to experience growing demand.
Impact of COVID-19
The COVID-19 pandemic has a positive impact on the expansion of the data center colocation industry as these technologies assist businesses in meeting the high-capacity demand of web traffic. According to the internet and data service providers, worldwide internet traffic is growing at a rate of 35–45% each year. There is a need to ensure that data center colocation network operators have the capacity and ability to offer high-performance services during elevated traffic demand. As a result, service providers are investing heavily in data center colocation in a variety of scenarios.
Further, the COVID-19 pandemic provides an opportunity to the data center colocation market, owing to the growth of the over-the-top (OTT) market. Data center colocation services assist organizations worldwide in achieving their business objectives while working from home and delivering superior data protection to their sensitive data.
Retail Colocation Prevalence over the Market
Based on type, the data center colocation market is divided into retail and wholesale colocation. The retail colocation segment dominated the market in 2020 by contributing over 70% of the total revenue. Retail colocation allows businesses to lease a portion of their data center. It gives businesses more flexibility while handling tiny amounts of data or when infrastructures are required for a short time. It is primarily advantageous for small businesses, as their data storage requirements are lower than the big corporations. Further, the retail model is ideal for businesses that aspire to benefit from colocation services but have a restricted budget.
To improve consumer experience and expedite shop operations, retailers use sophisticated technologies such as point-of-sale (POS) and electronic shelf labeling. Customers' preference is shifting toward excellent omnichannel shopping, powered by personalization, convenience, and transparency. Big retail groups are benefitting from these technologies by identifying trends and improving sales.
For instance, ALDO Group, a Canadian retailer, utilizes big data analytics to identify potential customers and forecast upcoming trends to boost sales. Due to these reasons, the retail sector's increasing usage of digital technology will add to the growing volume of data, driving the implementation of effective data analytics. As retailers use data analytics to connect with mobile customers and maximize e-commerce purchasing, data centers are needed to accommodate the rising retail application.
Large Enterprises Hold Massive Market Shares
Large enterprises led the market with a share of over 60% in 2020. High product demand amongst large businesses to handle and retain data efficiently accounts for these shares. Large businesses create a massive amount of data, necessitating high-capacity storage systems. Vast companies rent huge floor space close to their consumers while scaling up their infrastructure dependent upon the requirements from that region, with the help of data center colocation.
Further, colocation services enable large companies to control their data center infrastructure. It reduces the reliability of large enterprises on the third party for uninterrupted network activities. Large enterprises are, therefore, leaning towards data center colocation services.
North American Dominance over Data Center Colocation Market
Given the concentration of large cloud providers and SMEs creating data center colocation across North America, the region is expected to mark a high growth rate.
The expansion of the North American data center colocation sector is driven by growing data traffic and the demand for efficient systems, prompting firms to invest in mega IT facilities. The IT infrastructure framework is transformed into highly automated facilities due to new project construction and facility modernization. As a result, the size and quantity of electrical equipment have grown, along with the overall costs. Companies rely on colocation service providers to save money, thereby fueling the market growth in this region.
North America's horde of colocation data centers and cloud service providers will propel industry expansion. Businesses are concentrating on enhancing their hybrid multi-cloud strategy to service consumers.
Key players in the global data center colocation market are AT&T, Digital Realty Trust Inc, China Telecom Corporation Limited, NTT Communications Corporation, Equinix Inc, Verizon Enterprise Solutions, CyrusOne Inc, and Global Switch, among others. The market is fragmented and competitive. Inorganic growth techniques, such as collaborations, acquisitions and mergers, and cooperation, are used by major corporations to increase their market share.
Center Colocation Market Segmentation
By Organization Size
Frequently Asked Questions (FAQs)