How Cloud is Changing the Colocation Data Center Market

How Cloud is Changing the Colocation Data Center Market

The global data center market is changing slowly as cloud providers are taking away more customer workloads from colocation providers and using up more data center capacity for hosting such workloads. The outcome has been a slower growth rate for retail colocation accompanied by an increase in wholesale data centers. Reports show a 14% growth rate for retail colocation in 2016-2017 but a 17.9% growth in wholesale colocation during this period.

Changes in the data center market because of the evolution of cloud computing solutions:

There are many factors which are considered to be responsible for this change in the growth rates of wholesale and retail. Probably the most significant one has been the emergence of public clouds like Microsoft and Amazon. Incidentally, Microsoft has leases signed recently to the tune of 125MW of data center power in the US. Likewise, Oracle has also leased greater than 30MW capacity in 7 wholesale colocation centers in the US. The company has also followed this up by starting cloud availability centers in London, Turkey, Northern Virginia. So, almost two-thirds of the biggest data center leases in North America in 2016 had been signed by cloud providers.

These figures however do not suggest that the retail data center market is declining in any way. It is still a growing market which has a positive trajectory. But, the growth is primarily happening on top of this market which is controlled by the biggest providers. The bottom or middle sections witnessed slow growth because cloud vendors chipped away total retail revenues. So, those providers who are not catering to clients at a multi-region level are losing out. They target the smaller businesses and these are businesses which are keen to move their data and applications to a cloud.

The cloud has also brought about another important change in the colocation market. From carrier neutrality that was offered by colocation providers, now the focus has shifted to cloud neutrality. With more businesses moving their workloads into the cloud colocation hosting providers realize they are keen to sign up with multiple cloud vendors. This is why they are trying to give a convenient access to multiple clouds to their clients. This is a part of their business strategy at present. There have been companies like Equinix which have been stating the importance of multi-cloud strategies for quite some time.

Another significant development which is noticeable today is the likelihood of the Asia Pacific region overtaking North America as far as their share in the global colocation market goes. The leading nation in this is of course China followed closely by Thailand and Malaysia, India, Singapore Japan etc. By the turn of this decade, Asia Pacific data center market will overtake the North American market share.

About Akash Sharma (9 Posts)


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