Global Colocation is a $25 Billion Industry…and Counting

How much is a colocation data center worth? The value is diverse and contingent upon a number of factors including quality of servers and other hardware, security, location and sheer size—but in total the worldwide data center colocation industry is worth a whopping $25 billion according to 451 Research. Researchers report that of those many billions, over half come from the leading 60 service providers. While there are constantly new data centers popping up, at the end of 2014 there were 1,086 data centers in North America, the Asia Pacific, Latin America and Europe. However, not all of these data centers were in one central location—together, they operated 3,685 unique data centers.

According to 451 Research, those 60 leading providers make up six percent of “market players” overall. Within those 60 top players, the leading 20 bring in 28 percent of total revenue. However, this doesn’t mean smaller players should be dismissed—after all, the top 60 “only” make up six percent in a quickly growing market and industry. Overall, the colocation industry has been focused on consolidation, but there are 1,000+ smaller companies who focus on a regional area and they bring in about half of all revenue.

Does Size Matter?

One of the research directors, Greg Zwakman, says, “At its heart, the multi-tenant data center business is a regional business. So despite active consolidation and some concentration at the top, much of the market remains highly fragmented, with a mix of national and local players.” When it comes to consolidation, acquisitions and partnerships are happening at lightning speed. However, some of the biggest and most well-known moves include Colt picking up KVH in November 2014, as well as Shaw Communications doling out $1.2 billion for ViaWest last summer.

There are also a number of smaller scale deals happening. Zayo bought CoreXchange last year, Cologix bought Colo5, and DataBank scooped up Arsalon. However, it’s important to note that “multi-tenant data centers” being built in the past ten years mostly happens in major markets where there are many potential clients. At the same time, another 451 researcher, Kelly Morgan, says there’s a shift towards data centers that are outside of major metros.

Small Town Charm

As the owner or manager of a website, it’s important to understand the structure of your web host—including where their data center is located. It’s a wise move for a hosting company to house their hardware in a data center for added security. In Utah, the environment is ideal for datacenters because there are few natural disasters and great connectivity in many regions. According to Morgan, moving outside of major cities is happening “for several reasons, such as to reduce latency, to target medium-sized local businesses, or because operating costs are lower. We expect to see strong growth in several of these secondary markets over the next few years.”

There is also a trend towards having more square feet in data centers overall, combined with more power usage, says 451 Research. Already in 2015, the researchers have pinpointed 134 brand new datacenter builds and 176 major expansions. The bulk of this growth is happening in North America (60 percent), but all worldwide markets are slated for growth.

Why Stay Local?

Why does it matter where “your” data center is located? It doesn’t—until a problem pops up. For example, if a data center is located in a hurricane zone, Tornado Alley or a crime-riddled area, website owners won’t feel the hit until it’s too late. Data centers also face threats from hackers. Ideally, data centers have 24/7 human security as well as a secure center that staff members can easily get to if necessary. A very remote and rural location might be relatively safe from break-ins and perhaps natural disasters, but that’s pretty pointless if staff members largely maintain the center from a distance.

Utah colocation services allow Utah residents to support local, but also offer prime services and support to clients all over the world. Where you do business matters, but “supporting local” takes on a much more important meaning with colocation services. There may be mass growth and expansion in North America, but that’s a big landscape. Hone in on the best geo-targeted centers for you and your business in order to really optimize service and security.

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