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July 19, 2022
The data center colocation industry is witnessing increasing competition from existing and emerging industry players.
Sustained demand for colocation has driven data center service providers to expand hyperscale facilities in strategic locations. In addition, several carrier-neutral service providers have entered new markets as they recognize widespread geographic presence as a critical success factor for growth.
Further, private equity (PE) firms are increasingly recognizing data centers as an attractive asset class. And they’re willing to invest in large-scale facilities, further increasing the competition in several markets.
This is our first annual “CF List” focused on top colocation data center providers. Analysts share their views on what it takes to succeed with the technology. It includes a new list and fresh views on changes in the competitive landscape.
Typically, a colocation facility provides the building, cooling, power, bandwidth and physical security, while the customer provides servers and storage.
Alan Howard is principal analyst of cloud and colocation service in Omdia’s cloud and data center research practice.
Omdia’s Alan Howard
“Colocation is a mature business so there isn’t commonly something earth-shattering that pops up every 12 months.,” he said. “That said, automation and ease of service provisioning is an area that has been evolving. Typically it’s about automating customer interactions and ordering. Self-provisioning of interconnection is a good example. Monitoring customer infrastructure is another. Another area that has and will continue to evolve is data center operation efficiency to lower costs for both operators and their customers, which of course relates directly to sustainability activities. Customer requirements for sustainability, transparency/accountability and in particular the use of renewable energy offsets are growing at a fast pace. Many colocation customers, particularly hyperscalers, have sustainability requirements that must be met for a deal to be made.”
M&A has been quite heavy for a number of years now, Howard said. However, the most dramatic shift has been in private equity infrastructure funds acquiring public colocation companies and taking them private. There are a lot of implications behind that and how data center expansions might impact supply and demand dynamics in various markets.
Dan Thompson is principal research analyst at S&P Global Market Intelligence.
S&P Global Market Intelligence’s Dan Thompson
“On the whole, we have seen that the pandemic actually had a positive impact on the data center and managed hosting/services industry,” he said. “When all the workers got sent home, companies had to scramble to figure out how to support them and how to keep business moving forward. Colocation and other managed services were a way forward. At the same time, services offered by the hyperscalers (Amazon, Microsoft, Google, etc.) were also being heavily leveraged, which forced those companies to grow their infrastructure. This, too, had a positive impact on the wholesale end of the data center industry in that companies that had space in the large markets saw a lot of initial demand.”
Now that people are slowly heading back to the offices, companies aren’t abandoning any of those platforms, Thompson said.
“We’ve not seen any slowdowns or pullbacks,” he said. “Companies seem to be charging ahead now with some lessons learned from the last two years.”
Nishchal Khorana is vice president and global program leader at Frost & Sullivan.
Frost & Sullivan’s Nishchal Khorana
“Data centers form the backbone of today’s digital economy,” he said. “And the services industry continues to evolve rapidly with several trends impacting data center locations, design, technologies adopted and value proposition.”
Some of these trends include:
The enhanced focus of colocation service providers on scale as they build digital infrastructure to address the hyperscale demand from segments including public cloud service providers, OTT, and content and gaming companies.
Designing data centers with high-density colocation capabilities to optimize real estate and address the requirements of workloads such as big data and artificial intelligence (AI).
Sustainability becoming a core element of the data center strategy and value proposition impacting the data center design as well as operations.
Service providers are leveraging AI to gain energy efficiencies, enhance security and thereby create competitive differentiation.
Accelerated focus on edge data centers, as use cases demanding better customer experience and lower latency is on the rise.
The pandemic accelerated enterprises’ digital transformation initiatives, Khorana said. They leveraged technology to support new business models to deliver better customer experiences and enable a geographically distributed workforce.
“This led to more significant data processing and storage requirements, driving a greater need for best-in-class data center colocation services,” he said. “Besides the enterprise demand, leading data center service providers also witnessed an increasing demand from public cloud providers, a key market segment for colocation services. However, the pandemic also put forth significant challenges on the service providers with respect to a slowdown in new infrastructure builds and supply chain challenges faced with respect to capacity expansion.”
We’ve compiled a list (in the slideshow above), in no particular order, of 20 top data center colocation providers. It’s based on feedback from analysts and recent news reports. The providers are making the most of the ongoing competitive landscape and charting success.
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