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2020 Colocation Trends Wrap-Up—And Where We’re Going in 2021

By: Blair Felter on December 9, 2020

Data centers and information technology (IT) have become an inseparable part of modern business practices. From running mission-critical business applications, to communicating with customers, inventory management, accounting, human resource (HR) management, and more, IT infrastructure is a necessity for companies that wish to compete effectively.

Likewise, cloud and colocation data centers have become an important tool for businesses that need to grow their IT capabilities quickly, but don’t have the spare resources or expertise needed to manage everything internally. In this article, we’ll take a look at some colocation data center trends from 2020, wrap them up, and make some future data center trend projections for 2021:

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2020 Colocation Trends & Stats Wrap-Up

1: Colocation Services to Achieve a 14.8% CAGR between 2020 and 2030

According to a press release from Globe Newswire, the growing demand for data (of which 2.5 quintillion bytes are produced daily) “is expected to drive the global data center colocation market at a 14.8% CAGR between 2020 and 2030.”

This is from a starting point of a $42.1 billion market size at the end of 2019. So, with a compound annual growth rate (CAGR) of 14.8%, the expected overall market size for colocation data centers would be somewhere around $192.15 billion (assuming the growth rate remains steady) in 2030. Here’s a table showing how the growth would progress at a steady 14.8% rate:

CAGR Growth Table (Values Rounded to the Nearest Hundredth)

Year

Starting Market Size
(in Billions)

14.8% CAGR
(in Billions)

Ending Market Size
(in Billions)

2020

$42.1

$6.23

$48.33

2021

$48.33

$7.15

$55.49

2022

$55.49

$8.21

$63.7

2023

$63.7

$9.43

$73.13

2024

$73.13

$10.82

$83.95

2025

$83.95

$12.42

$96.37

2026

$96.37

$14.26

$110.63

2027

$110.63

$16.37

$127

2028

$127

$18.8

$145.8

2029

$145.8

$21.58                       

$167.38

2030

$167.38

$24.77

$192.15

2: High Private Data Center Costs Remain the Strongest Market Driver

According to data from PS Market Research, “The key factor driving the growth of the data center colocation market is the high costs associated with maintaining private data centers, especially for companies where the amount of data being generated is not consistent.”

For example, it is noted in the Market Research article that “Constructing a private storage facility can cost as much as $200 per square foot, in addition to the $10,000 per mile spent on fiber cabling.” While larger enterprises can often absorb such costs (and can achieve the economies of scale necessary to justify them), most SMBs cannot cover the cost of handling things in-house. The colocation data center industry provides an affordable alternative for these businesses.

This affordability is likely to remain a major factor in driving the use of outsourced IT for the foreseeable future.

3: COVID-19 and Colocation Service Growth

While the colocation industry as a whole is projected to achieve stable long-term growth, the 2020 COVID-19 (coronavirus) outbreak has been credited with some depression in the industry’s growth rate.

According to data cited by FierceTelecom, “The colocation services market revenue will grow by 6.2% this year, but that’s below a previous forecast of 9.2%.” However, it was noted in that same article that “Due to remote learning by students and remote workforces in homes, there was an increased demand for interconnection, which in turn spurred the need for more colocation space.”

The issue is that the pandemic caused many businesses that would normally subscribe to colocation data center services into temporary (or even permanent) closure—while the need for bandwidth and remote access spiked sharply with world-wide quarantine orders keeping people in their homes (meaning more online shopping and remote work). So, the organizations that already had a largely IT-focused business model increased their colocation service consumption even as the industry as a whole slowed growth slightly from the loss of certain customers.

4: The Number of Colocation Businesses in the U.S.

According to data from IBISWorld, as of 2020, there are 1,387 businesses in the colocation data center industry in the U.S. These businesses employ 57,567 people, for an average of 41 or 42 employees per data center company.

This makes the colocation industry a major part of the larger information industry in the U.S., which, as noted by the Bureau of Labor Statistics (BLS), employs around 2,859,400 people (or 1.8% of all jobs in the USA in 2019).

As the data center industry continues to grow in response to ever-increasing demand for stability and access to online applications and resources, it is likely that job growth in this sector will continue.

Additionally, as new companies enter the data center industry, top-tier businesses in the market will continue to innovate new colocation service models and technologies to attract clients and stand out from the crowd.

Colocation Trends to Look out for in 2021

edge-computing-puts-data-centers-near-usersEdge Computing

According to a press release featured on PR Newswire, the “global edge computing market size is anticipated to reach USD 43.4 billion by 2027, exhibiting a CAGR of 37.4% over the forecast period.”

Edge computing, or the placement of data centers and data processing equipment near the “edge” of a network where data is being collected and/or requested, offers several benefits. For example, having data centers nearer users helps to reduce latency, extend network reach, and spreads out the processing load for a company.

This colocation service was a major data center trend for 2020, and it is likely to remain a strong future data center trend moving forward.

Hyperscale Data Centers

As the Globe Newswire press release mentioned, Americans consume a massive amount of data (2.5 quintillion bytes) each day. This is driving a need for ever-larger data centers to store newly-created information and to process requests to access that data.

Hyperscale facilities, which are named such because of how much larger they are than most other enterprise data centers, may house thousands of servers in a single, super-sized facility. Most such facilities are owned and operated by tech industry giants, like Google, Microsoft, Apple, and Amazon. One example of a hyperscale facility is Microsoft’s Quincy, WA data center, which uses 24,000 miles of network cable.

“Green” Data Centers

One of the bigger future data center trends identified by PS Market Research was the trend towards green data centers. Environmentally-conscious consumers actively seek eco-friendly alternatives to traditional products and services whenever possible. Because of this, many businesses try to differentiate themselves by offering “green” solutions that minimize or eliminate waste and pollution.

So-called “Green” data centers focus on achieving a high energy efficiency to processing power ration so they don’t contribute as large of a carbon footprint as contemporary data centers. As noted by PS Market Research:

“By using ENERGY STAR-rated power supply systems, and energy-efficient heating, ventilation, and air conditioning (HVAC) equipment, centralized humidification systems, light-emitting diode (LED) lighting, routers, and servers, such facilities are able to save a significant amount of energy, thus resulting in numerous environmental benefits.”

Intelligent Monitoring of Colocation Data Centers

Although more organizations are moving away from privately-owned on-premises data centers and toward colocation data centers, they still often need to have a high degree of visibility into their IT operations. Public cloud services, unfortunately, often fail to provide the right amount of IT transparency to satisfy this need. This leaves companies in the dark about things like:

  • How much bandwidth and power their data center is using;
  • What is causing any app stability issues they’re experiencing; and
  • Any other critical data center performance metrics they might need to make more informed decisions.

This is where intelligent monitoring tools, like vXchnge’s own in\site solution, become important.

Intelligent monitoring tools help give colocation data center customers deeper insight into their off-site production environments—creating the IT transparency they need to make more informed decisions regarding their enterprise applications. This allows colocation service customers to retain the control and visibility of an on-prem solution while enjoying the benefits of colocation.

Stay on the Cutting Edge of Colocation with vXchnge Solutions

Are you ready to be on the cutting edge of future data center trends? vXchnge is here to provide the cutting edge colocation data center technologies you need to stay ahead of the competition in an increasingly competitive market.

From intelligent monitoring, to edge computing, large-scale data centers, and more, vXchnge is the data center service partner that can help you realize your IT infrastructure goals. Reach out to us today to drive your infrastructure innovation to a new level.

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