The colocation data center market is expected to reach $36 billion worldwide by the end of 2017, according to a new report from 451 Research. The global footprint will grow over 40 million square feet in that time as well, from 109 million to close to 150 million square feet. Currently, the colocation market is pegged at $22.8 billion in annualized revenue.
Between now and 2017, the global footprint will grow close to 75 percent, while global revenue will grow 63 percent. The analysts said that the market remains fragmented, with the majority of current revenue (about 75 percent) derived by local providers with less than $500 million in annualized colocation revenue.
The data center market is driven by growth of cloud, with colocation serving “the bedrock for much of Cloud 2.0,” according to Katie Broderick, research director at 451 Research.
Off-premises means it has to live somewhere, and colocation’s central, connected facilities are where stuff is moving, albeit in a variety of hosted models, from floor space to fully managed cloud.
The market leader is Equinix, with close to 8.5 percent of global market revenue. Digital Realty is the the second-largest supplier in terms of revenue (5.6 percent) but the largest in terms of operational square feet, with or 9.6 percent of global capacity.
“This remains an extremely fragmented industry,” said Kelly Morgan, research director, North American Datacenters. “The majority of colocation facilities are provided by local operators with only one to three facilities each. However, it is becoming harder for them to compete with the more geographically diverse providers that are now entering many local markets. We will see continued consolidation in this sector.”
Consolidation in the data center market has been ongoing. The biggest recent deal was the merger between Interxion and TelecityGroup in Europe. A recent example in the U.S. was the Fortune Data Centers and Dallas Infomart merger last October.
Other consolidation is occurring in the form of telecoms and cable companies buying service providers. Zayo acquired Latisys, and Canada's Shaw Communications acquired ViaWest. Large communications companies have been acquiring into the data center and cloud market for years. One big past example was Verizon acquiring Terremark.
The market seems split between those focusing on core markets and those focusing on emerging markets. Equinix and Coresite focus specifically on their core markets, while other players like 365 Data Centers and EdgeConneX focus on underserved metros.
451 Research estimates that today, less than half of the world’s total operational space for colocation (space supporting IT equipment) is in North America: about 43 percent. EMEA and Asia-Pacific compose a large portion of the other half, each accounting for one quarter of the market. However, this is the first quarter that APAC has edged out EMEA as the second-largest market. Latin America is around 4.5 percent of the market.