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The data center colocation and managed hosting services market size is estimated to grow at a CAGR of 13.87% between 2022 and 2027. The market size is forecast to increase by USD 163.36 billion. The growth of the market depends on several factors, including the rising demand for data center colocation facilities, the increase in operational business needs, and the increasing number of investments in the construction of colocation data centers. Data center colocation is a type of data center in which the colocation service providers offer data center spaces for setting up end-user servers. Under managed hosting service, a company takes a server on lease from the hosting service provider. The end-user has complete ownership of the server in data center colocation, unlike managed hosting. On the other hand, a managed hosting services provider leases the server and manages the operations at the site of the server.
This data center colocation and managed to host services market report extensively covers market segmentation by end-user (BFSI, healthcare, e-commerce, telecommunication, and others), type (wholesale and retail), and geography (North America, Europe, APAC, Middle East and Africa, and South America). It also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.
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The rising demand for data center colocation facilities is driving growth in the data center colocation and managed hosting services market. An enterprise that operates a colocation facility is offering more benefits compared to the construction of its data center itself. Collocation significantly reduces the capital expenditure (CAPEX) on infrastructure and improves the connectivity required for operational services. Data center colocation is a facility that rents computing servers, storage, and network equipment. Colocation facilities are designed with private servers that can be rented for use by companies to install their IT infrastructure. They help small- and medium-sized enterprises (SMEs) carry out operations using modern infrastructure at reduced subscription costs.
However, the number of these facilities is rapidly growing year over year. Many enterprises build and operate their own cloud platforms. This model of managed services is also being used by them to host these platforms. In the forecast period, managed hosting services are expected to be used more and more as businesses increase their online presence across various industry sectors. Local colocation and managed hosting service providers significantly boost investments in the global data center colocation and managed hosting services market, and this will drive the growth of the market in focus during the forecast period.
The emergence of innovative data centers is a primary trend in the data center colocation and managed hosting services market. Data centers are being developed to meet the growing demands for scaling, efficiency, and enhanced services in view of technologies evolving and businesses increasingly relying on data-intensive applications and digital transformation. Hyperscale data centers are designed to accommodate the massive scale and resource requirements of cloud computing and internet giants. These data centers leverage advanced technologies, such as software-defined infrastructure, virtualization, and automation, to provide high-density computing and storage capabilities.
Moreover, edge data centers bring computing resources closer to the point of data generation and consumption, reducing latency and improving the performance of applications. These data centers will allow faster processing, reduced network costs, and improved user experience through strategic positioning in close proximity to end-users or Internet of Things devices. The modular data center is built using specially designed components, which can be installed and scaled in a rapid manner. Prefabricated data centers are constructed off-site, offering reduced construction time and cost compared to traditional data center builds. Such factors are expected to drive the growth of the market focus during the forecast period.
The capital-intensive nature of the market in focus is a major challenge in a data center colocation and managed hosting services market. The colocation business model is based on the housing sector, and as a result, it's an enterprise with high capital requirements. Many organizations are shifting from a high CAPEX model to a high OPEX model to avoid the problems associated with the ownership of fixed assets. In order to reduce data center maintenance, security, and management costs, many end users from around the world have started adopting Data Center colocation.
However, this increases the burden on the vendors operating in the market. For data centers, end users pay only for space, power, and resources that they need in an existing colocation or hosting environment. However, it is for the vendors to manage staffing, security, network diversity, and even strict compliance standards such as PCI DSS. In order for these services to remain in the market, it is, therefore, necessary that they be accompanied by sufficient investment capacity. Also, due to high capital investment, vendors often face a liquidity crunch, which poses a major challenge to the growth of the market in focus during the forecast period.
The market share growth by the BFSI segment will be significant during the forecast period. The global driver for the banking and financial services sector is the growth of m-commerce and e-commerce in North America, Europe, and developing economies such as India and China in APAC. The financial and banking data shall include the customer's financial and account information, the cardholder's data, the transaction, and personal data.
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The BFSI segment showed a gradual increase in the market share of USD 33.54 billion in 2017 and continued to grow by 2021. Global BFSI organizations frequently struggle with high operational expenses associated with traditional data center ownership, which has an impact on their ability to grow their businesses. However, with the growing investment in high operational expenditure (OPEX), BFSI companies outsource colocation space from vendors or lease servers from managed hosting service providers. Such factors are expected to drive the growth of the BFSI segment of the market in focus during the forecast period.
The healthcare segment has observed an increase in the demand for data centers, and we expect this demand to continue during the forecast period. With regard to data center requirements of healthcare companies, the use of colocation facilities is increasing. Healthcare institutions need to connect and exchange data between separate IT systems while at the same time safeguarding the security of patients and confidential hospital data. The demand for Data Centre Colocation and managed hosting services is further driven by the increasing need to exchange electronic data, as well as improvements in healthcare delivery quality, safety and efficiency. The services provided offer secure, reliable, and cost-effective options to biotechnology companies, hospitals, insurance, and pharmaceutical companies, which require flexible, secure data center capacity while complying with information privacy and security regulations. Several medical government bodies are also entering into tie-ups with data center colocation providers in order to meet the IT efficiency requirements in the healthcare sector. Such factors are expected to drive the growth of the healthcare segment of the market focus during the forecast period
The wholesale segment refers to the leasing of a significant portion of data center space, typically an entire data hall or a large portion of it, to a single customer. The client shall lease the premises for a prolonged period and has the freedom to design and administer their infrastructure in accordance with its specific requirements. Wholesale data center providers offer larger floor areas and higher power densities compared with retail colocation providers. Leased space can cover anywhere from a few thousand square feet to several thousand square meters, or an entire data center. By leasing a significant portion of the data center, customers can benefit from economies of scale, reduced capital expenditures, and optimized operational costs compared with building and managing their own data centers. Such factors are expected to drive the growth of the wholesale segment of the global data center colocation and managed hosting services market during the forecast period
The retail segment refers to the leasing of smaller increments of data center space, typically measured in racks, cabinets, or smaller data center suites, to multiple customers. In order to satisfy the needs of enterprises with limited IT requirements, retail colocation providers are offering shared data center infrastructure and management services. Customers can start with a small footprint and easily expand their data center space as their requirements grow. This allows businesses to align their data center resources with their evolving needs and avoid overprovisioning. Retail colocation providers often have data centers in strategic locations, which allows businesses to position the infrastructure closer to their end users and target markets. This proximity can help reduce network latency, enhance performance, and improve user experiences. Such factors are expected to drive the growth of the retail segment of the global data center colocation and managed hosting services market.
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North America is estimated to contribute 45% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period. In this region, growing investments in hyperscale data center operations are expected to lead to a significant increase in the colocation and managed hosting services market. For instance, in March 2022, Vantage Data Centers invested more than USD 700 million to expand its hyperscale data center operation in Canada. Again, in February 2022, AVAIO Capital partnered with Adam Real Estate for the development of data center colocation in Quebec, Canada. Further, the US has the major vendors of managed hosting services, such as Lumen Technologies, Inc. and NaviSite, Inc. The region is also witnessing high demand for network security, owing to the strong digital presence in the IT, manufacturing, healthcare, banking, financial services and insurance (BFSI), retail, and education industries.
The outbreak of COVID-19 in 2020 propelled the demand for cloud data centers in North America, which negatively impacted the growth of the regional data center colocation and managed hosting services market to some extent. However, with rapid vaccination drives conducted by the government of several countries and the removal of lockdown norms, new colocation data center projects were announced by vendors in 2021. Furthermore, the demand for management hosting services has increased. The rapid growth in cloud hosting services is expected to slow down the growth in the regional data center colocation and managed hosting services market during the forecast period.
The Data Center Colocation and Managed Hosting Services Market industry report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Data Center Colocation and Managed Hosting Services Market Customer Landscape
Vendors are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
BT Group Plc - The company offers data center colocation and managed-to-host services to modernize and scale data center capabilities, maximize cloud application performance, and minimize operational and commercial risk.
Cogent Communications Holdings Inc. - The company offers data center colocation and managed hosting services with cogent data centers and utility computing.
Cyfuture - The company offers data center colocation and managed hosting services with scalable, reliable, and versatile where servers are designed to cater to the unique requirements of enterprises, offering unparalleled performance, enhanced security, and complete control.
The research report also includes detailed analyses of the competitive landscape of the market and information about 15 market vendors, including:
Qualitative and quantitative analysis of vendors has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize vendors as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize vendors as dominant, leading, strong, tentative, and weak.
The data center colocation and managed hosting services market report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027.
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Data Center Colocation And Managed Hosting Services Market Scope |
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Report Coverage |
Details |
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Page number |
172 |
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Base year |
2022 |
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Historic period |
2017-2021 |
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Forecast period |
2023-2027 |
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Growth momentum & CAGR |
Accelerate at a CAGR of 13.87% |
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Market growth 2023-2027 |
USD 163.36 billion |
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Market structure |
Fragmented |
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YoY growth 2022-2023(%) |
12.84 |
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Regional analysis |
North America, Europe, APAC, Middle East and Africa, and South America |
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Performing market contribution |
North America at 45% |
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Key countries |
US, Japan, China, Germany, and the UK |
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Competitive landscape |
Leading Vendors, Market Positioning of Vendors, Competitive Strategies, and Industry Risks |
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Key companies profiled |
BT Group Plc, Chunghwa Telecom Co. Ltd., Cogent Communications Holdings Inc., CoreSite Realty Corp., Cyfuture, CyrusOne LLC, Cyxtera Technologies Inc., Digital Realty Trust Inc., Equinix Inc., Fidelity National Information Services Inc., Flexential Corp., Internap Holding LLC, KDDI Corp., Lumen Technologies Inc., Navisite LLC, NTT DATA Corp., phoenix NAP LLC, Rackspace Technology Inc., Sabey Corp., and Verizon Communications Inc. |
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Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, and Market condition analysis for the forecast period. |
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Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
We can help! Our analysts can customize this market research report to meet your requirements.
1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by End-user
7 Market Segmentation by Type
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
Research Framework
Technavio presents a detailed picture of the market by way of study, synthesis, and summation of data from multiple sources. The analysts have presented the various facets of the market with a particular focus on identifying the key industry influencers. The data thus presented is comprehensive, reliable, and the result of extensive research, both primary and secondary.
INFORMATION SOURCES
Primary sources
Secondary sources
DATA ANALYSIS
Data Synthesis
Data Validation
REPORT WRITING
Qualitative
Quantitative
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