Data Center Colocation and Managed Hosting Services Market by End-user, Type and Geography - Forecast and Analysis 2023-2027

Data Center Colocation and Managed Hosting Services Market Forecast 2023-2027

The data center colocation and managed hosting services market size is forecast to increase by USD 163.36 billion at a CAGR of 13.87% between 2022 and 2027. 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 market research and growth report also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.

What will be the Size of the Data Center Colocation And Managed Hosting Services Market During the Forecast Period?

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Cyber threats, data leakage, and cyber hardening are significant challenges for IT security professionals in this market. Deployment models include public, private, and hybrid cloud. Pricing pressures and the need for differentiation and competitive edge are key market trends. Client relationships and customer experiences are crucial for success in this ecosystem. HIPAA regulations apply to healthcare and pharmaceuticals. The market expansion is influenced by the metaverse concept and industry expansion. Network monitoring, endpoint security, and physical infrastructure are essential components of the market. Overhead cost savings are a significant benefit of the market.

Market Dynamics and Customer Landscape

The market is experiencing significant growth due to the increasing adoption of advanced technologies such as Artificial Intelligence (AI), Internet of Things (IoT) devices, and automation in various industries, including healthcare and pharmaceuticals, enterprises, and IT services. This expansion is driving the need for secure and efficient data management solutions, leading to an increased demand for colocation and managed hosting services. Cybersecurity is a critical concern for businesses, particularly those with distributed teams and hybrid work models. Data security is essential to protect sensitive information, and endpoint security and network monitoring are crucial components of a robust IT security strategy. HIPAA compliance is a significant consideration for healthcare organizations, making operational efficiency and regulatory compliance key differentiators for colocation and managed hosting service providers. Deployment models, such as private, public, and hybrid, offer enterprises flexibility and scalability in managing their IT infrastructure. Colocation and managed hosting services enable businesses to leverage industry expertise and best practices, providing a competitive edge in terms of customer experiences and client relationships. Overall, the market is expected to continue expanding, driven by the need for secure, efficient, and cost-effective data management solutions.

Key Market Driver

The rising demand for data center colocation facilities is driving growth in the market. In the digital age, the market have gained significant traction among enterprises, particularly SMEs. These services enable businesses to rent physical infrastructure for their IT equipment, including servers, storage, and network equipment, in a secure and connected environment. Colocation offers numerous benefits, such as reduced capital expenditure on infrastructure, improved connectivity, and operational efficiency. Cloud computing, cybersecurity, data management, and remote work solutions are key drivers of the market. Artificial intelligence, automation, IoT devices, and hybrid work models are also transforming the industry. IT security professionals face increasing cyber threats, including data leakage, necessitating cyber hardening and network monitoring. Pricing pressures and differentiation are critical factors in the market ecosystem.

Customer experiences and client relationships are essential for gaining a competitive edge. Verticals such as IT & telecom, manufacturing, retail & consumer goods, healthcare & life science, energy & utilities, media & entertainment, and others are expanding their use of these services. Operational efficiency, HIPAA compliance, and physical infrastructure are essential considerations for enterprises in the healthcare and pharmaceuticals sector. Overhead cost savings, deployment models, and the metaverse concept are also shaping the industry's expansion. The market is expected to grow rapidly, offering significant opportunities for businesses seeking to enhance their IT infrastructure and digital capabilities.

Significant Market Trends

The emergence of innovative data centers is a primary trend in the market. In the digital age, the demand for data management and processing is escalating due to the proliferation of cloud computing, IoT devices, artificial intelligence, and automation. This trend is particularly evident in the context of the smart revolution, which encompasses smart cities, grids, and homes. Consequently, there is a growing need for hyper-scale-data centers to manage the vast amounts of data being generated. Equinix Inc., among other providers, has announced its entry into the hyper-scale market. These facilities offer colocation and managed hosting services, enabling businesses to deploy their IT infrastructure in a secure and efficient manner.

With the shift to hybrid work models and distributed teams, there is a heightened focus on cybersecurity, network monitoring, and endpoint security. Moreover, the expansion of industries such as IT & telecom, manufacturing, retail & consumer goods, healthcare & life sciences, energy & utilities, media & entertainment, and others is driving the need for operational efficiency and regulatory compliance (e.g., HIPAA). In this competitive landscape, differentiation through superior customer experiences, client relationships, and competitive edge is crucial. Despite the opportunities, there are pricing pressures and cyber threats, including data leakage, that require cyber hardening and robust security measures. The metaverse concept and industry expansion are expected to further fuel market growth. Overall, the ecosystem is evolving to meet the needs of enterprises and verticals, offering overhead cost savings and physical infrastructure solutions.

Major Market Restrain

The capital-intensive nature of the market in focus is a major challenge in the market. In today's digital age, cloud computing has become a game-changer for businesses of all sizes. The adoption of cloud-based services is on the rise due to their flexibility, cost benefits, and ability to scale resources as needed. This shift is particularly significant for Small and Medium Enterprises (SMEs) and start-ups, which can leverage cloud solutions to reduce capital expenditures (CAPEX) and operate more efficiently. Cloud computing offers several advantages, including quick implementation, operational efficiency, and cost savings. It enables remote work solutions, artificial intelligence, automation, and IoT device integration, making it an essential component of hybrid work models. Cybersecurity is a top priority in the digital era, and cloud providers offer advanced security features, including network monitoring, endpoint security, and IT security professionals. The market is expanding rapidly, with industries such as IT & telecom, manufacturing, retail & consumer goods, healthcare & life sciences, energy & utilities, media & entertainment, and others adopting cloud-based solutions. The metaverse concept is also gaining traction, adding to the industry's growth.

However, the market is facing pricing pressures, and differentiation through customer experiences and client relationships is crucial for gaining a competitive edge. Operational efficiency, HIPAA compliance in healthcare and pharmaceuticals, and physical infrastructure security are key concerns for enterprises. With the increasing use of cloud services, cyber threats such as data leakage and cyber hardening are becoming more prevalent, making network security and data management essential. In conclusion, the cloud computing market ecosystem is expanding, offering numerous benefits, including cost savings, operational efficiency, and advanced security features. However, it also presents challenges, such as cyber threats and pricing pressures, which providers must address to maintain a competitive edge.

Market Customer Landscape

The 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.

Customer Landscape

Market Segmentation

This 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). In the digital age, the market are experiencing significant growth due to the increasing adoption of cloud computing, e-commerce, and m-commerce in North America, Europe, and APAC regions, including India and China. This market caters to the data management needs of various sectors such as IT & telecom, manufacturing, retail & consumer goods, healthcare & life sciences, energy & utilities, media & entertainment, and verticals. The market is driven by operational efficiency, hybrid work models, and the increasing use of IoT devices, artificial intelligence, and automation. Cybersecurity is a major concern due to the sensitive nature of financial and banking data, including customer financials, account information, cardholder data, and personal information. Regulatory bodies like the EU's GDPR provide guidelines for the market.

By End-user

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 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 demand, and we expect this demand to continue during the forecast period. With regard to these 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 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 the 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

Regional Overview

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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. The market in the region is experiencing substantial growth due to increasing investments in hyperscale data centers. For instance, Vantage Data Centers invested over USD700 million in Canada, and AVAIO Capital partnered with Adam Real Estate for its development in Quebec. The US houses major managed hosting service providers like Lumen Technologies and NaviSite. The region's industries, including IT, manufacturing, healthcare, BFSI, retail, and education, have a strong digital presence, leading to heightened demand for network security. Key concerns include business continuity, availability, and service-level agreements. DCaaS providers like Rackspace Technology and cloud giants such as Google Cloud offer solutions. IT executives grapple with attack surfaces from malware and the need to secure on-premises infrastructure. Social media, retail industry digital services, online customer experiences, e-commerce, and mobile shopping apps create vast transaction histories, necessitating robust security. Cashier and sensor data add to the complexity.

Who are the Major Market Companies?

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:

• 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 DATACorp.
• Phoenix NAP LLC

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.

Market Analyst Overview

The market refers to two distinct yet interconnected solutions in the IT infrastructure market. It involves renting space and power in a third-party data center to house an organization's IT equipment. Managed Hosting Services, on the other hand, offer organizations the use of a service provider's infrastructure and expertise to manage and maintain their IT systems. The market is essential for businesses seeking to optimize their IT operations. Colocation provides businesses with the benefits of reduced capital expenditures, improved reliability, and enhanced services offer businesses the advantages of expert management, increased scalability, and improved performance. The market is experiencing significant growth due to the increasing demand for IT infrastructure solutions that offer flexibility, reliability, and cost savings.

The market is driven by factors such as the growing adoption of cloud computing, the need for business continuity and disaster recovery solutions, and the increasing complexity of IT infrastructure. The providers offer various solutions to cater to different business needs. These solutions include dedicated servers, virtual servers, managed storage, and managed network services. Providers such as IBM, Amazon Web Services, Microsoft Azure, and Google Cloud offer these services to businesses worldwide. In conclusion, they are essential solutions for businesses seeking to optimize their IT operations. The market for these services is experiencing significant growth due to the increasing demand for flexible, reliable, and cost-effective IT infrastructure solutions. Providers offer various solutions to cater to different business needs, making it an exciting and dynamic market to watch.

Segment Overview

The 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. 

• End-user Outlook 
  • BFSI
  • Healthcare
  • E-commerce
  • Telecommunication
  • Others

• Type Outlook 
  • Wholesale
  • Retail

• Region Outlook 
  • North America
    • The U.S.
    • Canada
  • Europe
    • The U.K.
    • Germany
    • France
    • Rest of Europe
  • APAC
    • China
    • India
  • Middle East & Africa
    • Saudi Arabia
    • South Africa
    • Rest of the Middle East & Africa
  • South America
    • Chile
    • Argentina
    • Brazil

Market Scope
Report Coverage	Details
Page number	172
Base year	2022
Historic period	2017-2021
Forecast period	2023-2027
Growth momentum & CAGR	Accelerate at a CAGR of 13.87%
Market growth 2023-2027	USD 163.36 billion
Market structure	Fragmented
YoY growth 2022-2023(%)	12.84
Regional analysis	North America, Europe, APAC, Middle East and Africa, and South America
Performing market contribution	North America at 45%
Key countries	US, Japan, China, Germany, and the UK
Competitive landscape	Leading Vendors, Market Positioning of Vendors, Competitive Strategies, and Industry Risks
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 DATACorp., phoenix NAP LLC, Rackspace Technology Inc., Sabey Corp., and Verizon Communications Inc.
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.
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.

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What are the Key Data Covered in this Market Research Report?

• CAGR of the market during the forecast period
• Detailed information on factors that will drive the market growth and forecasting between 2023 and 2027
• Precise estimation of the market in focus on the parent market
• Accurate predictions about upcoming trends and changes in consumer behavior
• Market growth analysis across North America, Europe, APAC, Middle East and Africa, and South America
• A thorough analysis of the market’s competitive landscape and detailed information about vendors
• Market forecasting of factors that will challenge the growth of market vendors

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