Data Center Colocation Market - Size, Share, Industry Trends, and Forecasts (2024 - 2031)

By Type:

Based on type, the market is segmented into retail colocation and wholesale colocation.

Trends in the Type:

• The micro data centers provided by retail colocation provide greater scalability and flexibility to the organizations requiring localized data processing.
• The energy efficiency and efficiency of large-scale operations are achieved with innovations in liquid cooling technologies.

Retail Colocation accounted for the largest revenue share of the total data center colocation market share in 2023.

• Retail Colocation is a service, where businesses can lease small spaces measures in racks or cabinets, in order to store their servers, equipment, and computing hardware.
• Without any significant capital investments businesses can get immediate access to colocation services using this facility.
• It is useful for small and medium enterprises, ensuring flexibility and scalability of operations according to data size.
• Therefore, the analysis shows that the flexibility, scalability, and reduction in cost significantly drive the segment in the market.

Wholesale Colocation is anticipated to register the fastest CAGR during the forecast period.

• Wholesale Colocation is a service, where businesses can lease large spaces, measured in floor space or rooms. Here a single customer can own the rent the entire space without sharing it with anyone.
• The large organizations with massive data loads, such as cloud service providers, and content delivery networks utilize the model for IT infrastructure.
• They optimize the data management costs for organizations, by reducing the per-unit costs for large-scale operations.
• Therefore, the cost-effectiveness and the efficiency in managing data loads for large-scale organizations, place the sector as the fastest growing in the market.

By Enterprise Size:

Based on enterprise size, the market is segmented into small and medium-sized enterprises (SMEs) and large enterprises.

Trends in the Enterprise Size:

• In order to improve operational efficiency by enhancing power and cooling, AI-based colocation services are continuously being adopted by large enterprises.
• Edge colocation enables reduced latency and improved performance for cloud-based services, utilizing localized data centers by businesses.

Large Enterprises accounted for the largest revenue of the overall data center colocation market share in 2023.

• Large organizations across various regions require multiple colocation services including storage, management, and processing of data.
• The requirement to ensure security, uptime, and efficiency of large-scale operations across the enterprises, accelerates the requirement for these services.
• Additionally, the rapid adoption of advanced technologies like cloud solutions, artificial intelligence, and machine learning, contributes to the shift towards colocation services.
• In December 2023, a joint generative AI Center of Excellence was launched by Accenture and Google Cloud in order to help businesses utilize AI for new business opportunities. They will provide the enterprises with tools to scale AI solutions which includes Google's Gemini model.
• Therefore, segmental trends analysis shows that efficiency, security, and advancement in technology drive the market.

SMEs are anticipated to register the fastest CAGR during the forecast period.

• To manage the growing amount of data, while ensuring reduced overall cost and enhanced security, SMEs are increasingly moving towards colocation services.
• The retail colocation allows SMEs to adapt to the growing data needs without imposing any hefty capital expenditure.
• Sectors like e-commerce and fintech are increasingly adopting these services with the rapid digitalization and adoption of cloud-based solutions, as data management is of the utmost significance for them.
• Therefore, the move towards digital transformation and the scalability provided to SMEs, drives the data center colocation market trends.

By Deployment Type:

Based on deployment type, the market is segmented into cloud and on-premises.

Trends in the Deployment Type:

• On-premises data centers are seeing innovations in green data centers, which include enterprises adopting renewable energy solutions and energy-efficient technology to reduce operational costs and carbon effects.
• The combined use of edge computing along with on-premises colocation enables businesses to process data closer to the data source, which benefits them with real-time data analysis and reduced latency.

The cloud sector accounted for the largest revenue share in 2023 and is anticipated to register the fastest CAGR during the forecast period.

• In order to achieve improved scalability, flexibility, and reduced overall cost, especially on physical infrastructure, cloud deployment is used to host the organization's data off-premises.
• The surge in cloud colocation services is due to the growing need for SaaS, PaaS, and IaaS models, in order to handle the growing data needs.
• Cloud colocation also enables advanced features like enhanced disaster recovery and business continuity features that ensure data security and accessibility in case of system failure.
• In June 2021, a cloud data center was launched by Acronis in India. It provides protection against cyber-attacks and ensures data compliance, along with faster access, data availability, and data sovereignty.
• The increasing shift from commercial data storage to hybrid cloud, in which businesses combine public and private cloud infrastructures, is in turn favoring cloud colocation services.
• The conclusion is that features like flexibility, scalability, and cost-effectiveness of cloud-based solutions are the driving factors for the data center colocation market demand.

By Industry Vertical:

The market is segmented into BFSI, IT & telecom, healthcare, government and defense, energy, retail, manufacturing, media and entertainment, and others.

Trends in the Industry Vertical:

• The BFSI sector is competing colocation against fintech innovations, which provide the required infrastructure for real-time transaction processing, blockchain, and AI-powered financial services.
• The government and defense sectors are moving towards implementing colocation services for secure and resilient data infrastructure, which is vital for managing confidential data and, at the same time, ensuring operational consistency in critical situations.

IT & Telecom accounted for the largest revenue share of 28.09% in 2023

• The IT & telecom sector is heavily dependent on data centers for managing huge amounts of data generated by services like network services, cloud computing, and telecommunication operations.
• The global rollout of 5G technology is helping the demand for colocation services within the telecom sector to rise at an exponential rate because of high-speed data transmission and low latency requirements.
• Data center colocation helps the IT & telecom sector with scalable infrastructure solutions, which are required for the management of its increasing need for data processing and storage.
• In April 2022, Compass Quantum was launched by Compass Datacenters a colocation giant, which offers a White Space-as-a-Service model. This ensures the deployment of 100kW modular data centers by the customers.
• In conclusion, the expanding telecom networks and demand for advanced IT infrastructure are the driving factors for the IT & telecom sector's dominance in the data center colocation market growth.

The Healthcare sector is anticipated to register the fastest CAGR during the forecast period.

• The healthcare sector is already adopting new digital health technologies such as telemedicine, electronic health records, and diagnostics driven by AI tools, which require secure and scalable colocation services.
• Data center colocation helps healthcare organizations with the necessary infrastructure for the storage and processing of large data volumes, which include sensitive patient data, along with ensuring regulatory compliance such as HIPAA.
• The shift inclined towards personalized medicine and increased adoption of AI in healthcare is further driving the need for colocation services because these services generate huge amounts of data that require secure and fast storage along with processing.
• The growth of healthcare cloud services, which consist of telehealth and medical imaging, is determining the need for reliable colocation services, which should ensure data accessibility and security.
• The conclusion is that rapid implementation of digital health solutions, along with the growing importance of data security and compliance, are the key drivers for the healthcare sector in the data center colocation market trends.