Crossconnects among tenants driving growth in multi-tenant data centers

Sept. 4, 2015
IHS recently found that crossconnects between customers, and with carriers, accounts for about 10 percent of all revenue among multi-tenant data centers.

Through IHS’s Multi-Tenant Data Center Intelligence Service, IHS analyst Liz Cruz recently reported on the growing phenomenon of crossconnects between customers within multi-tenant data centers (MTDC), and between tenants and carriers within those same data centers. “This is where physical cables are used to make direct connections between different customers and/or carriers within a data center,” Cruz explained. “This reduces latency and costs given that communication does not have to go through an outside Internet Service Provider. IHS currently estimates that slightly less than 10 percent of all multi-tenant data center revenue comes from crossconnect fees.”

Overall, global multi-tenant data center revenue grew 4.7 percent, as measured in U.S. dollars, in Q2 of 2015 compared to the same quarter last year. “Accounting for currency effects, growth is much higher given the weakening euro dragged on revenue in EMEA,” Cruz noted, adding, “However, if assessing the market in terms of space added, which grew by 90,000 square meters in just one quarter, it is quite clear that the MTDC market is a fast-paced one with strong potential for future growth.”

On the topic of crossconnects, Cruz said, “Retail colocation data centers in particular find their ability to offer direct crossconnects between customers to be a driver for not only new customers but also increased revenue per kilowatt from existing customers. It is a way for these companies to differentiate and increase revenue from existing tenants without having to invest in more space or power. However, the appeal of a data center dense with customers ripe for crossconnects eventually leads to more customers wanting to collocate at the same campus, therefore requiring more investment.”

She also pointed out that this direct-connect ability among industry peers has created “vertical-specific data center environments.” She noted that in London, Frankfurt, and New York, many financial institutions group in certain data centers to more-efficiently make trades and link to exchanges. In California, some data centers are geared toward digital-media companies that use crossconnects to deliver content to partners within the same facility, she noted.

“The ability to offer a deep interconnection environment is a major barrier to entry for new vendors because it requires a diverse network of carriers and a large data center with a robust tenant list, with which potential customers see value in peering,” Cruz observed. “This kind of business can take years to build.”

She said IHS expects that revenue from interconnections, or crossconnects, will account for a growing share of recurrent revenues in the MTDC market and help drive differentiation among providers.

You can find more information on IHS’s Multi-Tenant Data Center Intelligence Service here.

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