145 cloud and colo companies account for 40% of global data center space

Jan. 6, 2017
Analysis by IHS Markit says such a significant share of data center space by so few organizations means market volatility and infrastructure price pressure.

The top 145 cloud and colocation companies are now estimated to account for 40 percent of global data center space, measured in square footage, according to a new study by IHS Markit. “This is a remarkable figure given that Amazon’s AWS—the largest provider of Infrastructure-as-a-Service—set up its first data center just 10 years ago, in 2006,” the analyst organization said. “It was at this same time that Equinix—the top colocation provider—first purchased a data center campus in Ashburn, VA, a region that over half of the internet’s traffic now travels through,” the company added. “Cloud and colocation [colo] companies are growing and building data centers fast, and it’s changing the data center market in significant ways.”

In its analysis, IHS further noted that the domination of the data center market by so few companies “means there are a decreasing number of companies accounting for an increasing percentage of spend on data center infrastructure.” That reality comes with the following two significant consequences, the analyst explained.

  1. It creates volatility in the market for data center infrastructure suppliers. When just a few large companies account for such a great share of the market, builds and purchasing of equipment will ebb and flow more than what is historically typical.
  2. It means that these cloud and colo companies have an increasing ability to negotiate for lower prices. One lost sale to a major cloud or colo provider could make or break a data center infrastructure supplier’s revenue target for the year. Cloud and colo players know this and use it to their advantage when seeking best pricing.

Going forward, IHS forecasts that it expects cloud and colo companies to account for an even greater share of data center investments. Liz Cruz, associate director in the analyst organization’s cloud and data center research practice, commented, “I would not be surprised if, in just a few short years, we see cloud and colocation companies approaching the 60-percent mark in terms of ownership of data center square footage worldwide. The pace at which they are building, and at which regular enterprise users are outsourcing their own data center operations to those cloud and colo companies, is phenomenal, and there are no major roadblocks ahead. Sure, some enterprises may still choose to keep a few mission-critical applications in-house, but a growing adoption and acceptance of the cloud is leading to a hybrid approach to data center operation that allows for an increasing number of applications to be managed by cloud providers, which themselves are moving into colocations, causing the need for more colocation facilities to be built as well.”

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