Driven by increasing focus on digital infrastructure management during the COVID-19 pandemic, the data center colocation market is projected to witness significant growth by 2027. Additionally, rapid digitalization is anticipated to further propel market growth through the forecast period.
Data center colocation refers to a physical facility that gives space with proper cooling, electricity, and security to host computing hardware and servers of businesses. This capacity entails anything from cages and cabinets to private suites. Colocation helps create a high-performance environment for critical IT infrastructure.
Following the COVID-19 outbreak, companies had to shift to a remote work ecosystem in light of government-imposed lockdown restrictions worldwide. Subsequently, growing emphasis on maintaining a reliable IT infrastructure has bolstered consumer interest in data centers, thereby enhancing market dynamics.
Moreover, colocation enables customers to leverage a 100% uptime SLA and focus on their core business instead of managing a data center. It also offers dedicated private connection options to hundreds of cloud, network, and IT service providers in order to streamline an organization’s architecture, which has played a vital role in industry growth during the pandemic.
Recently, industry players have been implementing profitable strategies to gain a competitive edge in the market, which has been favorable for the global business landscape. For instance, in September 2021, Wipro, the Indian IT firm, won a USD 44.5 million contract from National Grid, the UK-based electricity and gas utility company, to provide data center services. The five-year contract between the two companies comprises four lots of managed services, colocation, mainframes, and data center migration.
The data center colocation market has been categorized in terms of type, end-use, application, and region. On the basis of end-use, the market has further been divided into SMEs and large enterprises.
The SMEs sub-segment is anticipated to register substantial growth by 2027, progressing at a robust CAGR through the assessment timeframe. The growing significance of IT infrastructure in SMEs is expected to fuel segmental expansion in the coming years.
From the application perspective, the data center colocation market has been bifurcated into BFSI, IT & telecom, energy, government & defense, manufacturing, healthcare, retail, and others. The IT & telecom sub-segment held a considerable share in the market in 2020 and is estimated to grow at a notable pace over 2021-2027. The expanding IT & telecom sector, along with the advent of 5G technology, is likely to support the demand for colocation services in the IT & telecom industry over the following years.
On the regional spectrum, the Latin America data center colocation market contributes to a major portion of the overall industry revenue and is speculated to attain a sizable revenue by the end of 2027. The booming BFSI sector in LATAM has boosted the adoption of advanced digital technologies, which is slated to positively influence regional market outlook in the future.
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