data centerThe market for global colocation services will grow at a 12.8 percent compound annual growth rate (CAGR) to reach $51.8 billion by 2020, according to a new report from Allied Market Research entitled “World Colocation – Market Opportunities and Forecast, 2014-2020.”

Huge demand to manage data servers in North America, in particular across the banking, telecom and IT sectors, makes the region the most promising regional market for colocation service providers.

Colocation Market Forecast
The North American colocation market was valued at $11.78 billion in 2014. Allied Market Research sees the North America region consolidating its market leading position out to 2020. Cuts in corporate IT budgets and the high costs of building dedicated data centers will drive growth in colocation services.

Allied divides the colocation market into two broad segments – retail and wholesale – based on space and power requirements. High demand for retail colocation services with power requirements ranging from 500-1000 kilowatts (kW) is driving growth in the retail segment.

Revenue in the retail segment accounted for roughly two-thirds of the overall market in 2014, Allied points out. Wholesale colocation providers have zoomed in on small- and medium-size businesses (SMBs), with power requirements in the 500-1000 kW range, in a bid for growth, the market research provider says.

Allied forecasts annual revenues for the wholesale colocation market segment will grow at a 13.7 percent CAGR from 2015-2020. Telecom and IT sector customers provide a big share of overall colocation market revenues, the market research provider adds — a position it expects will carry forward out to 2020. Demand will grow fastest in the energy sector, where colocation will increase at a 14.2 percent CAGR over the period.

Other key findings include:

  • Global colocation market would exhibit significant growth largely supplemented by the growing necessity of physical security and maintenance of data servers in organizations;
  • Realizing the value proposition of colocation facilities with resilient power supply, dedicated cooling systems and remote monitoring services are becoming the key target area among small and medium enterprises;
  • Wholesale colocation providers have broadened their facility range pertaining to power requirements in order to competitively secure their market position.

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