The colocation market has been getting quite the boost from hyperscale operators according to new research from Synergy Research Group.
In 2018, hyperscale operators spent much more on both wholesale and retail colocation than service provider and enterprise customers. Synergy found that while the overall colocation market grew by 10 percent during the year to $34 billion, revenues from hyperscale operators grew by 24 percent in the wholesale segment and 16 percent in the retail segment.
Hyperscale operators include cloud and internet service firms, encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), Software-as-a-Service (SaaS), search, social networking, and e-commerce operators.
Service provider customers were the second fastest-growing spender in the market, followed by enterprise customers. Enterprise customers spending for wholesale colocation was relatively flat between 2017 and 2018, but retail spending did grow by 7 percent.
According to Synergy, service providers include telcos, non-hyperscale cloud providers and internet service firms, hosting and outsourcing companies, and content and digital media service providers.
John Dinsdale, a chief analyst at Synergy Research Group, noted that these operators are currently “on a charge to rapidly extend their worldwide data center footprint,” and so they continue to increase their capex. But to support this rapid growth, building their own data centers is not enough, and they are starting to rely on colocation providers to lease both wholesale buildings as well as lease capacity at smaller edge locations.
Earlier this month, Synergy released data that in 2018, hyperscale operators’ capex grew 48 percent to nearly $120 billion. In the fourth quarter of 2018 alone, it reached $32 billion — surpassing each of the previous three quarters of the year.
Telco spending, in comparison, remained relatively flat from the previous two years, even though their capex is nearly double that of hyperscale operators.
Synergy did not reveal which companies were driving the colocation revenue. It did, however, note that colocation growth was the largest in the Asia Pacific region followed by Europe, the Middle East, Africa, and then North America. According to the research group, China, Brazil, Hong Kong, Germany, and Singapore had the highest growth markets.
The growth in the Asia Pacific region is attributed to a number of things, according to Dinsdale. “Generally speaking the APAC IT markets are less developed than North America and EMEA, and the APAC economies are growing more rapidly, so APAC IT markets tend to be growing more rapidly from a smaller base. The same is true in colocation,” he said. He noted that cloud services, search, social network, and e-commerce area are all seeing immense growth in this region.
The leading colocation companies in the market include Equinix, Digital Realty, Interxion, CyrusOne, QTS, and GDS, according to Synergy.
Dinsdale noted that some people see cloud computing and hyperscale operators as bad for the colocation market because they take growth opportunity away from these providers.
“I pretty much disagree with that whole notion. As our research shows, hyperscale operators are providing good growth opportunities for colocation providers,” he said. “When you look at the enterprise sector specifically rather than hyperscale and service provider sectors, the situation is more nuanced, but generally speaking outsourcing of all stripes is on the rise and that is good [for] colocation.”