Colocation (Kolokation)

What is a collocation

In the dictionary the collocation (colocation) is defined as joint placement or location of two or more objects. In terms of IT infrastructure, the collocation is placement of a computer hardware on the general platform. This general platform should have all necessary infrastructure and security aids for service and protection of the installed equipment. It also should provide reliable connection with telecom operators, clients and business partners.^[1]

The main types of placement of a computer hardware are listed below:

• placement of a computer hardware in data center of provider. For these purposes places in server racks of provider are selected.
• placement of server racks in data center of provider.
• lease of space in the machine hall.

Colocation covers full range of services, and search of their best combination requires careful comparison of requirements of business and pacing factors of the choice of the provider of the corresponding services providing service and protection of your IT infrastructure.

Providers build big data centers to use economic advantages of placement of the equipment of a large number of clients within uniform infrastructure. The architecture and the corresponding reliability of data processing centers very much differ, but the operator of a world class should use the checked constructive solutions having such functions as:

• the architectural durability providing protection against natural disasters;
• the guaranteed power supply consisting of sources of uninterrupted power supply (UPS) and reserve generators
• two separate entry points of the optical cable;
• physical and electronic security systems.

Construction and operation of several data centers increases efficiency of IT infrastructure and reduces operating costs at provider. If the provider has in Europe data processing centers, he will be able to sign general agreements which integrate other minor contracts and agreements with clients. This combination of structural and operational advantages allows provider to try to obtain the high levels of smooth operation and to offer agreements on the required service level.

Advantages colocation

To services colocation project implementations of consolidation of IT infrastructure, approach of network resort to clients and business partners, or simple cost reduction and concentration actually on IT resources, but not infrastructure for expansion of the existing DPCs. Here some more reasons of use of services colocation:

• Financial incentive. The companies which were limited in the actions to pared budgets earlier with hope look now at outsourcing. Outsourcing is a profitable opportunity to shift a capital expenditure to shoulders of provider and to spend the released funds for core business.
• Change of data centers. At the rapid growth of requirements to heat release and cooling of a computer hardware observed in recent years the companies are faced the need to invest millions of dollars in construction of the respective premises for placement of the IT infrastructure. The complexity of management of data centers and the related risks and also increase in adverse environmental impact, forces many leading companies to resort to services colocation.
• Consolidation. Having carried out the inventory of the data centers and the corresponding infrastructure, many companies came to a conclusion that using modern technologies they can achieve enormous economy, having taken measures to their consolidation. Consolidation of a set of data centers on the platform of one large provider the place allows to refuse a new capital expenditure and, the main thing, allows to reduce operating costs significantly.
• Technology upgrade. Along with data centers also technologies develop. New protsesoor, platforms for servers, storage systems (DWH) and network equipment are issued. A blade - servers"cloud" calculations and virtualization, as well as many other technological solutions, incredibly expanded possibilities of IT departments. Use of these advanced technologies means existence flexible and expanded, but at the same time not too burdensome financially, data processing centers. Providers offer services in providing the equipment in lease (dedicated) and to expansion of your hardware resources in the future.
• Reserve data center. Usually colocation resort to services in case of need in auxiliary or abnormal data centers. In this case such choice is logical as it provides economy of a capital expenditure, the built-in connectivities to network, and accomplishment of the normal requirement for remoteness from other data centers.

Russian market

2013

Despite economic conditions, demand for colocation and cloud services in Russia grows: outputs of the research conducted DCD Intelligence at the end of 2013 are like that.

Features of the Russian colocation segment, according to researchers, are:

• steady growth of demand for the areas of autohalls,
• the growing interest of the Russian enterprises in the outsourcing strategy of use of data centers,
• the aspiration of the international providers to create platforms for business in Russia.

Explicit deceleration in market development (in investment volume and opening of new machine halls) happened approximately in the middle of 2013. Till June, 2013 within 12 months the total amount of investments grew by 9% that contrasts with growth in 32% for previous year. Respectively, the total amount of machine halls during the same period increased by 8%, in comparison with 15% for previous year.

Despite obvious deceleration, these digits make the best impression, than indicators of Western Europe where average growth rates are 1.5% for machine space and 5% for investments.

According to the Russian research company IKS Consulting, the amount of the Moscow colocation market at the end of 2013 will be compared from one tenth amount of the market of data centers of London and one sixth markets in Frankfurt. In comparison with both commercial markets, the share of the available free areas of DPCs is also much lower.

The data published by DCDi demonstrate that the sector of colocation of Russia of 10% by a covering at the end of 2013 will need services of the third-party supplier (for comparison − in Germany 17% and in Great Britain 23%).

Representing about 76% of the colocation market of the Russian market, Moscow becomes the competitive and dynamic center for commercial services of data processing centers for Russia and in adjacent regions.

The capital colocation market in a broad sense includes:

• traditional telecommunication networks of operators (such as Rostelecom, VimpelCom, Megafon),
• the commercial DPCs belonging to the Russian suppliers (such companies as CROC, SafeData, Servionica and others).
• providers of services of data centers with foreign or international pattern of ownership.

To the last in particular, Linxdatacenter (the headquarters in Amsterdam) which entered the Russian market in 2006 after acquisition of DPC Cable&Wireless belongs. At the end of 2011 LinxDataxcenter opened the second data center on 9.000 m quarter in St. Petersburg.

The list of the international providers also includes Telehouse company which started at the end of 2012 the commercial project on sale of services of colocation in partnership with DataSpace. One more example of provider with the foreign capital - IXcellerate.

The area of autohalls in Russia from 2011 to 2013

Source: DCDi, 2014

Despite a talk on the current restrictions of deliveries for development of the Russian sector of colocation, operators instantly paid attention to opportunities for service providers with the correct strategy, and that number – promotion of services of DPCs to the enterprises which generate large volumes of Internet traffic.

While Moscow, most likely, will save and will even increase the provision of main "hub" of the country, other cities also have a chance to raise the status in this market. Several commercial providers, including Linxdatacenter and Selectel, already created regional platforms in St. Petersburg, the second in value colocation-market of the country, and about 10% of total amount are the share of them. Some companies (including, Megafon), created platforms in many regions of Russia, including Tatarstan, Murmansk and Siberia.

One of the cities with high potential of development of data centers in east part of Russia Novosibirsk, the third largest city of Russia with the population more than 1.5 million people is considered. In this region lower costs of labor resources and the earth, than in Moscow and St. Petersburg, and convenient strategic location for business in east part of Russia.

According to PMR, in 2013-2014 more than 50% of expenses on a collocation fall to the share of banks which use commercial services of DPC for data backup and duplication of IT systems. Financial institutions, as a rule, rent the area for 5-15 racks. According to DataLine for 2013, banks leased at this company on average 8 racks in DPCs.

World market

2019: Market size - $31.39 billion

At the end of May, 2020 the ResearchAndMarkets analytical company published some results of the research devoted to the world market of services of placement of servers in data centers (colocation, a collocation). Its amount in 2019 reached $31.39 billion. Experts do not specify dynamics concerning the 2018th, but assure that the considered market is on rise.

Follows from the report that increase in volumes of digital data leads to increase in demand for data processing centers around the world. The Cisco company predicts that by the end of 2021 IP traffic of data centers around the world will reach 20.6 Zbayt in comparison with 6.8 Zbayt in 2016 (these data bring into ResearchAndMarkets). Mainly this growth will be caused by demand growth from providers of cloud services and the IT companies.

The market of services of a collocation in DPCs in 2019 reached $31.39 billion

It is expected that annually the volume of all digital data generated in the world will increase by 35%. That will force many organizations to double the volume of the storages each 3 years.

Against the background of such trends the collocation became a profitable option for the organizations of the different size as allows to solve a data storage problem without essential capital costs.

At the end of 2019 North America and the Pacific Rim of which 78% of global power together were the share became the largest markets of services of a collocation in volume of the provided capacities. 

However, as expected, during the predicted period the palm will pass to Europe. Already now there are over 2148 platforms for placement of servers of the customers mainly concentrated in Great Britain, the Netherlands, Germany, France and Denmark.

Taking into account investment volume the market of a collocation in Europe during the considered period prodemonstirut some of the highest growth rates, experts predict.

Among the industries the highest growth rates during the period from 2020 to 2025 on services of a collocation, as expected, will be shown by health care. Medical institutions accumulate data on clinical trials and out-patient treatment more and more actively in order that — analyzing these data — to learn to treat patients more effectively.

But not all organizations in the field of health care have an opportunity to collect data owing to lack of necessary infrastructure. And the collocation in this case becomes the way out of a situation. Besides, the governments of the different countries oblige organizations to store medical data in data processing centers, but not own local storages. 

Besides, a number of additional state initiatives which will contribute to market development of a collocation is expected. For example, the government of China by the end of 2020 is going to create a uniform national electronic health care system which will demand additional resources.

The market of a collocation is fragmented that is caused by presence of a large number of players. The largest of them — AT&T, NTT Communications, IBM, Softbank, BT Group and others. In competitive struggle of the company use different tactics among which there are merges, absorption, partnership and investments into own development.

glorification of volumes of digital data leads to increase in demand for data processing centers around the world

According to experts, in 2019 in the market deficit stoykomest is observed. The main players were at a stage of building of the following queues while availability stoykomest in already constructed DPCs is almost exhausted. The clients wishing to place a large number of racks in commercial DPC are often forced to transfer the plans waiting for the end of construction of new platforms and increase in the offer.

According to the forecast of ResearchAndMarkets, by 2025 the size of the market of services of a collocation in data centers will reach $58.28 billion. At the same time the annual average growth rate from 2020 for 2025 will be 10.92%.^[2]

2018: Growth of the market by 10% to $34 billion

In 2018 the volume of the world market of services of a collocation in data centers exceeded $34 billion, having increased by 10% concerning the 2017th. Such data published on March 26, 2019 in Synergy Research Group analytical company.

The most fast-growing region in the considered market researchers call Asia-Pacific. The second place on dynamics was taken by EMEA (Europe, the Middle East, Africa), the third — North America. Among the leading countries the greatest growth rates are shown by China, Brazil, Japan, Germany, Singapore and Hong Kong.

Categories of clients with the most fast-growing expenses on services of a collocation in data centers, data of Synergy Research Group

Most quicker increase expenses on placement of the server hardware in DPCs the so-called hyper scalable companies. Here the largest suppliers cloud and Internet services, providers PaaS, SaaS and IaaS, owners of search systems, social networks and marketplaces belong.

Such clients in 2018 increased costs for services of a collocation for 24% in a wholesale segment and by 16% in retail. At corporate and state customers these investments were raised for 1% and 7% respectively.

Synergy Research Group selects one more client category in which include telecommunication operators, suppliers not cloud and Internet services, the hosting and outsourcing companies, suppliers of content and digital services. Here expenses on a collocation in 2018 increased approximately by 9%.

The analyst of Synergy Research Group John Dinsdale does not consider surprising leadership of the hyper scalable companies in the market as they actively expand the networks of data centers worldwide in this connection their capital expenditure in 2018 jumped by 43%.

To support so rapid growth, they cannot just build data centers — they need also to cooperate with service providers of a collocation for lease of both large objects, and capacities in small points — the expert noted.[3]

2015

Equinix - the market leader

In April, 2015 the given 451^[4] were published^[5]. Researchers note that in the first quarter 2015 the Pacific Rim took the second place in the rating of the largest markets colocation, having forced out EMEA. In respect of geography, the North American market remains to the largest: it has 42.6% of the world areas colocation. It is followed by the Asia-Pacific market (26.5%), Europe and the Middle East (26.4%) and Latin America (4.6%).

Source: 451 Research, 2015

According to data for the first quarter 2015, colocation is the market leader Equinix occupying 8% of a share of an annual income of global wholesale and retail sales colocation. On the second place on income - Digital Realty, at it is nearly 6%, despite the fact that, the company possesses more operational areas, than to her competitors.

Analysts consider that the market will grow further in the plan of the total operational area and will rise from today's 10 million sq.m to 14 million sq.m by the end of 2017. The world market kolokeyshen by 2017 will bring income in the amount of $36.1 billion. It is significant growth in comparison with forecasts for 2015 - $22.8 billion, and 78% fall on local medium-sized players.

World nodes of a collocation: Amsterdam outstripped London

In March, 2015 Amsterdam was entitled the capital colocation in Europe. For the first time in a decade Amsterdam outstripped London. According to researchers of a commercial real estate of CBRE, the need for services colocation in Amsterdam is higher now, than anywhere in Europe.

Providers sold colocation in the capital of the Netherlands during 2014 to 22 MW of the computing area – the gain to results of 2013 made 97% that allowed the city for the first time since 2004 to beat the championship of London.

"In 2014 Amsterdam endured year of record growth colocation when a number of large deals took place. New owners – the enterprises of the industry of media, technologies and telecommunications, promoted increase in level of demand in the market", - Mitul Patel, the associated director on researches of the market of data centers of EMEA in CBRE says.

According to the research CBRE, exactly a third of 66 MW of the general demand for colocation in Europe in 2014 fell to the share of Amsterdam –. Growth coefficient colocation did not fall in the region lower than the level of 2013.

On the other hand, there are indicators of decrease in demand for services colocation in Europe. Unlike the report CBRE, other firm - Synergy Research Group – specifies that growth of the same segment of the market in China was only 20%. At the same time 451 Research estimated income of the market colocation in global market in the amount of more than $25 billion a year.

"London as the international financial center remains the most steady market in Europe, and Frankfurt remains the engine of financial transactions, providing the high level of communication and being in the lead in the field of data protection in the EU", - Andrew Jay, the head of division of solutions for DPCs says in the market of EMEA in CBRE.

"We expect that the trend of growth will remain also in 2015, there will be new data centers, including the planned construction of Infinity in a campus London-Stratford and an object of Gyron in Hemel Hempstead". "At the time of the increasing competition in the market recently announced acquisition of Telecity Interxion is very timely consolidation of two largest players in the industry".

2014: Market size is $25 billion

According to the data of research company 451 Research published in December, 2014 the annual turnover of the world market of services in joint placement of the client server hardware in turbine halls commercial DPC (colocation) at the end of 2014 reached 25 billion dollars USA. At the same time colocation providers falls more than a half from revenue total volume to the share of six percent of the largest now. These digits appear in the report of Datacenter KnowledgeBase (DCKB).

Data of 451 Research show, positions of the largest players of the market are how strong and also speak about existence of a huge great number of small players. So, colocation falls to the share of 10 largest participants of the world market 28% of revenue total volume (or 7 billion US dollars) whereas 52% of the yruchki fall to the share of 60 largest players (or 13 billion US dollars).

Authors of the report note that the market is actively consolidated. Authors of material gave a number of fresh transactions as examples: acquisition American colocation provider of Colt of the large competitor on KVH Pacific Rim in November, 2014 and also acquisition of Shaw Communications of ViaWest company for 1.2 billion US dollars (this transaction was closed in July). It is possible to refer acquisition of Zayo of CoreXchange company in March to number of examples of small transactions which took place in 2014, acquisition of DataBank of Arsalon company in May and also purchase of Colo5 of Florida Cologix in September.

But even despite a wave of transactions of merges and absorption, more than 1000 companies still work in this sector now, many of which are quite strong players in certain regions. These small players generate remained 48 percent of revenue.

"In fact, rental of premises in commercial centers of data processing in lease to corporate clients is regional business. Thus, despite active consolidation and the continuing merges among the largest colocation providers, a considerable part of the market remains strongly fragmented at the expense of different national and local players", - Greg Zvakman, the head of division 451 of Research of quantitative researches says.

According to 451 Research, for the last 10 years the most part of investments into creation of commercial data centers fell to the share of the large markets where there are many potential tenants. Nevertheless, as the head of division 451 of Research of researches of the market of commercial DPCs of North America Kelly Morgan noted, specialists of the company observe the growing interest to the new markets from large players.

To that there are several reasons. For example, by construction of new local server farms colocation providers can attract tenants who need to minimize delays at data transmission. Besides, such approach allows them to achieve decrease in operating costs. For this reason specialists of 451 Research expect to see rapid growth of some secondary markets within the next several years.

In the report of 451 Research the 176th are in detail described known the project on expansion of commercial server farms and also 134 projects on construction of new DPCs of similar appointment which are implemented worldwide now. Experts note that New York and London are in the lead on the area and power of commercial DPCs which will be for the first time put into operation or are expanded within the next several years.

Now a little more than 60% of the planned expansions and projects on construction of new commercial DPCs fall to the share to North America, but the Pacific Rim and region of EBVA (the country of Europe, the Middle East and Africa) show high growth rates of this indicator. And large colocation providers is actively investigated by these regions to define where additional DPCs are required. One more perspective market is Latin America. Local market comes very close to the others in terms of the average size of revenue at the rate on one DPC. 4.5% of 3685 data centers which were studied by preparation of the report of Datacenter KnowledgeBase and also 5% of turnover of the world market colocation fall to its share.

By preparation of the fresh report of Datacenter KnowledgeBase the database which covers 3685 separate commercial data centers belonging 1086 colocation provider was created. The speech about the companies servicing North America, EBVA region, the Pacific Rim and Latin America.

See Also

• Overview of TAdviser: Commercial DPCs
• Data processing center (data center)
• Key services based on DPC
• Russian market of DPC
• Trends in the Russian market of data centers
• Cloud services (market of Russia)
• Russian IaaS market
• What is "green" data center?
• Measurement of profitability of DPC
• Container DPCs
• Technologies for DPC: Solid state drives (SSD)
• World market of DPC
• Main trends of the world market of DPC

Notes