This article is more than 1 year old

Public cloud has gone from existential threat to friends with benefits for colocation providers

Hyperscaler demand for colo space growing in double digits

Rather than eating into colocation providers' revenues, public cloud vendors have emerged as their fastest-growing customer category.

Data from Synergy Research shows that, overall, the colocation market grew 10 per cent to more than $34bn in 2018.

Revenue from hyperscale customers – the world's largest cloud and internet service providers – grew 24 per cent year-on-year in wholesale colocation, and 16 per cent in the retail colocation segment.

In comparison, revenue from "other service providers" – which include telcos, ISPs, hosting and content providers – grew about 8 per cent in wholesale colo, and 9 per cent in retail.

Enterprise spending on wholesale colocation was relatively flat in 2018, while the retail segment grew 7 per cent.

A few years ago, the data centre industry was experiencing something akin to an existential crisis, with some experts claiming that the colocation model was on its last legs. On one hand, the market was consolidating around a handful of global players – recall Equinix's acquisition of Telecity or Digital Realty's recent purchase of Dupont Fabros for $8bn.

According to Synergy, data centre mergers and acquisitions hit $20bn in 2017, setting a new record.

On the other hand, the colo market was threatened by hyperscalers, which were building out their own massive data centres, benefiting from economies of scale and renting out servers much cheaper than what was possible in a colocation environment.

It's now clear these concerns were unfounded. Colocation has enabled public cloud vendors to quickly expand into local markets where they previously didn't have a presence. Unfortunately, such deals are often shrouded in mystery – neither colos nor hyperscalers want to reveal the full extent of their partnerships.

"It comes as no surprise that hyperscale operators are providing a boost to colocation providers, as they are on a charge to rapidly extend their worldwide data centre footprint and in 2018 ramped up their capex by no less than 43 per cent," said John Dinsdale, chief analyst at Synergy.

"In order to support this rapid growth, they cannot just build their own data centres, so they also need to rely on colocation providers to lease out both large wholesale facilities and capacity at smaller edge locations. Hyperscale operators are becoming an ever-more important source of business for leading colocation companies such as Equinix, Digital Realty, Interxion, CyrusOne, QTS and GDS."

Growth was strongest in the APAC region, followed by EMEA and North America. The highest growth rates were recorded in China, Brazil, Hong Kong, Japan, Germany and Singapore. ®

More about


Send us news

Other stories you might like