Colocation and data centre markets undergoing rapid shifts

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Growth in the carbon neutral data centre market is expected to be driven by various government policies and environmental regulations.

The colocation and data centre markets have been undergoing rapid shifts in both the vendor landscape and the ways that customers consume services.

With Europe and North America remaining the largest markets for global colocation providers, dominant players try to stand out by addressing key customer needs and trends in different ways.

New Forrester research identifies major themes we’ll see in the data centre and colocation markets in 2021 and beyond.

Key takeaways include:

  • Colocation providers have become far more than infrastructure providers: Leading players will position themselves as partners in digital transformation and offer neutral service marketplaces.
  • Sustainability, Edge Computing, And Interconnection Drive New Trends: Sustainability and green energy procurement efforts are taking centre stage. At the same time, research shows that findings data centre workloads increased by 650 per cent between 2010 and 2019 while overall energy use remained flat.
  • M&A activities are consolidating the market: Vendors are rarely pursuing organic growth and colocation players with an existing multisite footprint have become especially attractive for acquisition.

According to the carbon neutral data centre market is projected to grow from US$3.46 billion in 2020 to US$9.42 billion by 2025, at a CAGR of 22.17 per cent from 2020 to 2025. The growth in the carbon neutral data centre market is expected to be driven by various government policies and environmental regulations especially which are aligned to reducing carbon emissions, for example, the International Climate Agreement.

Apart from this, the ongoing trend of Industry 4.0 and digital transformation, which has increased the amount of data being produced due to the data intensive nature of the applications, has significantly impacted the market.

The carbon neutral data centre market by industry has the largest share in the IT and telecom industry, followed by the BFSI industry. The IT and telecom industry or the ICT industry is a data-driven industry. Almost all the applications are data intensive and generate a huge amount of data in the entire value chain.

The telecom industry is dependent upon data centres as data transmission during internet services requires constant storage and processing, which is a primary criterion for quality services. Thus, in order to maintain quality, the industry has to rely on data centre facilities.
The hyperscale data centres have the highest potential in the carbon neutral data centre market by data centre type.

It is expected to be the most impacted type as most of the hyperscale operators and service providers such as Google and Microsoft have pledged to achieve carbon neutrality in their entire value chain by 2030. The companies have shown that lower PUE levels are possible to achieve with the use of efficient technologies utilizing renewable energy in the entirety of data centre operations.
Apart from this, the ongoing trend of cloud migration has also helped the market for hyperscale data centre types.

The colocation type data centre is accounted for the second-largest share in the market. The ongoing trend of digitisation and the development of various technologies such as extended reality, internet of things (IoT), artificial intelligence (AI), and other enabling technologies have helped many start-ups to grow.

These start-ups do not have much financial support to own and operate a data centre that supports their operations. This is where the colocation data centres become a solution for the needs of various smaller organizations with data centre demands.
The hardware segment has the highest share among other solutions and is expected to remain the largest contributor in the market (by carbon neutral solution).

Every data centre has a set of hardware equipment and devices which form the basis of data centre operations. These include servers, power and cooling equipment, storage, and networking devices. All these devices are crucial for a data centre.

Among these devices, servers consume almost half of the total power consumed by the data centres, followed by the cooling and power equipment. During the forecast period, the power consumed by the cooling and power segment is expected to reduce due to the increase in demand for efficient cooling systems.

Impact of COVID-19 on Carbon Neutral Data Centre Market
COVID-19 has restricted the growth of almost every industry globally owing to the measures such as lockdown and travel restrictions undertaken by the governments. Due to this, the entire supply chain of the data centre industry has been negatively affected.

This has restricted the flow of various equipment and devices, which are essential for data centre operations, due to which many data centres were not able to get commissioned, and many projects were stalled.

The lockdown also restricted people from traveling, which disallowed many data centre architects and engineers to reach onsite for the construction of new facilities and maintenance of existing facilities.

The server utilisation rate was also affected due to the halt in various computing activities in almost every industry. Many operators have reported that almost half of the servers were online during the pandemic. However, industries such as telecom, which is the largest consumer of data centre, operated in their fullest capacity and thus maintained the demand for data transmission and transfer services. This has also helped the industry to maintain a minimum operational return from the online services.