The initiative was launched in France three years ago and with more than 30 companies as members, the Colo Circle – known as Cercle ColoC – has been a success over the years. Meeting twice a year at Schneider Electric, the leadership of colocation companies in France discussed the current business environment, and their perspective of the year ahead. While there were macro-economic trends undermining France’s economy at present, colocation remained a strong business with acquisitions still in play and further expansion planned both within Paris, and across a number of business cities in the country.
International consulting firm BroadGroup presented a detailed perspective of the colocation market landscape, current trends and drivers, and future growth. The company has focused on data centre, hosting and cloud markets for the past nine years, carries out strategic consulting with key players, extensive work with investors including full commercial due diligence and has recently undertaken significant projects in the Kingdom of Saudi Arabia, Russian Federation, Brazil, Singapore, Malaysia, and South Africa. Its research includes Colocation Markets Quarterly covering the four Tier 1 markets in Europe, and it also hosts a number of major events around world including the Finance and Investment Forum for Data Centre Hosting Cloud (London, January 22, 2015) and the Datacloud global congress (Monaco, June 3-4, 2015).
BroadGroup expects that the number of global Internet users and Internet-enabled devices - key drivers for data growth - will grow at a compounded annual growth rate (CAGR) of 17 per cent and 27 per cent in 2013 and 2018, respectively. Video streaming is another important new driver. Netflix for example now accounts for 35% of all Internet traffic in the US with an average home using 20.4 Gb of content per month.
CIO perceptions are changing too. BroadGroup reported that several years ago data centres were often regarded as a pain point because of data growth, lack/cost power, old estates, and previous lack of focus. However data centres have returned as a top priority and seen as the key to IT architecture, Cloud plans and the move to outsourced offerings. 24% of UK data centre space as a proportion of total space is now outsourced.
BroadGroup believes that Data centres in mature markets are part of a broader IT/Internet infrastructure and attractive to many market sectors and users. This means that focus has shifted to the business benefits rather than the technical features of colocation and a strong proposition and positioning around cloud.
Cloud changes the notion of thinking in terms of compute (plus potentially network and storage) resource rather than data centre usage and leads on to Pay-per-use, linking data centre costs to business and application costs, virtualized/on-demand resources and agile and dynamic provisioning.
“Cloud means that procurement is no longer the reserve of data centre specialists, even property people or led by specific applications, but by a broader IT infrastructure and cloud strategy,” commented Steve Wallage, Managing Director, BroadGroup Consulting.
Presenting different strategic alternatives for colocation and cloud, BroadGroup believes that flexibility in the data centre world, used to mean offering different Tiers within the same facility.
“We are now seeing highly flexible or monthly deals and a move towards more dynamic on-demand offerings,” said Wallage.
The evolution of more flexible business focused offerings will lead to significant growth trends in the colocation market with 16% CAGR in Asia up to 2018.
Representatives of colocation providers from Brazil, France, India, Mexico, Russian Federation, Singapore, Italy and the UK subsequently discussed a number of key topics impacting Colocation. Output from these discussions revealed:
The impact of cloud on colocation: A number of short-term opportunities existed as Systems Integrators look to position for cloud; in the longer-term, scale becomes more important, otherwise providers need to adopt a more differentiated approach
The impact of Internet Giants on colocation: providers can attract Internet Giants as anchor tenants with opportunities to resell and distribute their services. However they are likely to become more of a hosting competitor.
Selling and marketing datacentres: Availability and SLAs were seen as key. Power usage is becoming more important – and must show exact usage. However providers were not yet seeing much vertical market difference. Customization is often provided by Systems Integrators.
Geographic opportunities: Increasingly providers need M&A and local partner to enter new markets. Main hubs were still very important. In Latin America key demand is still predominantly government and financial.
Business Models: Colocation is increasingly a commodity and pricing is generally flat – in France, it had fallen slightly in recent years – in Russia, more dramatically so. EBITDA margins will reduce as costs increase while pricing remains flat at best. Connectivity requirements at datacentres are increasing due to synchronization and replication drivers.
Future datacentre build: Flexibility is regarded as key to meeting different customer needs and providers need to offer differentiated services to industry segments. In Latin America for example, oil and Telco’s each had different requirements.
Impact of Modular build, Environmental issues and Regulation: Colocation providers were experiencing increasing changes and pressures in an increasingly regulated industry. A strong need was identified for an internal audit of the environmental position to be adopted by the entire organization. Environmental issues present both opportunities and key challenges for end-users.
The meeting was considered by participants as an outstanding success:
“A very engaging event with an excellent opportunity to network with peers from all around the world” representative from Kingsland Development, Singapore
“We experienced good networking, a great venue, good attendance, and good sharing trends. Very rich content and the benefit of a panel discussion” representative from KIO Networks, Mexico