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Forrester: Colo trends worth watching

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Here, Abhijit Sunil, analyst at Forrester, explores some of the most significant trends he has observed through his research. These trends highlight the most important messages that customers will hear from the major colocation players throughout 2021. They will also be the major differentiators that leading colocation players will promote.

The data centre market is rife with not just intense competition but also innovation. Indeed, data is the backbone of every industry today. And the data centres make the data accessible. This is also why there is increased scrutiny on how data centres operate and the overall effect they have on the environment.

Shaped by evolving consumer behaviour, enterprise needs and also the Covid-19 pandemic, the data centre and colocation market has been presented unique challenges and opportunities for 2021.

Data gravity heavily impacts decision making

Data gravity has introduced a chicken-or-egg problem in data centre market expansion. The concept states that, as data grows at a specific location, it is inevitable that additional services and applications will be attracted to the data due to latency and throughput requirements.

This, in effect, grows the mass of data at the original location. Data gravity is more important than ever because (a) we’re creating unimaginable amounts of new data and (b) with the Internet of Things (IoT), artificial intelligence (AI) and machine learning (ML), and the advent of edge computing, we keep inventing new ways to produce and consume piles of data. With the surge on the IoT and edge computing, more data will be produced in a decentralised manner.

The World Economic Forum estimates that globally, by 2025, 463 exabytes of data will be created each day. Data gravity is central to most decisions made by IT leaders when it comes to the geographic alignment of a data centre. This is also critical to how colocation vendors define markets.

Sustainability in the data centre

Scrutiny of the environmental impact of data centres is concurrent with their growth in the world’s major economic hubs. The 2020 Covid-19 pandemic boosted remote work models, surging global internet traffic by 40% between February 1 and mid-April 2020.

Data centre players have told Forrester that they are increasingly having to address the environmental impact a data centre will have around its immediate community right from the stage of planning and building the data centre.

At the same time, data centres themselves are becoming highly efficient. This efficiency offsets increasing energy demands. Colocation providers are among the top users of green energy and have been entering into long term contracts with utility companies.

This leads to price certainty and cost benefits that they can pass on to customers. According to 2019 US Environmental Protection Agency data, colocation providers are partnering with green energy producers as well as developing their own green energy-generation infrastructure.

Specialised workloads and services are increasing

Data analytics is on the rise in every industry, leading to unique workload environment demands by IT customers. The financial dynamics wrought by the Covid-19 pandemic don’t appear to have affected high-performance computing (HPC) services on public cloud.

HPC use cases are on the rise and include AI workloads and petrochemical applications such as seismic processing, depth imaging, financial analysis, and healthcare data mining. Services to support special needs are likewise rising.

According to Forrester analytics infrastructure surveys, in 2019 and 2020, 32% of global infrastructure decision-makers whose firms have implemented public cloud said they run HPC in their public cloud platform or plan to do so.

Running HPC on-premises often requires high upfront CAPEX and heavy OPEX requirements to cater to the power requirements. More colocation players offer the infrastructure and services necessary to run specialized workloads, including support for AI-based deep learning applications and thus offset the upfront hardware and talent investments needed.

Data centre interconnection is central to colocation benefits and a key strategy

Data centre interconnection – reliable, redundant network connectivity between sites – is among the primary advantages of the carrier neutral colocation model. All the major colocation players have robust interconnection roadmaps.

Leading colocation players started their interconnection strategies as neutral locations to exchange network traffic – being the connectivity option between Tier I communication service providers. This model remains prominent, but the colocation providers themselves now also compete with their telco partners.

Massive fibre buildouts got an impetus by growing remote work applications in Tier II and rural markets. This can also add to enterprise customers’ edge and cloud transformation strategies. For a variety of customers in a colocation facility, interconnection can address different strategic needs.

M&A activities are consolidating the market

The data centre industry has been moving toward larger facilities that optimise scale, sustainability goals, price guarantees, larger digital ecosystems, and most importantly, interconnection. Vendor consolidation yields this scale.

Mergers and acquisitions have been a constant in the colocation market, where fortune has favored the brave. While a few of the larger players have followed an organic growth approach, many others have actively pursued acquiring data centres, especially to boost their edge capabilities.

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