Today, IT infrastructure is more important than ever before. Before implementing any form of digital transformation strategy, business leaders must first rethink the physicality of data. As the need for speed and efficiency grows, the need for colocation solutions has never been greater.

The global colocation market is forecast to grow at an annual growth rate of 6.5% from 2021 to 2027.  Due to a number of factors, such as the widespread shift to cloud services and increasing government data protection laws, the demand for colocation will only continue to gain momentum.

So what exactly is colocation, why is it so crucial for IT managers today, and what trends can we expect to see throughout the remainder of this year?

What is colocation?

In a nutshell, colocation is a service that allows businesses to rent space in a data centre. The data centre provides the physical space, power, cooling, and security that businesses need to house their IT equipment, as opposed to hosting this on-site. The reason that businesses have been turning to this solution in the last few years, is down to the number of benefits that it offers.

1. Improved services/performance – Colocation data centres are typically equipped with the latest technology and are staffed by experienced professionals. This can help businesses improve the performance of their IT applications.

• Saving time and money – Colocation can help businesses significantly lower their IT costs by outsourcing the management and operation of their data centre. By making use of the already established and fully maintained infrastructure of providers, businesses are able to save on upfront investments. Secondly, businesses can take advantage of colocation’s high bandwidth and low latency to reduce network costs.
  

• Compliance – Many industries are subject to rigid regulatory standards in order to keep their IT infrastructure protected. However, meeting these standards isn’t the quickest and cheapest process – it can be time-consuming and costly, especially for businesses that do not have the expertise or resources to do so in-house. With colocation offerings, businesses are provided with access to pre-certified data centres that are already fully compliant with all regulatory requirements necessary. You can imagine the time and money that businesses save here, as well as giving the comforting knowledge that their data is secure.

In addition to this, colocation firms have data centres distributed across multiple geographic locations, which in turn helps businesses to protect their data from any local natural disasters or other disruptions that occur.

• Enhanced security – Data centres that provide colocation services are typically located in secure facilities and are monitored 24/7. With a growing number of threats in today’s landscape, this can help businesses protect their data from unauthorised access and prevent breaches and exploits.

And this goes even further than physical security measures; colocation data centres also have strong cybersecurity postures. Firewalls and intrusion detection systems are among the array of security measures in place to protect data from cyber threats. They also have disaster recovery plans in place to ensure that data is protected in the event of a natural disaster or other disruption.

• Sustainability success – The introduction of the Climate Neutral Data Centre Pact aims to ensure that members’ data centres become climate neutral by 2030 through the adoption of a number of measures – along with a rising demand for sustainable data centre services across industries, has driven data centres across the world to adopt new sustainable initiatives and lean into strategies that reduce environmental impact. For colocation providers, sustainability has become a crucial building block in their growth, to meet this rising demand. As a result, colocation data centre facilities tend to be more environmentally friendly than the typical on-premises data centre.
  

With the demand for sustainable services at the front of their mind, we’re seeing more and more companies migrate their data to colocation data centres. For instance, the relocation of Euronext’s data centre from London to the Global Cloud Data Centre of Aruba in Ponte San Pietro was decided in response to multiple factors, one of which was the desire to use a provider that meets certain requirements in terms of infrastructure sustainability.

Firstly, new generation colocation data centres are often built to be energy efficient by design. They use high-efficiency power supplies and cooling systems, and host a number of other features that help to reduce energy consumption. They are also more likely to use renewable energy sources, such as solar and wind power, to reduce their carbon footprint, which, by the way, is among the five initiatives part of the CNDCP pact.

A glimpse into the future

There are several trends that are likely to drive the growth of the colocation market further in the coming years. Take the increasing need for high-performance colocation as an example; businesses are increasingly demanding colocation services that can provide high levels of performance. This is being driven by the widespread shift to cloud-based applications and the growth of the IoT, AI-based applications and the huge increase in density on the power-per-performance capabilities of newer generation of servers foreseen in the next years. What’s more, the demand for sustainable colocation in particular is rising, as the environmental impact of IT infrastructure is becoming more and more of a priority for businesses.

However, colocation does not come without its challenges. For starters, the colocation market is becoming intensely competitive due to the entry of new players, as well as the expansion of existing players. What’s more, it is facing a number of regulatory challenges, including data privacy regulations, cybersecurity regulations, and environmental regulations.

Furthermore it will still be subject to, and likely even more than before, two historical challenges: the need of power availability (data centre market is esteemed to have used 1% of the planet’s total power consumption in 2021) and the risk that local regulations are not supporting with the correct timing the challenges presented by this sector.

So, can we expect the colocation craze to continue? In short, yes. Despite the challenges, the adoption of colocation strategies will only continue to grow in the years to come, driven by the need for businesses to have a more resilient and flexible IT infrastructure. As the market continues to grow, it is important for businesses to evolve with it, and stay up-to-date on the latest trends and developments.