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Jun 22, 2021

U.S. Colocation is Hot Right Now — Here’s Why

Laura Vietmeyer, Managing Editor

The global data center market is expected to reach 58140 million USD[1] by 2026. In the U.S., colocation is hot, and—reflecting the global market—is expected to continue to grow over the next five years.

Let’s take a closer look at why.

COVID-19 Changed the Landscape

The last 15 months have had a significant impact on the necessity for data storage, low latency and data processing. Streaming and social media companies that boast billions of users continue to grow and expand their colocation footprints. Increasing e-commerce sales have prompted retailers to more heavily in invest in IT infrastructure.

Although we’re all weary of hearing about the impact of the COVID-19 pandemic, it’s undeniable that this event has affected how we work and live. Despite the strides we’ve made to return to normalcy, some things will be forever changed—colocation being one of those things. In HorizonIQ’s 2020 State of IT Infrastructure Management, the majority of respondents said the pandemic has changed their IT strategies, accelerating the move to the cloud or a colocation data center.

Amid the pandemic, many enterprises downsized their commercial real estate footprints as their employees shifted to remote work. This downsizing included moving out of inefficient on-premise data centers that housed mission-critical, CAPEX-intensive infrastructure. Operations leaders have looked to colocation providers to find a new home for this infrastructure before considering establishing new on-premise facilities or refactoring applications for hyperscale models.

The pandemic also underscored how the global economy is increasingly reliant on digital services. Even as some companies shift back to working in an office, we won’t see a rush back to an on-premise model. At least part of this has to do with network and data storage demands.

Network and Data Storage Needs Aren’t Going Away

There’s no instance where we’ll go back to a time when we’re using less storage and less network bandwidth. Remote work is more of a norm than ever before. Streaming is up and doesn’t show any sign of abating, especially considering that movies are being released to streaming services in addition to (or sometimes foregoing) a theatric release. Pair these with the Internet of Things (IoT), AI, Machine Learning, robotics, and autonomous vehicles, and the demand for larger bandwidths and lightning-fast data processing has never been higher.

Lower latency and faster network connectivity are a must. Colocation data centers fulfill this need for speed, allowing customers to choose data center facilities closer to their users, and enhancing storage and networking services. The emergence of 5G will also boost the deployment of colocation services, allowing colocation providers to operate in remote locations.

Enterprise Companies Don’t Want to Be Data Center Operators

In addition to the acceleration of the move off-premise noted earlier, enterprise companies who previously built and ran their data centers are realizing that they don’t want to be data center operators. The costs associated with owning and maintaining a data center are high. Studies show that owning or building a data center can cost over $300 USD per square foot.

For SMBs, owning a data center is cost prohibitive. And while larger operations might be able to absorb these higher costs, owning and operating a data center is not an area of expertise for these companies. As such, they are starting to sell leasebacks of their facilities and are becoming tenants again in those buildings. Colocation in a third-party data center is the ideal route, saving on operational costs and on the time it takes to manage the data center itself, on top of managing the IT infrastructure it houses.

This decline of the enterprise-owned data center is expected to drive market growth for the foreseeable future.

INAP for Colocation

Choosing the right provider for your colocation needs is the difference between settling for a new solution that merely beats your legacy solution or taking your infrastructure and applications to the next level as you build for the future.

INAP Colocation provides highly secure and fully redundant data center operations, infrastructure, and storage, all underpinned by our patented network route optimization technology. We are also located where enterprise and SMB companies need to be, with Tier 3 data centers in the Tier 1 key markets that offer the capacity to deliver power up to 20kw racks. We have excellent network connectivity and a backbone to all the major cities. And, on top of high performance, we offer a spend portability program that allows you to swap your colocation investment dollar for dollar for a different INAP colocation facility, HorizonIQ Bare Metal Cloud, or one of HorizonIQ’s other services.

At HorizonIQ, we’ve seen first-hand the rising demand for colocation. Over the last 12 months, we’ve added 1.8 megawatts of capacity in our flagship Los Angeles data center to meet the needs of enterprise customers. These larger entities are looking to off-prem their storage and DR needs. Because of the demand, HorizonIQ will be completing another expansion in the coming months.


[1]Data Center Colocation Market Size To Reach USD 58140 Million By 2026 at a Cagr of 8.3% – Valuates Reports,” Cision PR Newswire, April 22, 2021

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About Author

Laura Vietmeyer

Managing Editor

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