Hyperscale operators become the fastest growing customers of colocation services

28 March 2019 | Natalie Bannerman

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Hyperscale operators have become the fastest growing customer category for colocation providers, according to new figures from Synergy Research Group.

Revenue in 2018, for both wholesale and retail colocation, grew much faster than revenues from other service provider customers and from enterprises. The overall colocation market grew by 10% in 2018, while hyperscale operators grew by 24% in the wholesale segment of the market and by 16% in the retail segment. Other types of service provider, shortly followed by enterprise customers, followed this. Spend on wholesale colocation was relatively flat in 2018 in comparison to 2017, while enterprise spending on retail colocation grew by 7%.

“It comes as no surprise that hyperscale operators are providing a boost to colocation providers, as they are on a charge to rapidly extend their worldwide data centre footprint and in 2018 ramped up their capex by no less than 43%,” said John Dinsdale, a chief analyst at Synergy Research Group. “In order to support this rapid growth they cannot just build their own data centres, so they also need to rely on colocation providers to lease out both large wholesale facilities and capacity at smaller edge locations. Hyperscale operators are becoming an ever-more important source of business for leading colocation companies such as Equinix, Digital Realty, Interxion, CyrusOne, QTS and GDS.”

The total colocation market grew to $34 billion in 2018 as indicated by Synergy’s Q4 and year-end data. Regionally, growth was strongest in Asia-Pacific, followed by EMEA and North America. Among the 20 largest country markets, the highest growth rates were achieved in China, Brazil, Hong Kong, Japan, Germany and Singapore.

Hyperscale operators comprise the world’s major cloud and internet service firms, including the largest operators in IaaS, PaaS, SaaS, search, social networking and e-commerce. The other service provider category includes telcos, non-hyperscale cloud providers and internet service firms, hosting/outsourcing companies and content & digital media service providers. The enterprise category includes all other industry verticals plus government and the public sector.