Report: Colocation services in North America to reach $25.5B this year

Edge computing is driving enterprises to use more colocation services, according to IHS Markit. (Pixabay)

Edge computing requirements are driving enterprises toward increased use of colocation services, according to a report by IHS Markit.

While there are various methods for enabling low-latency connections to users at the edge, colocation services ranked highest among IT decision makers in North America, according to a survey by IHS Markit.

Enterprises use colocation facilities so they can connect to the cloud, to IoT applications and services, and to other enterprises. These are data center facilities where a business can rent space for servers and other computing hardware. Most colocations include the building, cooling, power, bandwidth and physical security, while the customer provides servers and storage.

Colocation was cited as a key consideration for IT professionals planning while micro data centers, which IHS Markit said was previously a niche offering. This option was highly ranked to support processing and storage needs across dispersed geographies.

Overall, IHS Markit forecast the market for colocation services to reach $25.5 billion by the end of this year. As measured in racks, IT decision makers expect an average of 33% growth in total data center capacity from this year to next year. More than half (58%) of IT racks are expected to be placed in colocation data centers in 2019, up from 49% this year, according to IHS Markit.

Additionally, more than one-third (37%) of IT budgets will be spent on colocation services in 2019, up from 31% in 2018.

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The survey found that enterprises are making a move to colocation services in order to increase their application performance, improve speed of deployment into new data center space and decrease operational costs. Overall, the respondents expect to grow their overall data center capacity and to increase adoption of colocation services in 2019.

Some of IT decision makers' top colocation concerns include outages, compliance and regulatory issues, and changes to internal procedures.

Colocation providers, such as Equinix and Digital Realty, are battling it out to serve large cloud providers and telcos