Cloud Growth and Co-Location: The Newest Neutral Relationship

By: Doug Bonderud - Leave a comment


Co-location is on the rise. According to a study by consultancy North American Data Centers, multitenant data center leasing in the U.S. increased by 25 percent from 2015 to 2016, with strong growth expected through the first half of 2017. But that’s only part of the story. While retail investments are still on the rise, wholesale co-location from big players is up significantly thanks to massive cloud growth. The result is what may be the tech market’s newest neutral relationship: cloud and co-location.

The Rise of Co-Location

Data Center Knowledge puts it simply: Co-location and the cloud killed the data center. In a world where companies could rent secure storage space from co-location providers and leverage reliable connections through cloud vendors, the cost of building a private data center simply didn’t add up. And just like the cloud, co-location has gone through its share of growing pains.

For example, a lack of standardization means companies need to be careful when it comes to negotiating contracts and considering how they calculate costs. Is there a fixed charge per kilowatt of infrastructure? What does the ramp schedule look like, and what are the renewal terms? But in a similar vein to a cloud service-level agreement, co-location providers have worked out their biggest issues and attracted companies from across the industry gamut.

And with co-location well-established, a new shift is underway. It’s driven by a number of factors, including the rapid uptake of co-location services in the Asia Pacific region, where the market is projected to grow by 14.3 percent between now and 2020, according to a Market Intel Reports study.

Also critical to the industry is the rise of public clouds and the “race to zero.” While cloud front-runners spent big to build their own data centers, competing in the cloud marketplace now requires scale more than specificity. As a result, some companies are leasing co-location space.

The Cloud Companion

While cloud and co-location make sense as a unified package, there’s often a sense of opposition. Traditionally, data centers were designed to offer single-tenant access to network services with cloud computing as a kind of digital free-for-all. But thanks to big cloud growth, Data Center Knowledge notes, the shift to hyperscale co-location has created a new opportunity: neutrality.

Co-location providers already understand the value of carrier neutrality. Companies want the ability to leverage multiple telecommunication providers — or even connect with other co-location centers — from their chosen provider. But in a cloud-first world, that’s no longer enough. According to CIO Dive, multicloud is now the preferred strategy for organizations, with 85 percent developing multicloud initiatives this year, up from 82 percent in 2016.

Enter cloud-neutral co-location environments that provide tenants the ability to seamlessly connect with the cloud of their choice. This is the new normal in IT, because C-suites and tech professionals alike demand the ability to leverage the tools and services they want when they want them, unfettered by arbitrary rules or roadblocks.

Bottom line: There’s a twofold shift underway in co-location and the cloud. Co-location is the new cloud center, as tech providers see the benefit of leasing space rather than building new server stacks. At the same time, co-location providers are also developing a cloud neutral framework to supplant and surpass existing carrier-neutral arrangements. This creates a double growth pool for co-location as both first-party clouds and third-party clients look to maximize their tech investment.

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About The Author

Doug Bonderud

Freelance Writer

Doug Bonderud is an award-winning writer with expertise in technology and innovation. In addition to writing for Pivot Point, Security Intelligence, The Content Standard and Kaspersky, Doug also writes for companies such as McMurray/TMG and Straight North.