Current status of the collocation data center industry

Frost & Sullivan recently joined Frost & Sullivan to gather perspectives on current trends shaping market momentum and collocation challenges. Collocation data center report.. In connection with this report, Frost & Sullivan’s Global Research Director and Head of Energy and Environmental Best Practices, Gautham Gnanajothi, interviewed Sean Baillie, Executive Vice President of Marketing and Connection Strategy at QTS Realty Trust.

Gnanajothi: Sean, what are the key trends affecting the colocation services market in the next few years?

Bailey: First, our perspective is based on the fact that we serve all industries, including hyperscale, government and enterprise. The main trend we are seeing is a significant increase in space and power requirements per engagement, with average transaction sizes increasing in all three segments.

Also, COVID is not slowing demand. The pace of collocation and connectivity projects is increasing. COVID has created a global remote worker that accelerates interaction with all forms of digital services, including video and social media consumption. The underlying digital infrastructure that supports all of this growth is in the form of space, power, and connectivity projects and RFPs.

Hyperscale continues to expand. It targets about 30 of the world’s largest digital businesses, including Amazon, Google, Microsoft, Facebook, and Twitter. Hyperscale is defined as an organization that frequently purchases large volumes of capacity.

Three years ago, it averaged 10 MW of hyperscale trading, but now it’s 12, 24, and even 36 MW, and we’re tracking this very closely to accommodate it.

The federal government has made similar moves in terms of increasing space and power requirements, but it also tends to make strategic decisions for these organizations to reach the end of their on-premises data centers and withdraw. Integrate these facilities into a third-party multi-tenant data center.

Federal deployment sizes are typically one notch lower than the average hyperscale transaction and are typically offered in increments of 5-10 MW. We’ve been in federal space for over a decade, so we’ve seen long-term trends. Project releases and purchases have accelerated significantly over the last two years and are expected to continue for quite some time. In fact, because of the scale our business has achieved, we have just published and are just beginning to publish federal performance.

In the state, rural and education (SLED) markets, it is especially clear that they are motivated to get out of their own data centers or leasing (usually old buildings) that are about to expire. SLED deployments are not as large as supplied deployments, but follow the same pattern of increased projects and purchases.

Gnanajothi: And what about the corporate sector?

Bailey: Companies are beginning to take steps to join the ranks of the very large and growing Internet business. Enterprise digitization and the resulting digital services are rapidly increasing the requirements for larger technology stacks for storing, computing, analyzing, and connecting data.

The deployment of enterprise digital infrastructure is accelerating and expanding, and is beginning to undertake requirements such as junior hyperscale for space, power, and connectivity. What used to be a typical enterprise requirement for a 250-500 KW environment is now a requirement for multi-megawatt, multi-site engagement.

As space and power increase, so does the demand for all types of bandwidth. As large companies move to the digital model they need to deliver digital services to more customers on a global scale, the requirements for advanced connectivity are increasing. This requires direct access to a myriad of internet, IX, cloud, transportation and undersea networks.

As a result, companies are hiring network and connectivity specialists, and in some cases from hyperscalers. And if you’re deploying more than 1, 2, 3, or 4 MW and need the relevant capital, it’s only natural that you need to ensure that your network strategy doesn’t work.

We see it in almost every discussion with our customers and prospects. If you lack a dense connectivity ecosystem and strategies to extend them, you can’t win in the enterprise. And, as you’ve seen from our financial performance, we’re winning at a healthy rate.
Gnanajothi: So while digital transformation seems to make connectivity more important, companies probably don’t really understand it. Can you summarize what you are looking at?

Bailey: That’s exactly right, and you know we’re very vocal about it. I think we have reached an inflection point this year. Three or four years ago, everything was in a carrier hotel (IP network). Cloud on the ramp-To reach the network you need to reach, you had to buy Metro Transport and Metro Backhaul.

It all changed. The fiber network is widespread. The switch spreads and the router is next. Routers are entering and exiting Internet and cloud networks and are beginning to spread across carrier hotels to alternative locations such as QTS. This is a very important trend and will continue. Accelerating the delivery of digital services relies on the foundations of the Internet and cloud architectures. This is what QTS is ultimately working on.

We recently completed a contract with a cloud provider to deploy our core infrastructure to our QTS facility and decentralize it from several carrier hotels. They see what we see as a way forward in basic network architecture.

Therefore, you will see the decentralization of major cloud platforms and subsequent IP networks. This is because IP networks exchange large amounts of traffic with each other, and as each continues to grow its network, more locations are needed.

Gnanajothi: What do you see when we get out of the pandemic?

Bailey: Looking at the overall demand for collocation and connectivity, it’s very bullish. The pipeline is expanding and the scale of transactions is expanding entirely. As an example, between early 2020 and 2021, the new logo pipeline for enterprises more than doubled in terms of megawatt demand. And I haven’t seen it change. I think corporate demand will continue to grow over the next five to ten years.

Frost & Sullivan’s research agrees that companies are increasingly migrating from on-premises data centers to multi-tenant colocation facilities. Multitenant collocation facilities have reached the point where the idea of ​​a company building its own data center does not make economic or operational sense in terms of cost effectiveness and efficiency.

We can also see that the repatriation of the cloud is shifting from hypothesis to theory. Today, some large companies that have been in the cloud for five or ten years are faced with “build and buy” decisions given the size of their workload. Although they were major cloud consumers, they decided to switch to multi-tenant data centers and build their own cloud at those facilities. I’m not saying this is an industry-wide trend, but it’s seen at the corporate cap and I think we’ll continue to see it.

Gnanajothi: WWhat do you think are the major competitive factors in the Coro Services market? Given how competitive it is, what are the key qualities or features that offer an advantage to multi-tenant colo providers in the new digital age?

Bailey: For our three business segments, I think it’s all about scaling to meet the rapidly growing requirements associated with digital transformation in the future. Digital transformation identifies multi-tenant data centers with the ability to grow business quickly and provide the expertise and access to the advanced connectivity ecosystem needed to participate in the new global digital economy. It came to be.

The conversation begins with questions that focus on these areas, and they are looking to see if we are willing to develop a solution that maps to their needs.

Prospects are always asking the right questions. Can Coro Providers quickly scale up the space and power needed for their environment? Do you offer a variety of cloud and hybrid colocation connections, including carrier-neutral cloud interconnects for AWS, MS Azure, and Google Cloud? They include access carriers within the building, multiple entrance facilities and fiber routes, third-party neutral Internet peering exchanges, and direct access to high-capacity, low-latency submarine cables that are becoming increasingly important for global business models. Is it included?

Software-based visibility and control are also becoming important factors. QTS was the first colocation provider to be fully digital and ready for advanced technology. Our API-driven service delivery platform leverages advances in AI and ML to improve system reliability, energy efficiency, and security while simplifying and reducing operating costs. Customers interact with data and services to gain real-time visibility, access, and dynamic control of critical metrics across computing and storage environments, from a single platform and even from mobile devices. I will. This, coupled with the deployment of collocation, is becoming a necessary technology.
There is also a new focus on data centers that uses renewable energy to provide data centers with sustainable IT infrastructure and share the benefits of those data center enterprise customers. Companies, hyperscalers, and governments are all investigating providers’ sustainability attitudes and are consistently present in RFPs. They want to know where their power comes from. What percentage of that is from renewable resources? Do they pledge to move to renewable energy? Check all these check boxes as well.
These are the areas that QTS is focusing on. Florida News Times