Facility supply shortages have allowed operators to raise prices, boosting profit
Los Angeles, CA (PRWEB) December 13, 2012
The Colocation Facilities industry has fared extremely well over the past five years. Because the industry primarily houses servers for industry customers, the continual move to overall online operations has caused an increase in demand for server space. As such, greater demand from data processing and hosting services, an increase in the percentage of services conducted online and private investment in computers and software have all benefited industry revenue. According to IBISWorld industry analyst Lauren Setar, “Storage and server power demands have risen substantially and customers have used industry operators as a way to store server equipment without buying their own infrastructure or hiring an IT department.”
In the five years to 2012, the percentage of services conducted online has grown 3.5 percentage points, while private investment in computers and software has grown at an average annual rate of 2.7%, indicating a heightened need for areas to store servers and equipment. As a result, industry revenue has grown at an average annual rate of 10.2% to $18.5 billion in the five years to 2012, including an increase of 17.1% in 2012 alone.
Due to this increased demand, the Colocation Facilities industry has experienced a supply shortage; facilities are filling faster than operators can create space. “In response, companies in the industry have increased prices, which has helped push up profit margins,” says Setar. “This supply crunch is expected to continue in the next five years as well.”
Also in the next five years, an increase in the number of businesses and an increasing price of electric power will continue to boost industry revenue. Because colocation facilities can set a reduced energy rate with utility providers and infrastructure is generally highly energy efficient, customers will look to colocation facilities as a way to reduce operational costs. Additionally, the continued overall trend to be energy efficient will further push customers toward colocation facilities.
Although revenue is forecast to rise, the industry faces a significant level of external competition, primarily from customers' in-house operations. With continually decreasing price of computers and peripheral equipment, customers are able to use the savings to store servers in-house. Additionally, customers that are able to pay a cheaper rate for energy on their own may also choose not to store servers at colocation facilities. For more information, visit IBISWorld’s Colocation Facilities in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes firms that own and operate data centers that primarily lease equipment space to customers. Companies in the industry also offer auxiliary services including power management, security and network neutrality. Customers generally use industry services as off-site data storage to back up their data or to allow them to focus on other parts of their business without paying for these operations.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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