Making Space: Colocation Facilities in the US Industry Market Research Report Now Available from IBISWorld

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The Colocation Facilities industry has fared extremely well over the past five years as a result of greater demand from data processing and hosting services, an increase in the percentage of services conducted online and private investment in computers and software. For these reasons, industry research firm IBISWorld has added a report on the Colocation Facilities industry to its growing industry report collection.

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Facility supply shortages have allowed operators to raise prices, boosting profit

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.

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
IBISWorld
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