Facility supply shortages have allowed operators to raise prices, boosting profit.
New York, NY (PRWEB) February 06, 2014
The Colocation Facilities industry fared extremely well in the past five years, as the continual move to overall online operations caused an increase in demand for server space. Industry operators offer server storage, and an increase in the percentage of services conducted online and private investment in IT has benefited industry revenue. Storage and server power demand have risen substantially and customers use colocation facilities as a way to store server equipment. In the five years to 2014, the percentage of services conducted online is expected to grow 2.2 percentage points, while private investment in computers and software is expected to increase at an average annual rate of 5.0%, indicating a heightened need for server storage. As a result, IBISWorld anticipates industry revenue to increase at an annualized rate of 11.0% to $25.0 billion in the five years to 2014, including growth of 14.1% in 2014 alone.
According to IBISWorld Industry Analyst David Yang, “The industry has experienced a supply shortage in recent years; colocation 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. However, this supply crunch is expected to continue over the next five years. Due to the supply crunch, the industry has consolidated to bolster operating efficiency and increase capital investments. In the five years to 2014, the industry is anticipated to consolidate at an annualized rate of 2.1% to 934 enterprises.
In the five years to 2019, industry revenue is projected to increase, driven by an increasing number of businesses and rising electricity costs. “Colocation facilities can set a reduced energy rate with utility providers, and infrastructure is generally highly energy efficient,” says Yang. As such, the continued overall trend to be energy efficient will push customers toward colocation facilities. However, the industry faces a significant level of external competition, primarily from customers' in-house operations. As the price of computers and peripheral equipment continually decreases, customers are able to use the savings to store servers in-house. Additionally, customers that are able to pay a cheaper rate for energy may also choose not to store servers at colocation facilities. As such, colocation facilities will likely expand on services such as data security to provide additional value to customers.
For more information, visit IBISWorld’s Colocation Facilities in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Colocation Facilities in the US industry 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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