Report: Ownership Of Data Centers Is Not Critical To Operating A Colocation
This is the seventh consecutive quarter with double-digit growth in customer load.
Customer IT load at multi-tenant data centers (MTDC) grew 11% year-over-year in Q3 of 2015, according to a new release from IHS. This is the seventh consecutive quarter with double-digit growth in customer load. Recent news from CenturyLink and rumors of Verizon and AT&T’s sale of data center assets has raised some questions on the state of the overall colocation market and whether it’s a sign that growth is slowing. IHS believes that these business’ actions are not a reflection of the overall MTDC market health but rather, a strategic decision by some companies to specialize in colocation and IT services as opposed to ownership of real estate.
IHS has seen that telecommunication companies’ colocation business has been slower than market average for quite a while now, so it’s not a surprise that these companies are looking at ways to better manage that portion of their business. It is not about these companies wanting to exit the market, as evidenced by CenturyLink’s CEO Glen Post’s comment on their Q3 earnings call: “We expect colocation services will continue to be a service our customers will look for us for, but we do not necessarily believe we have to own the data center assets to be effective in delivery of those services.” Rather, the sale of data center assets is about these companies not wanting to invest more capital in a business model that is not working for them.
Perhaps it’s simply because the telcos, who are looking to unload the wave of data centers purchased a few years ago, are realizing that their specialization could lie solely in the IT services provided and not in the maintenance, upkeep, and management of huge real estate assets. It’s already quite common for retail colocation suppliers to lease data centers from wholesale data center providers like Digital Realty, Infomart, and Global Switch. Equinix, the revenue share leader in the MTDC market, owns just 23 of their 105 data centers. Most of CenturyLink’s facilities are currently leased as well, so they are really just talking about selling off the remaining 10 or so company-owned data centers.
Going forward, it will be interesting to see if the ownership of data centers consolidates under the major wholesale providers and if the retail segment becomes more specialized in colocation and additional IT offerings, like hosting and managed services.