New 2016 data from Synergy Research Group shows that revenue growth for the world’s three leading colocation operators far outstripped overall market growth in the year, thanks to a combination of major acquisitions and organic growth. While the total colocation market grew 9% from the previous year, Equinix, Digital Realty, and NTT in aggregate grew their colocation revenues by 28% and increased their share of the worldwide market. Beyond these three companies, the other top ten operators grew their colocation revenues by 12% while the companies ranked 11-20 grew by 8%. Apart from the three market leaders, other companies whose growth rates were well above average and who climbed the rankings included QTS, CyrusOne, CoreSite, China Telecom and KDDI-Telehouse. Consolidation will continue to be a major feature of the market, as evidenced by the recent announcement that Equinix is acquiring 29 data centers from Verizon, which is ranked second in the U.S. retail colocation market.
The data, which covers both retail and wholesale colocation, shows that the market is expanding steadily across all regions, with APAC having the highest growth rate. The major countries with the highest growth rates were China, Hong Kong, and India. Across the major regions, Equinix was the leader in EMEA, ranked second in North America and third in APAC. Digital Realty was the leader in North America and NTT the leader in APAC. Historically wholesale colocation revenues have been growing more rapidly than retail colocation, though in 2016 the growth rates were broadly similar. Equinix continues to have a strong lead in retail colocation while Digital Realty holds a similar position in wholesale colocation. Notably, Digital Realty and NTT now have significant market shares in both the retail and wholesale sectors, while Equinix maintains a tight focus on retail operations.
“In some senses colocation is following the same path as the cloud with market power gradually being concentrated in the hands of a few focused and deep-pocketed operators,” said John Dinsdale, a chief analyst and research director at Synergy Research Group. “In both cases the ability to run large data center operations effectively and efficiently is vital to success and companies that are too diversified or unfocused will struggle. And the similarities don’t stop there — as cloud usage continues to explode, colocation growth opportunities are pulled along in the slipstream.”