Nick Layzell, Customer Success Director, Telehouse Europe, provides insight into the growing impact of colocation, highlighting how it’s poised to transform operations, positioning itself as the preferred service model for businesses seeking scalability, efficiency and innovation.
Running an in-house data centre is expensive, with multiple overheads and many drawbacks, which is why colocation is set for considerable growth. Globally, the colocation market size is expected to reach US$155.40 billion by 2030, growing at a compound annual growth rate (CAGR) of 14% from 2030, according to a study by Grand View Research.
In Telehouse’s Vision 2030 research, 54% of organisations said they are opting for colocation services over on-premises IT infrastructure, significantly up from the 33% in the company’s 2020 research.
Colocation offers organisations the ability to lease space for networking hardware within a facility that provides comprehensive connectivity, advanced cooling systems, networking, internet bandwidth, power and stringent security. While the colocation provider ensures the facility’s operational excellence and security, clients retain responsibility for their own equipment.
The growth in colocation is driven by several factors including Digital Transformation programmes and demand for high-speed interconnection services and scalable environments.
Whereas an in-house data centre offers organisations full ownership of their infrastructure, they bear the managerial burdens and cost of equipment, cooling and power, along with compliance with security regulations. When problems occur, downtime costs mount rapidly.
The alternative is to migrate to the cloud. But in this year’s Flexera State of the Cloud Report, 84% of respondents said managing cloud expenditure was their most pressing cloud challenge – looming larger than security.
Colocation is also benefiting from a strategic shift in the way organisations perceive cloud computing, moving from a prevailing ‘cloud-first’ mentality to a more discerning, ‘cloud-selective’ approach. This change stems from the realisation that while cloud computing offers huge advantages in agility and innovation, it is not always the best fit for every business scenario or workload.
Many organisations are also still reluctant to entrust their most sensitive data to a public cloud. After reviewing all their options, companies see colocation as a more strategic, configurable approach to IT infrastructure — one that includes the benefits of cloud computing.
Cost and long-term cost-effectiveness
With cost reduction high on the list of priorities for on-premises data centre users, colocation is attractive through its elimination of extensive on-site data storage operations, reducing requirements for in-house technical staff and infrastructure. Downtime, the other major contributor to escalating expenditure, can be avoided with guaranteed SLA uptimes to ensure the highest levels of redundancy.
The cost-benefit analysis goes beyond storage costs, however, encompassing maintenance and scalability. Colocation is a cost-effective solution for businesses, whether they have stable workloads or are undergoing growth. It eliminates the significant costs associated with expanding cloud footprints to accommodate business growth or new workloads. There are also long-term cost benefits, especially when factoring in the investment in owned hardware.
Colocation also addresses the considerable pain points around energy costs. Forward-thinking data centre operators secure competitive forward-hedged rates, smoothing out violent fluctuations and offering greater transparency on energy costs.
Latency and performance consistency
Latency and performance are where colocation also makes sense. In sectors like finance, where real-time data access is essential, colocation offers the necessary low latency and consistency – a contrast to the potential variable performance in cloud environments. This stability is crucial for high-reliability applications.
Working with the right colocation partner, organisations like banks overcome the constraints of legacy architectures to improve customer experience, ensure smooth integration across channels and add new digital services. As AI use continues to grow, colocation can expand to support its considerable requirements for computing, data processing and real-time analysis.
Additionally, colocation facilities’ on-site expert engineers address downtime or other problems very swiftly, providing a level of responsiveness that cloud services may not match.
Security, customisation and control
Customisation and control are sometimes more challenging in public cloud environments, but colocation provides enhanced capabilities in this regard, covering hardware and software configurations, and catering to industries with diverse security needs and specific requirements. This is reinforced by the presence of skilled engineers on-site at colocation centres, bridging any skills gaps and ensuring adherence to stringent security protocols.
Regulatory compliance, data sovereignty and environmental considerations
The ability to meet specific regulatory and data sovereignty requirements is an essential consideration for companies needing to ensure data processing within specific geographical boundaries. This is where colocation has the edge on in-house set-ups. Rather than having to access external expertise on ever more complicated regulations, colocation operators have employees steeped in compliance requirements.
Increasingly linked to compliance is sustainability. With an appetite for innovation in cooling technologies and hyper-efficient energy use, colocation facilities help reduce the environmental impact of businesses. Leading facilities operate with 100% green energy sources and are equipped with on-site generators and Uninterruptible Power Supply (UPS) systems that deliver redundant power if a critical incident or emergency takes place.
Scalability, network connectivity and hybrid solutions
Colocation provides not just storage, but also scalable computational resources and connectivity options that allow businesses to match their available budget to their service requirements and keep a lid on costs.
Crucially, colocation enhances Business Continuity, providing access to leading cloud services and applications vital for seamless operations during critical periods, such as the shift to hybrid working models.
Colocation enables businesses to create hybrid environments, combining the strengths of both colocation and cloud models. This approach allows for the use of colocation for stable, critical workloads, while leveraging the cloud for its scalability and flexibility, optimising the IT infrastructure for diverse needs.
Accessibility and ecosystems
One of the big drawbacks of on-premises infrastructure is the absence of cutting-edge connectivity with networks and ecosystems. Colocation, by contrast, ensures immediate accessibility and bespoke infrastructure, critical for certain workloads. It opens a much more connected digital ecosystem of partners, including leading cloud providers like AWS and Microsoft Azure.
The presence of various ISPs and interconnection services at colocation centres facilitates high-bandwidth, low-latency connections and enables quick interactions with partners, suppliers and customers.
What we can see, then, are many solid business reasons for making a strategic switch from on-premises data centres and indiscriminate use of public cloud services towards a more bespoke approach centred on colocation. Each business is unique with its own requirements, but colocation offers the most efficient and cost-effective way of entering the faster, more agile future, leaving the burdens and drawbacks of on-premises infrastructure well behind.
