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Demand for colocation is rising around the globe. According to the most recent IHS Markit Global Multi-Tenant Datacenter Tracker (an alternative term for Colocation), worldwide colocation revenues increased by around 10 percent versus the same quarter in 2016. A recent Vertiv enterprise survey showed that in North America, 57 percent of enterprise companies plan to increase their use of cloud or colocation in the next two years.

Do these same trends hold for Europe?

Europe is a significant driver and adopter of modern technology. It is also home to some of the most active colocation hubs in the world. London is currently ranked No. 1 on Cloudscene’s world ranking of colocation ecosystems, with Amsterdam (2), Frankfurt (3) and Paris (5) not far behind. According to CBRE’s Quarterly Data Centre Solutions MarketViewcolocation capacity in these four European hubs grew by 20 percent in 2017.

What’s driving the colocation boom?

In a post-economic crises world, colocation was used to address capital investment challenges. However, it has since evolved to where colocation facilities and the associated rich interconnection and direct access to multiple clouds is fundamentally enabling the digital transformation of enterprises. 

As IT competency and capacity become increasingly critical components of business success, more and more businesses realize they are ill equipped for this new reality. Their enterprise data centers either can’t scale quickly enough or are becoming too complex to be managed effectively. Either way, companies are outsourcing more of their IT needs and are either eliminating or significantly rationalizing their data center footprint. The big winners from this are cloud and colocation providers. Enterprises are moving to hybrid models where they are not only using multiple cloud providers, but also multiple colocation providers suited to their exact application needs.

This isn’t about to change. The hottest technology trends heading into 2018 – things like virtual reality, artificial intelligence, the Internet of Things or self-driving automobiles all require massive amounts of computing power, which is often located in dispersed locations at the ‘edge’. Colocation providers, with their state-of-the-art equipment and honed expansion processes can meet that demand in ways traditional enterprise facilities simply can’t.

Additional drivers for colocation growth in Europe

Of course, there are other factors, unique to Europe, driving the proliferation and adoption of colocation. Brexit and the looming implementation of the EU General Data Protection Regulation (GDPR) and Markets in Financial Instruments Directive are creating uncertainty around data storage, transmission, ownership and security across the continent. Some estimates suggest nearly half of European businesses will move data to a different location in advance of these changes.

It’s unlikely most organizations will see reflexive investment in new data center facilities as an appropriate response to MiFID II or GDPR. Instead, at least in the short-term, this is likely to trigger an increase in reliance on colocation providers.

Conclusion

Colocation providers offer safe harbor, with dedicated facilities and connections and expertise in global networking. Both the global trends in digital technology as well as unique legislative and political factors are driving the colocation demand in Europe. Colocation growth projections range from 7 percent to a more aggressive 11 percent compound annual growth to 2020. Market ambiguity is certainly baked into those projections, but it’s safe to say colocation growth will continue and we may even look back on those forecasts as being too conservative. 

For more details, visit the dedicated page on the website https://www.vertivco.com/en-emea/public-campaigns/colocation-hub/

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