The CF 20: 2023’s Top Data Center Colocation Providers You Should Know
A continuing challenge is the immense up-front capital investment to bring a facility to market.
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Digital Realty is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. Digital Realty has a global data center footprint of 300-plus facilities in 50-plus metros across 27 countries on six continents.
In addition, Digital Realty is listed on the U.S. Environmental Protection Agency’s (EPA) Green Power Partnership National Top 100 list.
Equinix is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. Equinix is the largest colocation provider globally in terms of revenue and second largest in terms of square feet. With 240-plus data centers globally, it’s best known as an interconnection pioneer and has been building their ecosystem of services for about two decades, according to Omdia.
In addition, Equinix is listed on the EPA’s Green Power Partnership National Top 100 list.
NTT Global Data Centers is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. NTT is technically a telco operator, but its global data centers (GDC) group is the third-largest colocation company globally. It built GDC over the years by acquiring successful colocation companies around the globe and recently merging all the operations together, according to Omdia.
With more than 50 facilities worldwide, CyrusOne ensures the continued operation of digital infrastructure for nearly 800 customers, including approximately 200 Fortune 1000 companies. Its global platform of hybrid-cloud and multicloud deployments offers customers colocation, hyperscale and build-to-suit environments.
Blackstone-owned QTS Realty provides data center solutions across a diverse footprint spanning more than 9 million square feet of owned mega-scale data center space within North America and Europe. Last month, QTS arranged the refinancing of four of its data center properties, according to Data Center Dynamics. The loan comes from a consortium of four banks and and is led by Citigroup. It will be used to refinance QTS’ existing debt of $667 million and provide funding to finance built-outs for incoming tenants.
In addition, QTS is listed on the EPA’s Green Power Partnership National Top 100 list.
Cyxtera is one to watch among data center colocation providers as an acquisition of the company could be on the horizon. According to Data Center Dynamics, Cyxtera has received at least six letters of intent to buy the company.
Cyxtera is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. It’s a global leader in colocation and interconnection services, with a footprint of more than 60 data centers in over 30 markets.
Iron Mountain is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. Iron Mountain is best known for their long history as a records management company, including off-site data center backup, media pickup and storage. Its colocation business was formed over a decade ago and it now operate over 4 million square feet throughout its facilities, according to Omdia.
In addition, Iron Mountain is listed on the EPA’s Green Power Partnership National Top 100 list.
China Telecom offers an extensive global internet data center (IDC) network with over 700 IDCs located in prime areas in Mainland China and in key overseas markets.
The definition of an effective data center colocation solution depends on individual customer’s needs, said Omdia’s Alan Howard.
“But for colo providers, that means having common services they don’t provide themselves available to customers through partners or MSPs available in their data centers,” he said. “Of course, timely service and support along with a highly effective and efficient management process to assure a cost-efficient and highly available five nines operating environment are critical.”
Rackspace is among key players in the data center colocation market.
“Historically, colocation was primarily viewed as a space and power business, a place to securely house a company’s racks or other types of IT equipment,” Omdia said. “In an increasingly hybrid and multicloud world where data residency and localization is a requirement, colocation service providers (SPs) possess the most robust set of interconnection services to assure acceptable latency to markets that would otherwise be cost prohibitive to the average enterprise.”
In May, CoreSite announced the continued expansion of its Silicon Valley and Denver data center campuses to meet the digital infrastructure requirements of public and private cloud providers, enterprises, network and service providers. It’s adding its ninth data center in Santa Clara, California. CoreSite has also completed the design and permitting process to add 3,420 square feet and 500 kilowatts of IT load to its downtown Denver data center.
Telehouse is a global data center service provider, bringing together more than 3,000 business partners including carriers, mobile and content providers, enterprises and financial services companies at over 45 data centers worldwide. Established in 1988 and owned by Japanese telco KDDI, Telehouse has operations in 15 cities globally, including in the United States, the United Kingdom, France, Germany, China, Singapore, Vietnam and Japan.
Colt Technology Services offers exchange colocation in over 30 market venues and third-party proximity data centers in Europe, Asia and North America across asset classes (equities, derivatives, commodities, FX and others). It serves over 450 capital markets customers, including 18 of the top 25 diversified financial groups, 50-plus exchange venues and 13 European central banks.
This month, Flexential announced an enhancement to its Interconnection Mesh solution, which simplifies colocation to cloud connections with a new layer 3 VPN (L3VPN) multipoint service option. The new capability, available now across all markets, complements Flexential’s national 100Gbps backbone, allowing for any to any dynamic connections to customer deployments, and access to an ecosystem of carriers, cloud providers and subsea transport options on the FlexAnywhere platform of 39 data centers across 19 markets.
DC Blox is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. DC Blox is focused on serving communities where secure and reliable data centers, and broad connectivity options are limited. It operates five such data centers and will open its new Myrtle Beach cable landing station data center in 2023, according to Omdia.
Cologix provides carrier-and cloud-neutral hyperscale edge data centers and services in 11 markets across North America. Cologix is the interconnection hub for cloud service providers, carriers and an ecosystem of partners who want to deploy applications at the very edge across Canada and the United States.
Last December, Switch became a private company. DigitalBridge and IFM Investors acquired Switch for $11 billion. Switch is recognized as the independent global leader in exascale data center ecosystems, edge data center designs, telecommunications solutions and next-generation technology innovation.
In addition, Switch is listed on the EPA’s Green Power Partnership National Top 100 list.
Evoque Data Center Solutions provides companies with a unified offering of colocation, build-to-suit data centers, and full-stack cloud engineering. Evoque delivers a combination of connectivity, security and redundancy. It supports a diversified base of mid-to-large enterprise and web scale customers across multiple segments.
DataBank is among seven companies that represent an estimated 37% of colocation service revenues as tracked in Omdia’s Cloud & Colocation Services Tracker – 2022. In 2016, DataBank was acquired by DigitalBridge, an infrastructure investment fund that also owns Vantage and Switch. In 2019, DigitalBridge also acquired Zayo, and Zayo’s zColo business was acquired by DataBank, which gave it a broader interconnection footprint including 20-plus carrier hotel facilities, according to Omdia.
In addition, DataBank is listed on the EPA’s Green Power Partnership National Top 100 list.
H5 Data Centers is among leading data center operators in the United States with over 3 million square feet of data center space under management. The company designs and engineers data center solutions to address the core infrastructure and edge requirements of its customers. H5 Data Centers operates 22 data centers in 20 markets.
Last fall, Evocative completed its acquisition of the majority of INAP’s data centers, including colocation and related network services. The acquisition netted nine data centers. Evocative’s data center footprint spans Boston, New York, New Jersey, Atlanta, Dallas, Phoenix, Los Angeles, Silicon Valley and Seattle with 11 colocation facilities. In addition to colocation services, it provides enterprise customers with a full suite of cloud-to-edge infrastructure solutions.
Last fall, Evocative completed its acquisition of the majority of INAP’s data centers, including colocation and related network services. The acquisition netted nine data centers. Evocative’s data center footprint spans Boston, New York, New Jersey, Atlanta, Dallas, Phoenix, Los Angeles, Silicon Valley and Seattle with 11 colocation facilities. In addition to colocation services, it provides enterprise customers with a full suite of cloud-to-edge infrastructure solutions.
Data center colocation is in high demand, but providers face high upfront costs and a potentially lengthy wait for return on investment.
Data center colocation is among the most preferred choices among businesses due to cost benefits versus building and managing a private data center facility, according to Grand View Research. In addition, a colocation data center offers better operational flexibility when scaling up infrastructure to accommodate large data volumes.
This is our second annual “CF List” focused on top data center colocation providers. Analysts shared their thoughts on the technology and industry. It includes a new list and fresh views on changes in the competitive landscape.
The global data center colocation market is expected to reach $155.4 billion by 2030, with a compound annual growth rate of 14.2%, according to Grand View Research. The market totaled nearly $55 billion in 2022.
Cyxtera’s Chapter 11 Bankruptcy
Data center colocation providers are facing additional challenges due to inflation and macroeconomic volatility. For instance, Cyxtera recently filed for chapter 11 bankruptcy. In a bankruptcy document, Cyxtera said it has reached out to potential companies around a potential sale or investment.
“Despite its strong core business performance, [Cyxtera] has recently faced significant headwinds from inflation and macroeconomic volatility, which have driven up interest rates and energy prices,” it said. “As inflation swelled in 2021 and 2022, the Federal Reserve reacted by raising interest rates at the fastest pace in decades. This contributed to the ballooning of Cyxtera’s annualized interest expense on funded debt from $35.9 million in Q1 2022 to $75.7 million in Q1 2023.”
Cyxtera sent us the following statement:
“Cyxtera’s unique global platform of highly interconnected data centers is operating normally as we undertake a financial restructuring process to strengthen our balance sheet, enhance financial flexibility and pursue new opportunities for growth. Our channel partner relationships remain core to our strategy, and we are confident the steps we are taking will make us an even better partner for the long term. We expect to complete this process in the coming months, and our focus remains on providing innovative, high-quality data center services that help organizations transform and scale their businesses.”
The ‘Tricky’ Thing About the Business
Omdia’s Alan Howard
Alan Howard, principal analyst of cloud and colocation service in Omdia’s cloud and data center research practice, said the tricky thing about the data center colocation business is the immense up-front capital investment required to bring a facility to market. (Omdia and Channel Futures are both part of parent company Informa.)
“In most cases, particularly for retail-focused data centers, it can be a lengthy wait to reach a stabilized revenue run-rate and an ideal return on invested capital (ROIC),” he said. “While colocation companies have to be very good at building and operating data centers, it is capital management that keeps them in business, and that means managing the typical debt load required to build data centers.”
The economic environment has had a significant impact on debt management for some companies and raises concerns about debt default, as is the case with Cyxtera, Howard said.
“I can’t speak to exactly why Cyxtera is in this predicament, but for the larger colocation companies in particular, debt management is a long-term and constant process that aims to consistently de-risk the impact of interest rate volatility through various debt instruments and techniques,” he said.
Private Equity in Data Center Colocation
In the meantime, private equity (PE) firms are increasingly recognizing data centers as an attractive asset class. QTS Realty, CyrusOne and Switch were acquired by PE firms and taken private.
“It’s a bit of a complicated story, but as a public company, investor oversight has a bias toward short-term return numbers, which can temper expansion opportunities,” Howard said. “A colocation company owned by a PE firm still has significant oversight from their investors, but there is a longer-term investment return mentality, unlike Wall Street. This has the potential to open up opportunity for longer-term growth strategy as opposed to short-term return demands.”
Growing Importance of Sustainability
Forrester’s Abhijlt Sunil
Abhijit Sunil, senior analyst at Forrester, said several data center colocation providers on the CF 20 are listed on the U.S. Environmental Protection Agency’s (EPA) Green Power Partnership National Top 100 list. Using green power helps reduce the environmental impacts of electricity use and supports the development of new renewable generation capacity nationwide, according to the agency.
“We have heard from the sustainability teams of these companies and others in the colocation space about how seriously they’re considering sustainability in their data centers and the services they offer,” Sunil said. “Most of them have strong commitments to sustainability and this trend has accelerated since the pandemic due to a few reasons. First, we have seen multiple commitments that are hard to back out from data center players. Second, the power consumption of data centers is more studied and under scrutiny now than ever before. This especially came under the spotlight during the pandemic when there was an acceleration to cloud models.”
Third, there is increased scrutiny from investors and customers to have their own sustainability goals and want to make sure that the partnerships they make will help them, he said. And finally, there’s increasing power demands from chips in servers especially for running specialized applications such as artificial intelligence (AI).
We’ve compiled a list (in the slideshow above), in no particular order, of 20 top data center colocation providers. The providers are making the most of the ongoing competitive landscape.
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