Data Center Colocation & Managed Hosting Market to Grow by USD 306.2 Billion (2025-2029) with Rising Demand for Colocation Facilities, Report on How AI is Redefining Market Landscape - Technavio

NEW YORK, Feb. 6, 2025 /PRNewswire/ -- Report with market evolution powered by AI - The global data center colocation and managed hosting services market size is estimated to grow by USD 306.2 billion from 2025-2029, according to Technavio. The market is estimated to grow at a CAGR of  18.5%  during the forecast period. Rising demand for data center colocation facilities is driving market growth, with a trend towards growing investments in hyper-scale data centers by colocation providers. However, high power consumption in data centers  poses a challenge. Key market players include BT Group Plc, Chunghwa Telecom Co. Ltd., Cogent Communications Holdings Inc., CoreSite Realty Corp., Cyfuture, CyrusOne LLC, Cyxtera Technologies Inc., Digital Realty Trust Inc., Equinix Inc., Fidelity National Information Services Inc., Flexential Corp., Internap Holding LLC, KDDI Corp., Lumen Technologies Inc., Navisite LLC, NTT DATA Corp., phoenixNAP LLC, Rackspace Technology Inc., Sabey Corp., and Verizon Communications Inc..

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Market Driver

In today's digital age, businesses are increasingly relying on data center colocation and managed hosting services to manage their IT infrastructure. Trends such as cloud computing, cybersecurity, remote work solutions, artificial intelligence, and the Internet of Things (IoT) are driving the expansion of this market. With the rise of hybrid work models and distributed teams, data security and endpoint security have become top priorities. IT executives are seeking operational efficiency, HIPAA compliance, and business continuity through DCaaS providers like Rackspace Technology and Google Cloud. Pricing pressures and differentiation are key factors in the competitive market ecosystem, with customer experiences and client relationships offering a competitive edge. Verticals such as IT & telecom, manufacturing, retail & consumer goods, healthcare & life sciences, energy & utilities, media & entertainment, and others are leveraging these services for overhead cost savings and digital services. The industry is also facing cyber threats, data leakage, and cyber hardening, making network monitoring and availability essential. The metaverse concept and online customer experiences are also driving growth in the e-commerce sector, with retailers like eBay and Amazon leading the way. Mobile shopping apps and transaction history are becoming the new cashier, making data center security a must-have for businesses. 

The data center colocation and managed hosting services market are experiencing significant growth due to increasing investments in hyper-scale data centers. With the advent of the smart revolution, the creation of vast amounts of data necessitates efficient processing. Hyper-scale data centers are becoming a priority to manage this data influx. Equinix Inc., among other service providers, has announced the construction of such data centers in May 2022. This trend is expected to continue, fueled by the development of smart cities, smart grids, and smart homes. The demand for managing the information processing needs of our connected world is driving the expansion of hyper-scale data centers. 

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Market Challenges

• In today's digital age, businesses face numerous challenges in managing their data and IT infrastructure. Cloud computing has disrupted traditional on-premises infrastructure, leading to the growth of Data Center Colocation and Managed Hosting Services. However, cybersecurity remains a top concern, with cyber threats, data leakage, and attack surfaces increasing. Remote work solutions and distributed teams require endpoint security and network monitoring. IT executives must differentiate their offerings and provide excellent customer experiences to maintain client relationships and gain a competitive edge. Industries like IT & telecom, manufacturing, retail & consumer goods, healthcare & life sciences, energy & utilities, media & entertainment, and verticals, are expanding their use of Data Center Colocation and Managed Hosting Services for operational efficiency and overhead cost savings. Pricing pressures, HIPAA compliance, and the metaverse concept add to the complexity of this market ecosystem. Cybersecurity professionals are essential in addressing cyber threats, implementing cyber hardening, and ensuring business continuity and availability. DCaaS providers like Rackspace Technology and Google Cloud offer solutions to help businesses navigate these challenges and stay ahead of the curve. The retail industry, including eBay, Amazon, and mobile shopping apps, generates vast amounts of transaction history. Ensuring data security and privacy is crucial for customer trust and regulatory compliance. Data center solutions enable businesses to meet these challenges while focusing on their core competencies. In conclusion, Data Center Colocation and Managed Hosting Services offer businesses the flexibility, security, and efficiency they need to thrive in today's digital landscape. By addressing challenges such as cybersecurity, data management, and operational efficiency, these services provide a competitive edge and enable excellent customer experiences.
• The global shift towards cloud computing is driving significant growth in the Data Center Colocation and Managed Hosting Services Market. Organizations, particularly SMEs and start-ups, are attracted to cloud solutions due to their cost-effective nature. Cloud services offer scalability, eliminating the need for businesses to invest heavily in their own data centers and the associated high capital expenditure (CAPEX) and operating expenditure (OPEX). Large enterprises also benefit from cloud services by being able to scale their workloads as needed, reducing their overall IT infrastructure costs. The implementation of cloud-based software is quicker than traditional on-premises solutions, making it an attractive option for businesses seeking to streamline their IT operations.

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Segment Overview 

This data center colocation and managed hosting services market report extensively covers market segmentation by  

• End-user
• BFSI
• Healthcare
• E-commerce
• Telecommunication
• Others
• Type
• Wholesale
• Retail
• Geography
• North America
• Europe
• APAC
• Middle East And Africa
• South America

1.1 BFSI-  The banking and financial services sector (BFSI) is experiencing significant growth in m-commerce and e-commerce activities in North America, Europe, and emerging economies like India and China in APAC. Strict regulations, such as the EU's General Data Protection Regulation (GDPR), govern the handling of sensitive financial data, including customer information and transaction details. BFSI companies, including Goldman Sachs, JPMorgan Chase and Co., and Morgan Stanley, require optimal uptime, security, connectivity, and data integrity for their IT infrastructure. Traditional data center ownership poses high operating costs, hindering business expansion. To mitigate these challenges, BFSI firms are increasingly outsourcing colocation space from vendors or leasing servers from managed hosting service providers. This shift towards outsourcing is anticipated to fuel the growth of the BFSI segment in the data center colocation and managed hosting services market during the forecast period.

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Research Analysis

The Data Center Colocation and Managed Hosting Services market is experiencing significant growth due to the increasing demand for secure and efficient data management solutions. With the rise of remote work and hybrid work models, the need for reliable and secure data center services has become essential for businesses of all sizes. Cybersecurity is a top priority, with data security, endpoint security, and network monitoring becoming crucial components of any data center solution. Artificial intelligence and automation are also driving innovation in the market, enabling businesses to optimize their operations and improve customer experiences. IoT devices are generating vast amounts of data, requiring and scalable data center solutions. Differentiation through superior customer experiences and strong client relationships is key to gaining a competitive edge in the market. Deployment models, such as public, private, and hybrid, cater to various industry needs, including HIPAA compliance for healthcare and pharmaceuticals. Operational efficiency and IT security professionals are also critical factors in the success of data center colocation and managed hosting services. The industry's expansion is expected to continue as more enterprises seek to optimize their data management and improve their competitive position.

Market Research Overview

In the digital age, businesses are increasingly relying on data center colocation and managed hosting services to manage their IT infrastructure and deliver superior online customer experiences. Cloud computing, cybersecurity, data management, and remote work solutions are driving the market's expansion, with artificial intelligence, automation, IoT devices, and hybrid work models also playing key roles. IT security professionals are in high demand to protect against cyber threats, data leakage, and malware, while pricing pressures and differentiation are key challenges. The market ecosystem includes IT & telecom, manufacturing, retail & consumer goods, healthcare & life sciences, energy & utilities, media & entertainment, and various verticals. Operational efficiency, HIPAA compliance, and regulatory requirements are important considerations for healthcare and pharmaceuticals. Enterprises are turning to Data Center as a Service (DCaaS) to reduce overhead costs and improve availability, while IT executives seek a competitive edge through client relationships and service-level agreements. The metaverse concept and industry expansion bring new opportunities, but also increased attack surfaces and cybersecurity risks. Physical infrastructure, endpoint security, network monitoring, and business continuity are essential components of any data center strategy.

Table of Contents:

1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation

• End-user
• BFSI
• Healthcare
• E-commerce
• Telecommunication
• Others
• Type
• Wholesale
• Retail
• Geography
• North America
• Europe
• APAC
• Middle East And Africa
• South America

7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Trends
10 Company Landscape
11 Company Analysis
12 Appendix

About Technavio

Technavio is a leading global technology research and advisory company. Their research and analysis focuses on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions.

With over 500 specialized analysts, Technavio's report library consists of more than 17,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio's comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

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SOURCE Technavio