Colocation market ready to cash in on rising interest in enterprise AI

IT market watcher Omdia claims the datacentre market is primed to take full advantage of the growing enterprise interest in artificial intelligence (AI) technologies, with operators that have backed liquid cooling and high-density server rack deployments set to have the upper hand.

In a research note, Omdia said the datacentre market has a “heightened awareness of [the] practical applications for AI” that enterprises are keen to tap into for productivity improvements and cost-reduction purposes.

“Colocation businesses, including both multi-tenant and single-tenant datacentre providers, are expected to be riding this wave of new AI growth,” said the Omdia research note.

“Some of these companies have adapted their datacentre designs to enable higher rack power density. The power consumption of servers configured for AI training is akin to high-performance computing (HPC) clusters for scientific research.”

Name-checked in the note are Equinix, Digital Realty and NTT Global Data Centres for being the top three biggest colocation companies in the world, as well as examples of the size of providers who are well-placed to tap into the AI trend.  

These three companies operate more than 700 datacentres and have more than 100 construction projects underway, Omdia confirmed, and – between them – they generated 33% of the $41.6bn in revenue the colocation sector brought in last year.

Alan Howard, principal analyst at Omdia, added: “The colocation providers able to provide the highest rack densities, and access to liquid cooling will now have the upper hand in the market for datacentre space.”

However, as Howard pointed out, building a datacentre with such “advanced operating characteristics” is not for those running short on funds.

“Achieving these advanced datacentre operating characteristics is not for the faint of heart, or those companies with an aversion to high capital expenditures,” he said.

“Colocation companies like Equinix, Digital Realty, NTT GDC, Flexential, DataBank, Compass, Aligned, Iron Mountain and a host of others are in the business of taking that capital risk to build datacentres so that enterprises and cloud service providers don’t have to.”

Omdia is predicting strong growth for the global colocation market overall, with the growing enterprise demand for AI capabilities set to be a causal factor.

According to its Colocation Services Tracker, the market is expected to grow to reach a value of $65.2bn in 2027, with a five-year compound annual growth rate of 9.4%.