We have all seen the rapid changes that can take place in our technology landscape. But how do they impact your role? Successful IT decision-makers and Trusted Advisors must understand and prepare for these shifts to create and guide powerful IT strategies.
This need is no more evident than in the colocation market, where demand for space and power continues to grow and evolve. In turn, that demand has created notable trends that are driving different buying behavior and feature capabilities.
In anticipation of the release of AVANT Analytics’ Colocation & Cloud 6-12 Report, explore a sneak peek of some of the new directions we are seeing and what implications they have for you.
4 Key Trends in Colocation
The colocation (colo) market is experiencing significant shifts as businesses adapt to new technological and operational realities. Four key trends are driving changes in the industry:
- Cloud Repatriation
- Remote Workforce and Changes in Commercial Real Estate
- AI and Wholesale
- Network Hubs for Multi-Cloud Environments
Cloud Repatriation
About five years ago, the prevailing belief in IT planning was to “move everything to the cloud”. The promise of scalability, reduced costs, and the elimination of on-premises infrastructure was compelling. However, companies learned expensive lessons along the way. Many now realize not all workloads are suited for the public cloud due to higher costs and performance issues with certain applications.
For example, applications in the AI space, particularly those that require intensive GPU workloads, often face performance bottlenecks in the public cloud. This has led many organizations to reconsider their cloud strategies. According to 451 Research, 48% of businesses have migrated workloads out of AWS, Azure, or Google Cloud. Moreover, 96% of those surveyed cited cost as the primary reason for repatriation.
This trend highlights the need for a balanced approach to IT infrastructure. Companies must leverage the benefits of both cloud and on-premises solutions. In some instances, colocation facilities offer a middle ground. They provide the necessary infrastructure for workloads better suited outside the public cloud.
Remote Workforce and Changes in Commercial Real Estate
The COVID-19 pandemic permanently altered the work environment. Remote and hybrid work models have become the norm, leading to notable swings in commercial real estate. Many U.S. organizations scaled back on office space. Others have chosen not to renew corporate real estate leases. This shift has implications for IT infrastructure as well.
According to Korn Ferry and Gallup, U.S. office occupancy is only at 50% compared to pre-pandemic levels, and 97% of employees prefer remote or hybrid work. With reduced physical office spaces, companies must find new homes for their IT infrastructure. Colocation facilities have emerged as a viable solution, offering secure and reliable environments for IT equipment.
This trend underscores the importance of flexibility and adaptability in IT infrastructure planning. By leveraging colocation facilities, organizations can ensure their IT systems are robust and accessible, regardless of their physical office footprint.
AI and Wholesale
The rise of artificial intelligence (AI) workloads is another significant change impacting the colocation market. AI applications require massive amounts of computational power and cooling. This leads to an unprecedented demand for data center space and power. Colocation providers are struggling to keep up with this demand, as utility companies face challenges in supplying the necessary resources.
The surge in AI workloads drives the need for wholesale colocation solutions. With these solutions, large-scale facilities can accommodate the power and cooling requirements of AI applications. This trend highlights the critical role of colocation providers in supporting the growth of AI and other high-performance computing workloads.
Network Hubs for Multi-Cloud Environments
As remote and hybrid work models become more prevalent, the need for robust and flexible connectivity solutions grows. This has led to the rise of network hubs for multi-cloud environments. These hubs enable seamless connectivity between various cloud platforms and on-premises infrastructure, ensuring users can access their applications from anywhere.
Network hubs are particularly important in a remote work context, as employees need reliable access to cloud applications regardless of their location. By establishing network hubs, colocation providers can offer low-latency, high-bandwidth connections that enhance the performance and reliability of cloud-based applications.
The trend towards multi-cloud environments underscores the need for flexible and scalable connectivity solutions. Colocation facilities equipped with network hubs can provide the necessary infrastructure to support this growing demand, ensuring businesses can effectively manage their IT resources across multiple cloud platforms.
The colocation market is evolving rapidly, driven by several diverse variables. As businesses adapt and needs change, the importance of flexibility, scalability, and reliability in IT infrastructure planning only grows. Colocation facilities are well-positioned to meet these needs, offering businesses a robust solution for their IT infrastructure challenges.
By understanding and leveraging these key trends, businesses can optimize their IT strategies and ensure they are well-equipped to meet the demands of the future. Keep an eye out for our upcoming Colocation & Cloud 6-12 Report for a deeper dive into these trends!