Frost & Sullivan says that increasing use of Big Data, IoT applications and analytics software, coupled with growing global mobile data traffic which is expected to increase at 53% CAGR from 2015 to 2020, is seeing enterprises’ demand additional bandwidth, data storage and computing power, as well as infrastructure and services for secure storage and monitoring of data.
All these factors are driving demand and growth of the Australian data centre (DC) services market. According to the firms new report, Australian Data Centre Services Market 2016, the overall market had an annual growth of 18.3% reaching $976 million in 2015, and is predicted to grow at a CAGR of 12.4% till 2022, with the market reaching $2.055 billion by 2021.
Co-location growth is predicted at a CAGR of 11.4% till 2022, while managed hosting revenues is predicted to grow at a CAGR of 14.5%; largely due to more enterprise customers maintenance and control of their IT to managed hosting providers.
Wonjae Shim, Research Analyst, ICT Practice Australia & New Zealand, Frost & Sullivan says organisations outsource their data centre requirements for a number of reasons but a primary one is the cost of building and maintaining a captive data centre is too expensive and time consuming. Organisations can significantly reduce their IT budget and costs by outsourcing data centre operations and maintenance to third party providers.
One of the key growth drivers of data centre services is the heightened demand for cloud computing, which has resulted in an increasing number of cloud services providers and enterprises in Australia. Cloud services providers are amongst the largest users of data centres facilities in the world and this is a catalyst for growth in the DC ecosystem, drawing enterprise customers, telcos and IT services firms. Enterprise organisations are storing less data in-house, opting for cloud service providers; so co-location providers proportion of revenues from cloud services providers is growing.
Despite co-location services growing about 20% over the past 5 years globally, compared to 3% growth in captive data centres, the outsourced space constitutes only 24% of total data centre space available worldwide. This indicates a sizeable growth opportunity – especially in the Asia Pacific region where outsourced space is at 12.1% of total available data centre space.
Another market trend is improved power densities in DC centres. Customers pay for co-location services on a kW rate per rack basis, so cost to the customer is affected by a combination of power consumption and required footprint. As organisations opt for racks at higher compute power, they will still pay proportionate to the amount of power consumed, but at a reduced footprint.
Many DC facilities currently run at a facility wide average of 2-3kW, but this is expected to increase significantly as compute power capabilities and efficiencies improve. By the end of 2016, the average kW per rack utilisation will reach close to 5kW, with many big enterprise customers with large compute power requirements requesting their infrastructure to run at very high power densities, between 20-30kW in extreme cases.
The DC services provider landscape in Australia comprises DC specialist providers, IT services firms, telecommunications companies and modular DC providers. While DC specialist providers such as Equinix, NextDC, Metronode, Global Switch and Digital Realty are the most dominant providers of co-location, IT services firms such as Fujitsu, IBM Softlayer, HP and telcos such as Telstra, Optus and Macquarie Telecom provide managed IT services, which is the faster growing segment in the market. Due to the ability to add capacity on demand, modular DC providers are also becoming increasingly popular amongst cloud services providers and enterprises with special requirements.
Improving power consumption, energy efficiency and facility security are the key areas of challenge and concern for DC providers. However, with the continuous increase in demand for services, improvements in power densities and technology, the market is expected to continue to grow at a healthy rate over the long term.
DC assets are able to provide stable long term returns due to continued demand, high barriers to entry to market (CAPEX costs), real estate costs, and highly specialised technologies and personnel. Investment in DC assets is expected to markedly increase in the short term and the positive long term outlook for DC services is likely to encourage private equity investment and buyouts in the sector.