LONDON-Colocation providers in Europe will need to weather a difficult transitional period between now and 2003, but the principle of outsourcing data to a colocation specialist is poised to grow tremendously among European enterprise customers, according to a new study from Frost & Sullivan.
The current environment almost is reminiscent of the aftermath of the dot-com rush in the late 1990s, the firm said. In spite of the tremendous hype surrounding the colocation market, European businesses still are reluctant to entrust mission-critical operations to outsourcing facilities.
Customer demand for outsourcing also has slowed, and a number of data centers have curtailed their expansion rates.
“Nevertheless, colocation is an excellent hosting alternative providing an extremely fast solution to space and power supply problems,” said Marina Martin, analyst at Frost & Sullivan. “A rapidly growing number of traditional bricks-and-mortar companies are Web-enabling daily functions to reduce costs and enhance productivity.”
A rash of companies are realizing that colocation enables them to define and adhere to core competencies. However, the real challenge for colocation providers lies in surviving the economic downturn by generating revenue quickly to compensate for the current glut of data centers.
Frost & Sullivan predicts colocation revenues in Europe will leap from $275 million this year, to $2.6 billion in 2007. The aggressive roll out of data centers across Europe in 1999 and 2000 hinged upon the willingness of investors to inject cash into colocation facilities, the majority of which are unlikely to become profitable before mid-2002, the study said.
The study suggests third-generation network operators, which have spent billions on spectrum, could capitalize substantially on the use of networked colocation data centers, rather than rolling out and bearing the cost of the infrastructure themselves.
