With the increasing costs of maintaining private data centers and the generation of large but inconsistent volumes of data, enterprises are increasingly preferring renting data centers, which are also known as colocation data centers. For instance, the development of a private data center facility can cost as much as $200 per square foot, excluding the $10,000 per mile cost of setting up fiber cabling. Unlike large organizations, small and medium enterprises (SMEs) cannot afford such high costs.

Moreover, the SMEs that use cloud computing solutions do not need to make these kinds of huge investments. This is why the demand for data colocation centers is rising sharply. In simpler terms, a data colocation center is any large data center that rents out space to various third parties for their network equipment and servers. Furthermore, the increasing adoption of advanced technologies such as the internet of things (IoT) and artificial intelligence (AI) and rapid digitization of business operations are also resulting in the generation of large volumes of data that need to be cost-effectively and efficiently managed and securely stored. 

Owing to the aforementioned factors, the revenue of the data center colocation market reached $42.1 billion in 2019, while the market will advance at a CAGR of 14.8% from 2020 to 2030. Depending on type, the market is divided into wholesale colocation and retail colocation categories. Between these, the wholesale colocation category is predicted to register faster growth in the market in the coming years. This is credited to the soaring demand for large storage spaces and the increasing adoption of cloud solutions by large organizations for efficient data management and storage.

Additionally, these facilities provide various benefits such as higher power capacity, reduced total cost of ownership (TCO), higher bandwidth, and strategic colocation. Furthermore, these data centers assist companies in meeting the strict regulatory requirements associated with data privacy and security. When organization is taken into consideration, the data center colocation market is categorized into large enterprises and SMEs. Of these, the large enterprises category held the larger share in the market in the past years. 

This was because large enterprises extensively used the services of colocation data centers in the past years, owing to the fact that these data centers allow these enterprises to massively reduce their operating costs and focus more on their core operations, instead of worrying about storing data. Geographically, North America would dominate the data center colocation market till 2030, as per the estimates of the market research firm, P&S Intelligence. This will be because of the presence of a large number of data centers and colocation service providing companies in the region.

Thus, it is clear that due to the high costs associated with owning private data centers and the burgeoning requirement for storing and managing large volumes of data, the demand for data center colocation is surging sharply across the world.