China colocation market to quadruple by 2016

China’s colocation market to witness 40% per annum compound growth until 2016.


A report entitled China Colocation 2013 released by DCD Intelligence forecasts that the carrier-neutral colocation market in China will grow at a 40% compound annual growth rate over the coming few years – some 380% by 2016. 

According to DCD Intelligence analyst Hawkins Hua, the Shanghai-based author of the report: "Inherent complexities involved in network interconnectivity in the country have led to bottlenecks as internet traffic has increased. This has led to increased use of colocation facilities by enterprises wishing to bypass traditional interconnection routes. Although the market is still dominated by the state owned telecom carriers, there is a growing market of carrier-neutral providers who are proving popular with enterprises”. 

Although dominated by the state owned telecoms carriers - who between them represent two thirds of the colocation market in China - the country has witnessed an influx of carrier neutral colocation providers. Many of these are reliant on the state-owned giants for space and network provision. 

The report estimates that the carrier neutral colocation market in China will grow at a compound annual growth rate (CAGR) of 40% through to 2016. This is in stark comparison to the country’s 20% CAGR for the data center market as a whole.

Stringent regulations regarding foreign ownership of China-based companies -- together with difficulties in establishing a business presence in the country -- has to a certain degree prevented a mass influx of international colocation providers. However, multi-national providers are gaining a foothold in the market through strategic partnerships with local based companies.

Growth drivers

The key drivers of growth in the use of colocation in China mirror those elsewhere in the world - including the increasing complexity of IT infrastructure and applications leading to companies choosing to outsource rather than operate their own facilities.

As throughout the world, power costs and staffing Issues are also strong drivers toward the use of colocation. 

In addition there are drivers unique to China, such as the serious bottlenecks in terms of interconnecting network traffic that have occurred as internet traffic has grown. The use of colocation facilities has increased because of their better connectivity - enabling colocation customers to bypass some of these traffic bottlenecks. 

According to the report, the three key factors involved in a company’s decision to choose a colocation provider within China include:

1) Interconnectivity between networks.

2) Infrastructure reliability, security and scale.

3) Geographic coverage of facilities.

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