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7 colocation trends to watch in 2021

The colocation market is poised for growth, alongside the higher-visibility cloud computing sector. Find out why with our data center services outlook for the new year.

The rise of cloud computing might have overshadowed colocation in recent years, but the time-tested service not only remains viable, but shows signs of renewed vigor.

Customers with legacy workloads and stringent compliance requirements are making colocation a component of their IT strategies, alongside cloud. Cloud repatriation, for example, is landing workloads in colocation provider's data centers. In addition, colocation has become a springboard to the cloud for customers who want to move IT assets off site but aren't quite ready to commit to public cloud platforms. Colocation is also getting a boost from edge computing and the increase in remote workers.

With those factors in mind, here are seven colocation trends set to emerge next year.

1. Market growth

"We continue to see strong demand for colocation and data center products and services going into 2021," said Russell Cozart, senior vice president of marketing and product strategy at Cyxtera Technologies, a colocation services provider based in Miami.

Cozart said the COVID-19 pandemic and the associated work-from-home economy has accelerated digital transformation, resilience and edge strategies for enterprises and service providers. The speed-up has boosted demand for hybrid IT and as-a-service offerings -- areas in which colocation serves as a major pillar, he noted.

Russell CozartRussell Cozart

Organizations looking to downsize commercial real estate and facilitate remote work will turn to colocation as a flexible option, said Jeff Tapley, EMEA group managing director and senior vice president of the portfolio management group at Interxion, a Digital Realty company. Interxion provides colocation and interconnection services.

"As we move into next year, we expect to see continued demand for colocation services as more and more businesses implement semipermanent remote-working models," Tapley said. That trend will be especially prevalent in industries heavily affected by stay-at-home orders, such as digital media, healthcare and education, he added.

Alan SealAlan Seal

2. Interest in remote hands offerings

The continuing COVID-19 pandemic -- with the potential for travel restrictions and quarantines -- means enterprise customers can't always rely on their own staff to perform data center duties such as cycling servers and replacing hard drives. Alan Seal, vice president of engineering at vXchnge, a colocation and connectivity provider based in Tampa, Fla., said his company offers remote help when client personnel can't come on site. "We have definitely seen an uptick in remote hands support," he said.

3. Expanded role in remote workforce security

When the COVID-19 pandemic began in early 2020, business quickly deployed approaches such as VPN tunneling to provide work-from-home employees with secure access to applications. In the coming months, those organizations might look to colocation for more vigorous security next year.

In 2021, Seal said he expects customers to tap colocation to filter traffic through a centralized location. Customers can direct traffic through a VPN or IP routing to the colocation facility, which, equipped with managed firewalls, can control access to websites and cloud-based applications, he said.

4. Evolution of edge computing

Colo facilities will need to weigh the effects of edge computing on colocation use cases, technology and investment strategy.

Mitch FonsecaMitch Fonseca

"In 2021, we will continue to define what edge computing means for everyone and how different types of workloads will be able to leverage edge computing," said Mitch Fonseca, senior vice president and general manager of data center services at Cyxtera.

Fonseca also believes the new year will reveal how the continued development of 5G will help push edge computing further along.

Against that backdrop, colocation providers are investing in edge data centers, pursuing markets where hyperscale cloud providers are usually absent.

"We target edge markets and … we are making a lot of the investment necessary to be there, as the trend turns more toward massive data consumption under 5G," Seal said. For instance, vXchnge operates data centers in tier 2 cities such as Pittsburgh and St. Louis.

Jeff TapleyJeff Tapley

Tapley said smaller, locally situated edge data centers that place storage and computing much closer to the end user drastically reduce latency for IoT and other cutting-edge technologies. "The need for edge technology will only become greater as we start to enter the smart era, where even our fridges and kettles will be connected and generating data," he said.

5. New-look data centers

Edge data centers emerging in 2021 and beyond will look a bit different than traditional facilities.

Seal said customers making massive deployments into data centers are giving way to "smaller deployments doing specialized functions" that require reduced latency. Customers, he noted, are moving to fewer cabinets but higher density power utilization.

"One of our focus points is providing higher-density cabinets," Seal said.

Data center infrastructure could also experience a steadier shift to physical pods and containers. Industry vendors are poised to make adoption of those technologies easier for colocation providers.

"We are seeing some very innovative solutions from many manufacturers on mechanical infrastructure that should make it less expensive and less risky to deploy edge pods [and/or] containers," Fonseca said.

colocation graphic
Colocation has sparked customer interest as a cloud onramp and delivery model that offers greater control.

6. AI demands on infrastructure

5G isn't the only technology shaping colocation trends. AI compute and AI compute as a service will significantly affect data center services. Fonseca said this influence is mainly due to the electrical and mechanical requirements of running AI infrastructure at scale.

"Not all colocation providers will be able to support these workloads out of the box without upgrading their infrastructure," he said.

Seal said he views AI and electric and autonomous vehicles as technologies that boost demand for low latency and, by extension, edge data centers. "2021 will see explosive growth in the EV (electric vehicle) market as manufacturers release new models to their lineup," he noted. "These vehicles include AI assistants such as [Apple] Siri, [Amazon] Alexa and Google Assistant, as well as constant communication to support features like navigation and over-the-air software updates."

Low latency, supported by data centers, will become a key factor in the success of EVs and autonomous vehicles, Seal said.

7. Focus on environmental impact

Colocation providers will be taking a closer look at energy use in 2021.

"As we move into next year, we'll continue to see data center providers innovating to minimize their impact on the environment," Tapley said, noting that Interxion earlier this year committed to a CO2 emissions reduction target.

The industry should be "as mindful of power utilization as possible," Seal said. "[Providers] need to look at ways to improve that utilization, whether it is through cooling or improved battery performance. I believe customers are going to demand it of colocation providers."

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