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Data Center Market

Market Study on Data Center Based on Increasing Demand for Cloud Services, Digital Transformation Initiatives, and IoT Proliferation

Data Center Market Size and Share Analysis

The global data center market size is expected to attain the valuation of US$220 Bn in 2024, further reaching US$551 Bn in 2031, witnessing a robust CAGR of 10.1% over 2024 - 2031.

Data Center Market Size (2024 E)

 US$220.0 Bn

Projected Market Value (2031 F)

 US$551.0 Bn

Historic CAGR (2019-2023)

9.8%

Projected CAGR (2024 to 2031)

10.1%

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Market Introduction and Key Trends

Once known merely as small rooms that were housed by businesses on-site, data centers have seen furious growth in all possible dimensions over the past decade. Today, they have become the lifeblood of the worldwide IT industry – and predominantly managed by multinational operators.

With projections of a strong double-digit annual growth rate and worldwide investments in new data center facility construction hitting the US$50 billion mark through 2031, it is clear that the data center economy is building up faster than expected and will demonstrate aggressive growth in the years to come.

With rapidly expanding digitalization, individuals and businesses alike are responsible for massive data generation that further needs to be stored and made accessible - easily, and securely. The data center market report says rocketing demand for data centers presents a flexible and scalable solution to cater to ballooning demands.

Local spatial circumstances is another strong influencer for data center market growth. Certain countries like Russia, and China that have stringent regulations regarding data sovereignty are experiencing critically growing need for localized data centers.

Rapid surge in digital content, and aggressive eCommerce expansion will further drive data center demand. With an extending consumer base for online stores, and media streaming, organizations are more inclined towards creating a strong data center infrastructure.

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Major Data Center Market Trends

  • The rise of smart data centers
  • Modular data centers
  • Sustainable data centers
Market Research Methodology

Market Research Methodology

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Key Dynamics Shaping Market Expansion

Ascending Cloud Adoption

The data center market is being reshaped by cloud computing, and edge computing. Businesses are increasingly opting for cloud storage due to its cost-effectiveness, scalability, and flexibility. This shift necessitates data center in cloud computing.

Meanwhile, the rise of edge computing is changing how data is processed.  Edge computing processes data closer to its source, reducing latency for real-time applications like autonomous vehicles, and smart cities. This trend is driving demand for smaller, decentralized data centers located near end users.

Rising Demand from SMEs

While large enterprises currently dominate the data center market due to their use of big data and data security needs, the trend is shifting. The widespread adoption of advanced technologies like AI, big data, and machine learning is generating massive amounts of data. This, along with the increasing use of data-generating devices like wearables and IoT sensors, is creating a big market opportunity.

Businesses are leveraging data analysis to extract valuable insights, further driving the need for data storage and processing solutions. This trend is expected to benefit the market as a whole, potentially opening doors for wider adoption by SMEs in the future.

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Factors Impeding Market Growth

High Costs Remain a Hurdle for Data Center Growth

The high upfront costs associated with building and designing data centers are a major roadblock for data center market growth. These facilities require significant capital expenditure for land, construction, power infrastructure, and cooling systems. Operational costs also add up, including power consumption, maintenance, security, and ongoing cooling needs.

Furthermore, the relentless pace of technological advancement forces existing data centers to constantly adapt. This translates to increased expenses, primarily for advanced hardware and software solutions.

Failure to adapt can lead to a data center becoming incompatible with evolving industry demands. These ongoing costs can significantly impact a data center's long-term financial health and hinder market expansion.

Future Opportunities

Green Data Centers

The focus on sustainability is driving a shift towards green data centers. Businesses are adopting energy-efficient solutions to reduce their environmental impact.

Government regulations are also pushing for sustainability, further increasing the demand for green data centers. These facilities utilize renewable energy sources like solar and wind power, lowering their reliance on fossil fuels and resulting in significant cost savings for operators.

The 5G Revolution

The rollout of 5G networks creates a surge in data traffic due to faster transmission speeds and new applications. This necessitates an expansion of data center infrastructure to handle the increased load. 5G requires high speeds for downloads, streaming, and online services, driving the need for faster data centers globally.

Cloud services also rely on robust data centers to manage applications and resources. Providers are focusing on edge computing services, requiring smaller data centers or edge locations closer to users. This trend, combined with the rising adoption of cloud services by businesses of all sizes, fuels the growth of the data center market.

Micro Data Centers

The rise of compact, portable, and modularized data centers, known as micro data centers, presents a significant market opportunity. By placing data centers closer to devices or users, they reduce latency, making them ideal for applications requiring real-time responses, such as industrial automation and autonomous vehicles.

Additionally, micro data centers can be easily deployed or scaled based on needs, allowing companies to respond quickly to changing demands without incurring extra costs. This growing demand for micro data centers is expected to create significant future opportunities for the market.

Category-wise Analysis

Corporate Data Centers Rule

The majority of the market belongs to corporate data centers. These data centers cater to big companies that need affordable solutions for storing, retrieving, and backing up vast amounts of information. This makes them ideal for businesses dealing with large data volumes.

Banking & Finance Takes the Data Center Charge

The Banking, Financial Services, and Insurance (BFSI) sector is the champion of the market. This dominance is driven by a surge in online banking, mobile wallets, and online payments. Additionally, 24/7 operations are crucial for BFSI to keep the global economy humming. As a result, this sector heavily relies on data centers to function smoothly.

Hardware Reigns Supreme, Software on the Rise

Hardware currently holds the biggest share of the market due to the ever-increasing demands of social media, digital transactions, and the Internet of Things (IoT). Upgrading hardware like CPUs, servers, and storage is crucial for data centers to keep up with processing and storage needs.

However, software is poised for the fastest growth. The rise of virtualization and cloud computing is driving the need for advanced software solutions that enhance security and improve efficiency. These solutions include encryption, intrusion detection, and monitoring tools, along with software for managing power consumption in green data centers.

While network equipment currently holds the highest revenue share, mirroring the hardware trend, UPS systems are expected to see the fastest growth. This is due to the increasing reliance on data centers and cloud services, making uninterrupted power critical to avoid data loss and downtime.

Professionals Lead Data Center Services Category, Support Services on the Rise

Traditional data centers struggle to keep up with modern needs. This has made professional services the leading player in the data center services market. These services focus on designing, implementing, and upgrading data centers for better performance, capacity, and efficiency.

The growing need for new data centers, driven by the rise of digital operations, further fuels the demand for professional services.

However, support services are expected to see the fastest growth. With data centers becoming increasingly complex due to advanced hardware, software, and networking components, organizations require ongoing support to manage and optimize these systems effectively. This trend is expected to continue as data centers become even more intricate.

On-Premise Reigns, Hyperscale Charges Ahead

On-premise data centers remain the king of the hill, holding the biggest market share. This is because they offer enterprises maximum control over security and data, allowing for customization to meet specific business needs and performance demands. Additionally, on-premise solutions are ideal for low-latency applications requiring fast data transmission.

However, hyperscale data centers are poised for the fastest growth. The ever-growing demand for cloud computing services is driving the need for these large-scale facilities.

Hyperscale centers provide the storage, processing power, and network resources needed to support a wide range of cloud-based applications. Additionally, the rise of online media streaming, with its need for high-performance and bandwidth, is fueling the growth of hyperscale data centers.

Tier 3 Leads, Tier 4 Charges in

Tier 3 data centers hold the biggest data center market share due to their efficient processing, storage, and ability to handle the demands of digital transformation. This makes them ideal for many organizations. Additionally, stricter data protection regulations are driving adoption of tier 3 solutions.

However, tier 4 data centers are expected to see the fastest growth. These top-tier facilities offer complete fault tolerance and redundancy, ensuring minimal downtime (less than 30 minutes per year). This makes them perfect for government organizations, large businesses, and any entity requiring constant data availability and the highest level of security.

Large Enterprises Dominate, Small Businesses Catching Up

Large enterprises are the data center powerhouse, generating massive amounts of data and driving the market with their cloud adoption. Data centers provide them with the muscle to support advanced technologies and access reliable cloud services.

However, small businesses are the rising stars. As they invest more in online technologies to compete globally, their reliance on data centers for secure and efficient data management is surging. Additionally, the affordability of cloud services for software, infrastructure, and storage makes data centers even more attractive for small businesses. This trend is expected to propel significant growth in this segment.

Cloud Service Providers Lead the Charge, Technology Follows Close Behind

New Data Centers Market Share (2024)

38.20%

US Market Share (2024)

40.00%

IT & Telecommunications Market Share (2024)

26.80%

Region-wise Analysis

North America Secures 40% Share to Maintain the Top Spot

Home to some of the most advanced and efficient IT infrastructure in the world, North America holds a dominant position in the global market. The region’s technological prowess facilitates the implementation of the new generation of data centers. In addition, the massive R&D investment capacity further boost the leadership of North America in global industry, especially the data center market in the US.

North America, with the largest market share of around 40%, remains at the forefront throughout the period of forecast. The digital transformation hotspot, the fostering digital economy of this region fuels the demand for data centers to serve eCommerce, cloud computing, and other digital projects.

Led by the Northern Virginia, the US data center market houses some of the world’s largest data centers in Phoenix, Northern California (Silicon Valley), Atlanta, Dallas, Chicago, New York & New Jersey, Portland, Los Angeles, and Seattle.

Northern Virginia Houses the World’s Largest Market for Data Centers

Hyperscale operators have generally grouped around several key markets with favorable conditions regarding local infrastructure, energy costs, proximity to end users, and the price of land.

The Northern Virginia region is undoubtedly the world’s most important data center hub, offering the most inventory of any region, though also ranking among the most expensive, pushing operators to consider alternative markets. Another key consideration is energy efficiency, with the industry under pressure to deliver sustainability targets.

Although many providers do not publish efficiency metrics, survey data indicates that efficiency gains across the market have leveled off in recent years, with further improvements requiring significant investment. Many industry players are exploring nuclear energy as a solution, with small, on-site nuclear reactors known as Small Modular Reactors (SMRs) able to secure energy independence.

The US, and China stand the tallest as the largest revenue generators in the worldwide data center industry, followed further by Japan, Germany, and the UK.

Asia Pacific Develops Lucrative Potential

The expanding network infrastructure, exploding 5G accessibility, and increasing government investments shaping fiber connectivity will drive the growth of data centers across Asian markets. Escalating demand for fiber-to-the-home (FTH), and/or fiber-to-the-building (FTB) service will further supplement the data center market growth in the region.

Research identifies a whopping 80% of the total operational capacity of the region concentrated in the top three countries, i.e., Mainland China, Australia, Japan, followed by the next attractive data center market in India, and Singapore.

Heightened demand for cloud post-pandemic, and exceptional rise in the ubiquity of Internet have been the largest contributors to market growth in Asia Pacific, shows the data center market overview.

While IT infrastructure takes up the maximum share of the overall data center investments, a sizeable data center market share also goes to the electrical and mechanical infrastructure.

Investments flooding tier IV data centers, widespread availability of skilled engineering workforce, and the cost advantage in terms of operations and development will play a collective driving force for market growth here.

Asia Pacific is expected to record the fastest rate of growth through the end of the forecast period. Industries like healthcare, banking and finance, retail, and manufacturing are witnessing rapid digital transition, and cloud adoption, which necessitates data centers.

The region’s flourishing eCommerce world further raises the demand for data centers. Mounting smartphone sales, and exceptionally rising use of mobile devices will continue to create demand in line with the increasing manage mobile app usage, mobile payments, and mobile-based services.

Industry Developments Shaping Lucrative Potential of India

  • In September 2023, ST Telemedia GDC India made a billion-dollar investment in data center expansion in India.
  • In September 2023, Digital Realty announced the introduction of a new data center in India, its first in Chennai, to support up to 100 MW of critical IT load capacity.  
  • In February 2023, H5 Data Centers announced the expansion of its new data center in Atlanta, Georgia.
  • In January 2024, NTT unveiled a new data center campus in Noida, India.
  • In February 2024, Colt DCS declared its plans of US$1.3 Bn investment for development of multiple new data center campuses across India over the next few years.

Major Data Center Companies

  • Microsoft
  • Oracle
  • Amazon.com Inc.
  • IBM Corporation
  • SAP SE
  • Alphabet Inc.
  • Hewlett Packard Enterprise
  • Equinix Inc.
  • Digital Realty
  • NTT Communication Corporation
  • Alibaba Cloud
  • AT&T Intellectual Property
  • Lumen Technologies (CenturyLink)
  • China Telecom Americas, Inc.
  • CoreSite
  • CyrusOne
  • Digital Realty
  • Google Cloud
  • Tencent Cloud

Recent Developments in Global Data Center Market

  • In June 2021, NTT Communications Corporation made an announcement of the launch of its integrated network fabric service, Data Center Interconnect (GDCI).
  • In April 2022, Phison Electronics Corporation, and Seagate Technology Holdings declared expansion of their SSD portfolio.
  • In April 2023, Microsoft launched its latest trusted cloud space, in Poland. This launch was the company’s first in eastern and central Europe.
  • In June 2023, IBM announced its plans to open its first European quantum data center in 2024 to provide access to cutting-edge quantum computing for various institutions.
  • US cloud provider Expedient acquired a former Nationwide Mutual Insurance data center near Columbus, Ohio.
  • Oracle is expanding its cloud data centers by building 100 new ones and expanding 66 existing ones.
  • Adani Group is investing heavily in the Indian data center market with a US$6 billion commitment.
  • Web Werks is planning a significant data center park in Bengaluru for US$2.4 billion.

- Companies Covered in This Report -

  • Microsoft
  • Oracle
  • Amazon.com Inc.
  • IBM Corporation
  • SAP SE
  • Alphabet Inc.
  • Hewlett Packard Enterprise
  • Equinix Inc.
  • Digital Realty
  • NTT Communication Corporation
  • Alibaba Cloud
  • AT&T Intellectual Property
  • Lumen Technologies (CenturyLink)
  • China Telecom Americas, Inc.
  • CoreSite
  • CyrusOne
  • Digital Realty
  • Google Cloud
  • Tencent Cloud

- Frequently Asked Questions -

Increasing adoption of cloud computing, digitalization across industries, and the surge in data generation.

Through modular designs, virtualization technologies, and strategic partnerships to expand infrastructure efficiently.

Businesses prioritize energy-efficient designs, renewable energy sourcing, and implementing innovative cooling solutions to minimize environmental impact.

Data center providers invest in robust cybersecurity frameworks, encryption protocols, and continuous monitoring to safeguard sensitive information.

Emerging markets in Asia Pacific, especially China and India, alongside established hubs in North America, and Europe, present significant growth potential due to increasing digitalization, and connectivity demands.

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