Uncovering Potential in the Managed Data Center Service Sector

The organization’s business model has been witnessing a significant amount of pressure from different macroeconomic forces resulting in a substantial amount of profits being foregone as the costs are eating up high percentages of the revenues. Simultaneously, the pace of technological innovation and the requirement of resources that the enterprises need while ensuring adherence to IT and regulatory related compliance further drains out the financial resources that could otherwise be utilized in achieving the company’s goals. As such, the businesses are focusing on refining the operational efficiency and effectiveness in order to improve their financial health and increase the ability to whether the unanticipated changes in the macroeconomic environment. This is promoting the adoption of managed services as it has the potential to reduce the cost by approx. 35% in comparison to the traditional/in-house IT teams (source: Avendus). Similarly, managed services tend to reduce the recurring in-house cost by 30% to 40% while boosting the overall efficiency by 50% to 60% (source: Cisco). This is driving the third-party data center industry – with the trend projected to further continue over the years to comes, the managed data center services market size is estimated to reach US$408.684 billion in 2025 from US$191.673 billion in 2019 at a CAGR of 13.45%.

 

High Potential for Small and Medium Scale Enterprises

The small and medium scale enterprises are increasingly migrating towards a cloud solution that allows them to compete in an increasingly crowded market. Planning and implementing an IT strategy is no longer limited to the large firms, but also for the smallest of companies on the planet. However, it is extremely capital intensive for small firms to build their own data center. The estimated cost of building a data center is approx. US$200 per square foot while the maintenance, staffing, and monitoring costs are separate. Furthermore, depending upon the usage, the average life of a server is between 3-5 years, and the replacement costs further adds to the total cost of ownership, making the decision of a firm with the limited financial ability to invest in building its own data center space redundant.

Enterprises Employinig, Recruting, and Trying Recruit and Having Hard-To-Fill Vacancies for ICT Specialists in EU-28, in %, 2018

Source: Eurostat

Fortunately, there is a way, where the small businesses can exploit the potential of digital and big data without investing significantly in building the data center. These businesses seek budget-friendly plans which are offered by the managed service providers that provide the flexibility and cost-effective IT solutions that can be scaled according to the requirement. For instance, the growing amount of digital data could possibly create storage capacity related issues that can be easily be alleviated by opting for colocation solutions offered by the managed service providers. Moreover, only 25% of the small and medium scale (10-249 persons employed) are using cloud computing solutions in the EU-28 (source: Eurostat) while only 18% of them have hired an IT specialist in 2018. It is expected that the cloud solution will capture a greater proportion of the SME’s in the next five years, however, small businesses can potentially save on the cost of hiring IT specialists and other resources by outsourcing its IT needs to the third-party service providers. The agility, advisory expertise, and cost efficiencies are key factors that are extremely attractive to businesses with a limited budget and will drive the managed data center services market for small and medium-size firms in the immediate future.

Developing Regions Providing High Growth Opportunities

The number of internet users in the developing regions has grown at a CAGR of 12.69% between 2008-2019 as against the 3.55% growth achieved in the developed region. Access to the internet in the developing region has stimulated a number of investments specifically in the media, entertainment, and content creation industry. The ability to reach large masses at a relatively low cost is strategically significant for internet companies. Moreover, e-commerce has also grown in the Asian market at a very high pace and is set on a path of disrupting the traditional method of shopping. Thus, the amount of data generated every day is estimated to have increased from 39.151 billion GB in 2016 to 74.438 billion GB in 2019 (source: Knowledge Sourcing Intelligence Analysis).

Number of Internet User and Data Created Everyday (In Billion GB)

Source: International Telecommunication Union & Knowledge Sourcing Intelligence Analysis

The expected increase in the competition in the media & entertainment industry is anticipated to generate higher revenue generation opportunities for the managed data center service providers as these companies will strive to focus on core objectives while simultaneously outsourcing its data management requirement to the third-party service providers. Moreover, with the anticipated rise in the internet penetration – the investment in the development of data center infrastructure and the simultaneous rise in demand for managed services is projected to substantially escalate in the next five years. Thus, the managed service providers are also strategizing innovatively that will allow them to improve them their market position. For instance, in February 2020, Yotta Infrastructure introduced a launch offer for its managed data center services at a price that we were 40% cheaper than the prevalent market rates. Similarly, ESDS Software Solutions Pvt Limited – one of India’s leading managed data center services company announced the expansion of its office in Kolkatta, India in February 2020 to accelerate its growth plans.

ABOUT THE AUTHOR

Siddharth David is a Senior Market Research Analyst at Knowledge Sourcing Intelligence LLP. His expertise lies in offering predictive analysis and an all-inclusive outlook of different industry verticals from both the macro and micro point of view, with a special knack for market sizing and delivering key strategic insights. To read more articles by him, and for more information regarding multiple global markets, visit https://www.knowledge-sourcing.com.