DATA CENTER AS A SERVICE MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Data Center as a Service Market Size and Trends

Global data center as a service market is estimated to be valued at US$ 89.58 Bn in 2024 and is expected to reach US$ 289.91 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 18.3% from 2024 to 2031.

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Data center as a service market growth is driven by increased adoption of cloud-based services among enterprises  globally. Evolution of technologies such as AI, ML, IoT and 5G networks boosts the need for scalable and efficient data storage. Enterprises are increasingly outsourcing their data management requirements to specialized service providers due to advantages such as low upfront costs, scalability, operational flexibility and faster deployment. Cloud service providers are making significant investments in building robust data center infrastructures to capture this growing opportunity. Rapid digital transformation among organizations can boost demand for on-demand access to data center infrastructure and resources in the near future.

Global Need for Scalability in IT Infrastructure

Global shift towards digitization of businesses has increased data generation and data usage. Every organization , irrespective of industry, relies heavily on data and IT infrastructure to power their digital operations. However, maintaining expensive on-premise data centers is a challenge for many organizations, especially small and medium sized businesses. The high costs associated with building, operating and scaling traditional data centers does not make economic sense for all companies. Businesses need to ensure scalability and flexibility of their IT infrastructure to quickly adapt to changing market conditions and business needs. Cloud-based data center services allow organizations to avoid huge upfront capital expenditure and obtain robust IT resources on demand. Companies can easily scale their computing power, storage and network bandwidth based on real-time usage requirements without worrying about expensive infrastructure upgrades. This delivers tremendous agility and flexibility for digital transformations. As more industries get disrupted through technology, the ability to flexibly scale IT infrastructure is  a critical success factor. Data center as a service addresses this need perfectly by offering on-demand, pay-per-use resources to businesses of all sizes.

For instance, in October 2022, Intel, an American multinational corporation and technology company and Google Cloud, Google Cloud Platform (GCP) is a suite of cloud computing services offered by Google that provides a series of modular cloud services including computing, data storage, data analytics, and machine learning, alongside a set of management tools, jointly developed the E2000 chip, known as Mount Evans, that enhances data center security and efficiency by offloading data packaging from CPUs, thus, improving performance and security for cloud customers sharing resources.

Market Concentration and Competitive Landscape

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Rising Significance of Optimal Resource Utilization

With growing climate change concerns, businesses are under increasing pressure to curb their carbon footprint and optimize resource consumption. Traditional on-premise data centers often exhibit suboptimal power and space utilization rates, typically falling below 20%. This leads to wastage of huge amounts of electricity as well as valuable office real estate space.  Cloud-based mega data centers adopted by top service providers are designed with the highest efficiency standards. State-of-the-art cooling systems, power distribution architecture, and server virtualization enable cloud data centers to achieve a power usage effectiveness (PUE) ratio as low as 1.1, which translates to 90% more efficient compared to typical on-premises facilities. Furthermore, cloud providers are able to maximize space utilization through advanced rack design and workload consolidation across thousands of customers. Shared multi-tenant services allow businesses to utilize resources only when required without under-utilizing expensive on-premise assets. With growing focus on sustainability, data center as a service delivers unmatched efficiency benefits that are difficult to achieve through traditional models. This boosts adoption of cloud-based infrastructure solutions worldwide.

Key Takeaways from Analyst:

Global data center as a service market growth is driven rising demand for scalable, flexible and cost-efficient data center infrastructure among enterprises. Many companies are opting for hybrid or fully managed hosting models rather than building their own on-premise data centers. The pay-per-use model of DAAS provides an operational expense oriented approach, and this boosts  adoption.

North America dominates the market and Asia Pacific is the fastest growing region due to investments made in digital transformation initiatives across countries like China and India. Consolidation of data centers can also drive the market growth as these allow virtualization and maximum utilization of infrastructure. Security concerns in certain regions inhibits organizations from moving completely to public or hybrid clouds.

The integration of edge compute capabilities and emerging technologies like AI/ML, blockchain, and IoT with data center infrastructure can unlock significant market growth opportunities. Although large cloud providers currently dominate the market, managed hosting and colocation service specialists can still capitalize on growth by offering tailored solutions. Overall, Data-as-a-Service (DAAS) is poised to gain traction as a scalable and cost-effective alternative to traditional on-premise infrastructure models, catering to businesses seeking enhanced flexibility and efficiency.

Market Challenges: Security threats associated with cloud adoption

Security threats associated with cloud adoption can hamper the global data center as a service market growth. One of the major concerns among organizations is loss of control over the infrastructure and risk of internal and external attacks. When infrastructure is managed by external cloud service providers in a shared environment, organizations lose visibility and control over how their systems and data are managed and secured. This introduces the risk of breaches and attacks from other tenants sharing the same infrastructure or even from internal employees of the cloud providers.

Market Opportunities: Emergence of edge computing and 5G technology

Edge computing and 5G technology can offer opportunities for the global data center as a service market growth. 5G technology promises extremely low latency combined with high bandwidth. This allows for computation and storage to moved closer to the end users. Edge computing leverages this ability of 5G by deploying micro data centers near cellular towers or enterprise locations to provide services with minimal latency.

The growing adoption of IoT, autonomous vehicles, VR/AR, and other applications that necessitate real-time connectivity and data processing will drive significant demand for infrastructure capable of supporting these low-latency applications. Edge computing with micro data centers deployed in a distributed manner is ideal to enable such applications. Data center operators are well poised to capitalize on this opportunity by virtualizing and containerizing their infrastructure and offering it on-demand to various end users.

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Insights, By Infrastructure- Economies of scale boosts servers segment growth

In terms of infrastructure, servers segment is estimated to contribute the highest market share of 54.4% in 2024, owing to the economies of scale achieved through server virtualization and consolidation. As data center operators look to reduce costs and maximize resource utilization, servers provide an opportunity to host multiple virtual instances on a single physical machine. By aggregating workloads that previously required dedicated servers, it is possible to significantly improve hardware usage rates, thereby optimizing resource utilization.  In addition to saving upfront capital expenditures for servers, ongoing maintenance and management costs are also reduced as fewer physical servers need power, cooling and administration. Server virtualization allows data center operators to scale their infrastructure capacity on demand through simply provisioning additional virtual machines, without the legacy constraints of having to purchase and deploy new physical hardware.

Insights, By Organization Size - Extensive customization needs boosts large enterprise segment growth

In terms of organization size, large enterprises segment is estimated to contribute the highest market share of 57.70% in 2024 due to their extensive customization needs. Large enterprises have massive and complex IT environments supporting numerous business-critical applications, databases and workloads. These require highly tailored data center solutions with stringent service level agreements around performance, security and reliability. Public cloud providers and traditional colocation offerings are often inadequate in meeting the customized visibility, governance and control demands of large enterprises. As a result, these tend to invest heavily in private or hybrid cloud solutions delivered as a service with deep integration and management capabilities. Public cloud pricing models does not always scale favorably for the volumes of data and computing power consumed by extensive enterprise environments. Data center as a service (DCaaS) offers the agility and scalability of public clouds, but with enhanced oversight, security, customization, and predictable monthly costs aligned with actual usage, making it a preferred option for large enterprises seeking a balance between flexibility and control.

Insights, By Vertical- Digital transformation boost IT & Telecom segment growth

In terms of vertical, IT & telecom segment is estimated to contribute the highest market share of 24.5% in 2024 due to digital transformation initiatives boosting demand for data center infrastructure within the industry. As telecommunications and technology companies add capabilities like 5G, internet of things (IoT), Edge computing and artificial intelligence/machine learning, there will be huge volume of data to store, manage and analyze. There is increasingly heavy reliance on cloud-like data centers to deploy new platforms and services at scale quickly. Within IT & telecom firms, traditional hardware-centric models are shifting to optimized infrastructure and application delivery as a service. This enables rapid product development, testing and deployment. It also supports flexible consumption-based pricing that more closely tracks revenue. With digital innovation occurring at fast pace, IT & telecom companies procuring data center capacity as a service can instantly scale resources up or down as needs fluctuate without long procurement cycles.

Regional Insights

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North America has established itself as the dominant region in the global data center as a service market with estimated market share of 33.7% in 2024. The strong presence of leading cloud and managed service providers such as Amazon Web Services, Microsoft Azure, IBM, Google in the U.S. has boosted demand for data center services across all major industry verticals. Key factors driving the market growth include high digital connectivity and IT infrastructure penetration, strong economy supporting large-scale cloud adoption among enterprises, flexibility and scalability offered by data centers, and focus on reducing upfront capital expenditure through pay-per-use pricing models. The exponential data traffic and emerging technologies requiring massive computing power such as IoT, big data analytics and AI are encouraging established businesses to enhance their existing infrastructure through third-party data centers.

Asia Pacific, specifically Southeast Asian countries, is expected to witness fastest growth. Countries like Singapore, Malaysia, Thailand and Indonesia are rapidly emerging as the new destinations for data center investment and operations. Strong economic growth, young tech-savvy population, focus on digitalization of services and availability of highly-skilled workforce at competitive costs have been drawing major cloud and managed service providers to set up their infrastructure in the region. Rising cloud adoption among SMEs and startups, increasing data sovereignty regulations in some APAC nations are prompting global companies to localize their data centers. Governments' initiatives promoting digital economy and improving connectivity infrastructure have raised for third-party data centers exponentially. Proximity to fast-growing markets ensures low latency and compliance with data localization mandates. The region is expected to witness multiple hyperscale data center investments in the near future.

Market Report Scope

Data Center as a Service Industry News

• On 7 May 2024, Cisco, an American multinational digital communications technology conglomerate corporation, expanded its security presence by launching the first security cloud data centers in Jakarta, Indonesia. This milestone highlights Cisco's dedication to enhancing cybersecurity readiness for businesses in the country, driven by growing demand for security services. The new data centers enable public sector, financial services, and state-owned enterprise customers to better align with local data regulations and compliance requirements.
• In November 2022, Equinix and VMware expanded their global partnership to deliver new digital infrastructure and multi-cloud services. As part of this expanded partnerhsip, the companies launched VMware Cloud on Equinix Metal - a distributed cloud service that provides a more performant, secure, and cost-effective cloud solution for enterprises to run their mission-critical applications.
• In September 2022, Arm unveiled the Neoverse V2, its latest generation of data center chip technology designed to handle the growing data demands driven by 5G and the proliferation of internet-connected devices
• In June 2022, Google Cloud, a suite of cloud computing services offered by Google that provides a series of modular cloud services including computing, data storage, data analytics, and machine learning, alongside a set of management tools and Deutsche Telekom, a German multinational telecommunications company formed a strategic alliance to expand their presence in Europe. This partnership is aimed to provide sustainable and secure cloud services by combining Google Cloud's advanced data center capabilities with Deutsche Telekom's extensive network infrastructure. This cooperation is expected to leverage the strengths of both partners to meet the growing demand for cloud services in the region.
• In June 2022, Oracle Cloud Infrastructure (OCI), a comprehensive suite of cloud services designed to help organizations build, deploy, and manage modern cloud applications and services expanded its distributed cloud services by introducing specialized regions and previewing Compute Cloud@Customer. This new offering typically consumes 60-75% less data center space and electricity, resulting in an average annual cost of around US$ 1 million for customers.

*Definition: Global data center as a service  market provides data center services such as storage, servers, networking components, and virtualization on a subscription basis rather than having to build and maintain own expensive data centers. DCaaS allows enterprises to outsource their data center management needs and focus on core business activities. This on-demand delivery model of data center resources and capabilities gives more flexibility and cost savings to organizations without requiring huge capital expenditures.

Market Segmentation

• Infrastructure Insights (Revenue, US$ Bn, 2019 - 2031)
  • Servers
  • Storage
  • Networking
• Organization Size Insights (Revenue, US$ Bn, 2019 - 2031)
  • SMEs
  • Large Enterprises
•  Vertical Insights (Revenue, US$ Bn, 2019 - 2031)
  • Retail
  • BFSI
  • IT & Telecom
  • Healthcare
  • Manufacturing
  • Others
• Regional Insights (Revenue, US$ Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • Israel
    • South Africa
    • Rest of Middle East & Africa
• Key Players Insights
  • 365 Data Centers
  • Alibaba
  • Amazon.com, Inc.
  • AT & T
  • Cloudian
  • Cyxtera Technologies.
  • Dell Inc.
  • Digital Ocean, LLC.
  • Digital Reality
  • Equinix, Inc.
  • Hewlett Packard Enterprise Development LP
  • Huawei
  • IBM Corporation
  • Linode LLC.
  • Microsoft Corporation