{"id":11882,"date":"2018-03-28T11:00:21","date_gmt":"2018-03-28T19:00:21","guid":{"rendered":"http:\/\/www.palada.net\/index.php\/2018\/03\/28\/news-5651\/"},"modified":"2018-03-28T11:00:21","modified_gmt":"2018-03-28T19:00:21","slug":"news-5651","status":"publish","type":"post","link":"http:\/\/www.palada.net\/index.php\/2018\/03\/28\/news-5651\/","title":{"rendered":"Investment Banker Paints Rosy Picture of Colocation Market in 2018\u00a0"},"content":{"rendered":"<p><strong>Credit to Author: Greg Jones| Date: Wed, 28 Mar 2018 15:41:51 +0000<\/strong><\/p>\n<p>We\u2019ve all been hearing about how robust the market for data center space is, but a presentation by an investment banker who has his finger on the pulse on the market day in and day out gave me a new appreciation for how great the opportunity really is.<\/p>\n<p> <img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-46834\" src=\"https:\/\/blog.schneider-electric.com\/wp-content\/uploads\/2018\/03\/DH-Capital-Colo-Growth-Small-300x223.png\" alt=\"Colocation Market Growth\" width=\"350\" height=\"260\" srcset=\"https:\/\/blog.schneider-electric.com\/wp-content\/uploads\/2018\/03\/DH-Capital-Colo-Growth-Small-300x223.png 300w, https:\/\/blog.schneider-electric.com\/wp-content\/uploads\/2018\/03\/DH-Capital-Colo-Growth-Small.png 459w\" sizes=\"auto, (max-width: 350px) 100vw, 350px\" \/> <\/p>\n<p>Herb May is a partner and managing director with DH Capital, an investment bank founded 15 years ago in New York that is focused on the Internet infrastructure space. His company has been involved in close to 100 deals, representing almost $20 billion in value. Most of DH Capital\u2019s work is as a mergers and acquisitions advisor, but raising capital is a growing percentage of its business. The point is, the company understands the financials behind data centers and colocation companies inside and out.<\/p>\n<p>That\u2019s why <a href=\"https:\/\/www.schneider-electric.com\/en\/work\/solutions\/for-business\/cloud-and-service-providers\/colocation.jsp\" target=\"_blank\" rel=\"noopener\">colocation providers<\/a> would do well to take notice of what May had to say during his presentation at the recent International Colo Club event hosted by Schneider Electric in London. Spoiler alert: it\u2019s almost entirely good news.<\/p>\n<p><iframe loading=\"lazy\"  src=\"\/\/www.slideshare.net\/slideshow\/embed_code\/key\/sInoOGdFw6eHT6\" width=\"100%\" height=\"420\" frameborder=\"0\" ><\/iframe> <\/p>\n<h2>Promising Colocation Market with Growth of Cloud Adoption<\/h2>\n<p>Cloud adoption is, in a word, exploding, driven by Internet of Things (IoT) technology, with dramatic growth from 2009 to 2017 \u2013 and no sign of stopping.<\/p>\n<p>\u201cWe expect in the next 3 years a two-fold increase in storage demand,\u201d May said. \u201cClearly IOT and [artificial intelligence] is really going to drive so much of the data that\u2019s generated, and will dwarf the global IP traffic by multiples.\u201d A slide citing statistics from the Cisco Global Cloud Index showed IoT has the potential to generate 275 times more data than IP traffic by 2020: 600ZB for IoT vs. 2.3ZB for global IP traffic.<\/p>\n<p>I&#8217;m not sure I quite process those numbers above, but I can understand huge growth such as Microsoft&#8217;s and Amazon&#8217;s cloud businesses. Microsoft\u2019s cloud revenue nearly doubled in 4 quarters, and was up 90% year-over-year in Q3 2017. Amazon added nearly $10 billion in revenue in six quarters and was up 45% in Q3 2017 vs. the prior year.<\/p>\n<p>\u201cWe haven\u2019t really seen in U.S. capital markets the ability to grow on top of these incredibly large numbers,\u201d May said. \u201cWe expect those numbers to continue to drive activity in the marketplace.\u201d<\/p>\n<h2>Key Colocation Provider Market Trends to Watch<\/h2>\n<p>The only bit of cautionary news in his presentation was that the cloud is not lifting all boats equally. Legacy Infrastructure-as-a-Service (IaaS), simple managed services, legacy IT outsourcing and traditional value added reseller (VAR) services are all on a downward slope as other cloud services grow rapidly. The big winners include wholesale colocation, connectivity-centric colocation, highly automated infrastructure, and complex managed\/hybrid cloud.<\/p>\n<p>On the other hand, while stocks were up across the board in 2017, real estate investment trusts (REITs) focused on data centers benefited disproportionately. CoreSite saw gains of nearly 60% in 2017 (as of November), Interxion was up more than 50% and CyrusOne was up 45%, for example. \u201cNo industry group has benefitted probably more than the REIT and the colo players,\u201d May said. \u201cThe multiples at which they\u2019re trading and the value of their currency is at a level that\u2019s hard to imagine.\u201d<\/p>\n<p>May doesn\u2019t see any slowdown in 2018. \u201cWe think M&amp;A activity is going to remain brisk into 2018,\u201d he said. \u201cStrong fundamentals and increasing scarcity value will support the strong valuations.\u201d<\/p>\n<p>Providers with highly automated infrastructure will continue to flourish alongside giant public cloud players. \u201cCloud and IP traffic growth creates this almost can\u2019t-miss scenario for the data center providers with highly networked and\/or scaled campuses,\u201d he said.<\/p>\n<h2>Make Your Colocation Accommodating to the Future<\/h2>\n<p>That highlights the need for tools that can help deliver automation, such as Schneider Electric\u2019s cloud-based <a href=\"https:\/\/www.schneider-electric.com\/en\/work\/campaign\/innovation\/datacenters.jsp\" target=\"_blank\" rel=\"noopener\">EcoStruxureIT<\/a>\u00a0platform. EcoStruxure collects data from all sorts of data center and building devices and infrastructure then applies analytics to help drive increased data center efficiency, reliability and more (the subject of this previous blog on <a href=\"https:\/\/blog.schneider-electric.com\/co-location\/2018\/01\/19\/data-center-growth-opportunity-efficiency\/\" target=\"_blank\" rel=\"noopener\">leveraging data analytics<\/a>).<\/p>\n<p>Finally, May mentioned the topic of edge data centers frequently comes up in conversations he has with various stakeholders. \u201cWe\u2019re going to be so bold as to call 2018 the Year of the Edge,\u201d he said. That likewise ties to Schneider Electric offerings such as our\u00a0<a href=\"https:\/\/www.schneider-electric.us\/en\/work\/solutions\/system\/s4\/data-center-and-network-systems-micro-data-center\/\" target=\"_blank\" rel=\"noopener\">Micro Data Centers<\/a>\u00a0and\u00a0<a href=\"https:\/\/www.schneider-electric.com\/en\/product-range\/62320-smartshelter-container?filter=business-3-Critical%20Power,%20Cooling%20and%20Racks&amp;parent-category-id=7550&amp;parent-subcategory-id=7570\" target=\"_blank\" rel=\"noopener\">SmartShelter<\/a>\u00a0prefabricated, modular containers.<\/p>\n<p>At the end of May\u2019s presentation, I asked how long we can expect this kind of growth to continue. \u201cThe market can\u2019t go up forever. And valuations can\u2019t go much higher,\u201d he said. But that doesn\u2019t mean we\u2019re in for a big downturn by any stretch.<\/p>\n<p>The scarcity of data center space will continue to ensure we won\u2019t see huge sell-offs. Potentially, index funds that have thus far missed out may rebalance and invest more in data center-focused REITs, which will spur more investment and \u201ccontinued strong multiples going forward,\u201d May said.<\/p>\n<h2>Access Presentation on Colocation Industry Trends<\/h2>\n<p>Be sure to check out <a href=\"https:\/\/www.slideshare.net\/SchneiderElectric\/key-industry-trends-ma-valuation-trends\" target=\"_blank\" rel=\"noopener\">May&#8217;s presentation<\/a>. It&#8217;s guaranteed to get you fired up for 2018, or at the very least put you in a good mood.<\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/blog.schneider-electric.com\/co-location\/2018\/03\/28\/investment-banker-paints-rosy-picture-of-colocation-market-headed-into-2018\/\">Investment Banker Paints Rosy Picture of Colocation Market in 2018\u00a0<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/blog.schneider-electric.com\">Schneider Electric Blog<\/a>.<\/p>\n<p><a href=\"https:\/\/blog.schneider-electric.com\/co-location\/2018\/03\/28\/investment-banker-paints-rosy-picture-of-colocation-market-headed-into-2018\/\" target=\"bwo\" >http:\/\/blog.schneider-electric.com\/feed\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Credit to Author: Greg Jones| Date: Wed, 28 Mar 2018 15:41:51 +0000<\/strong><\/p>\n<p>We\u2019ve all been hearing about how robust the market for data center space is, but a presentation by an investment banker who has his finger on the pulse on the&#8230;  <a href=\"https:\/\/blog.schneider-electric.com\/co-location\/2018\/03\/28\/investment-banker-paints-rosy-picture-of-colocation-market-headed-into-2018\/\" title=\"ReadInvestment Banker Paints Rosy Picture of Colocation Market in 2018\u00a0\">Read more &#187;<\/a><\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/blog.schneider-electric.com\/co-location\/2018\/03\/28\/investment-banker-paints-rosy-picture-of-colocation-market-headed-into-2018\/\">Investment Banker Paints Rosy Picture of Colocation Market in 2018\u00a0<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/blog.schneider-electric.com\">Schneider Electric Blog<\/a>.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","footnotes":""},"categories":[12389,12388],"tags":[17938,12390,12391,12392,17939,17940,17941,17942,10495,12463,17943],"class_list":["post-11882","post","type-post","status-publish","format-standard","hentry","category-scadaics","category-schneider","tag-cloud-adoption","tag-colocation","tag-data-center","tag-data-center-architecture","tag-dh-capital","tag-financial-forecasts","tag-herb-may","tag-international-colo-club","tag-iot","tag-micro-data-center","tag-smartshelter"],"_links":{"self":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/posts\/11882","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/comments?post=11882"}],"version-history":[{"count":0,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/posts\/11882\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/media?parent=11882"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/categories?post=11882"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/tags?post=11882"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}