Managed Services Not Always the Answer

Not all colocation companies need to offer high-end managed services to make money, according to a new report by London-based research firm TARIFICA.

“Industry professionals have failed to recognize the fundamental distinction between the colocation business model and the data center model,” said Nicola Ainsworth, managing partner at TARIFICA. “Colocation is essentially an infrastructure business, and the data center model is conversely, one of service provision.”

TARIFICA argues that until recently the two businesses have had a very different customer base and revenue stream with rack space in data centers traditionally priced lower than in a colocation facility where space is ancillary to the main outsourcing solution product.

Data center operators are traditionally service providers with a strong corporate, global enterprise or SME customer base, such as BT Ignite and Colt, or larger web hosters, ISPs and organizations such as IBM.

But the research suggests that a decision to offer managed services may have disastrous consequences for colocation companies. Where financial analysts have insisted that colocation companies should offer managed services and also target the lucrative corporate market, space has remained largely empty.

TARIFICA says it is a misconception that there is more space in Europe than actually exists with analysts double- or even triple-counting the amount of available space. Data center operators do not necessarily physically build their own data centers and sometimes locate the center within a colocation facility.

Although there is more empty space in built facilities than anticipated 18 months ago, TARIFICA says this situation will reverse, providing colocation companies do not begin to compete with data center operators. With more service providers reverting to leasing colocation space, much of the available colocation space could theoretically be filled within the next twelve months.

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