Multi-Tenant Datacenter North American Providers 2016

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1 MARKET FORECAST Multi-Tenant Datacenter North American Providers 2016 JUN 2016 Stefanie Beaubien Williams, Research Analyst Kelly Morgan, Research Vice President Dan Thompson, Senior Analyst Rick Kurtzbein, Research Analyst The North American multi-tenant datacenter market is consolidating and maturing but continues to see strong demand. The market overall will continue to grow and providers will continue to expand, particularly in top markets such as Virginia and Dallas but also in edge or emerging markets RESEARCH, LLC

2 ABOUT 451 RESEARCH 451 Research is a preeminent information technology research and advisory company. With a core focus on technology innovation and market disruption, we provide essential insight for leaders of the digital economy. More than 100 analysts and consultants deliver that insight via syndicated research, advisory services and live events to over 1,000 client organizations in North America, Europe and around the world. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. NEW YORK SAN FRANCISCO LONDON BOSTON 20 West 37th Street 3rd Floor New York, NY P F Geary Street 9th Floor San Francisco, CA P F Gower Street London, UK WC1E 6HH P +44 (0) F +44 (0) Liberty Square, 5th Floor Boston, MA P F ABOUT THE AUTHOR STEFANIE BEAUBIEN WILLIAMS RESEARCH ANALYST Stefanie Beaubien Williams joined 451 Research in April She brings a diverse background, including experience in the customer service, hospitality and business management arenas. Stefanie s past work includes small network administration, HTML, FTP, SEO and several technical writing projects. II

3 Key Findings 2015 was a record year for M&A activity in the MTDC sector, especially in North America, leading to increased consolidation of providers as major players acquired other significant providers. The M&A activity for 2016 has slowed compared to 2015, but some providers are up for grabs, potentially before year-end. As providers become more and more cognizant of the underlying costs to build in various markets, we re seeing some states proactively develop legislation centered on tax breaks specifically for midsized or largescale datacenters. However, several states are also ignoring the opportunity, allowing bills to die during legislative sessions or reacting to demand from a provider looking at the market by rushing previously overlooked bills through the process. Edge markets are growing in numbers as providers and customers look to spread themselves out to support demand for more remote and more cost-effective datacenters. Drivers are primarily CDN, mobility, and the Internet of Things (IoT), and demand will rise as the space grows. Remote, overlooked markets and top market fringe cities are both in the crosshairs. Providers are revisiting previous strategies to support shifts in demand as the sector changes. The options: go big in size or in service. In some cases, providers are doing both. Mega-datacenters and a full stack of services appeal to specific verticals, leaving providers with a more honed target customer and an altered competitive outlook. III

4 Executive Summary INTRODUCTION The 2016 Multi-Tenant Datacenter North American Providers and Market Forecast presents estimates of the overall size, scope and growth of the multi-tenant datacenter (MTDC) market in North America. It also spotlights various prominent US-based MTDC providers. In this report, multi-tenant datacenters are considered multi-customer colocation and wholesale facilities. Single-user enterprise datacenters and single-tenant datacenters are specifically excluded from this analysis. The intended audience for this report includes: Wholesale datacenter and colocation providers assessing market share and market positions. Hosting providers considering datacenter leasing decisions. Financial professionals considering investments in datacenter properties and companies. Real estate and planning professionals interested in North American MTDC market analysis and provider-by-provider analysis of the MTDC space. This report was last published in January Research intends to update this report annually and also publish a second annual report that focuses on the global MTDC markets and providers. We also plan to publish individual MTDC reports annually looking at a city, a region of the world or a specific country s market in more detail. METHODOLOGY This report on North American providers is based on a series of in-depth interviews with a variety of stakeholders in the industry, including IT managers at end-user organizations across multiple sectors, technology vendors, managed service providers, telcos and VCs. This research was supplemented by additional primary research, including attendance at a number of trade shows and industry events. Reports such as this one represent a holistic perspective on key emerging markets in the enterprise IT space. These markets evolve quickly, though, so 451 Research offers additional services that provide critical marketplace updates. These updated reports and perspectives are presented on a daily basis via the company s core intelligence service, 451 Research Market Insight. Forward-looking M&A analysis and perspectives on strategic acquisitions and the liquidity environment for technology companies are also updated regularly via Market Insight, which is backed by the industry-leading 451 Research M&A KnowledgeBase. Emerging technologies and markets are covered in 451 Research channels including Business Applications; Cloud Transformation; Data Platforms and Analytics; Datacenter Technologies; Development, DevOps and IT Ops; Enterprise Mobility; European Services; Information Security; Internet of Things; Mobile Telecom; Multi-Tenant Datacenters; Networking; Service Providers; Storage; and Systems and Software Infrastructure. Beyond that, 451 Research has a robust set of quantitative insights covered in products such as Voice of the Enterprise, Voice of the Connected User Landscape, Market Monitor, the M&A KnowledgeBase and the Datacenter KnowledgeBase. All of these 451 Research services, which are accessible via the web, provide critical and timely analysis specifically focused on the business of enterprise IT innovation. For more information about 451 Research, please go to: IV

5 Table of Contents 1. NORTH AMERICAN MTDC MARKET 1 NORTH AMERICAN MTDC MARKET OVERVIEW Figure 1: North American MTDC Provider Services Mix Figure 2: North America Enterprise Plans When New Capacity Is Needed Figure 3: North America MTDC Revenue NORTH AMERICAN TOP MARKETS Figure 4: Estimated MTDC Operational Space by City Top 10 US Markets INSIGHTS AND IMPLICATIONS 7 SHIFT IN SCALE, SERVICES Figure 5: Interest in Additional Services MOVE TO THE EDGE M&A ACTIVITY Figure 6: MTDC M&A Activity INCENTIVES Figure 7: States with Legislated Tax Incentives MARKET SIZING 11 TOP TIER NORTH AMERICAN PROVIDERS Figure 8: Top-Tier MTDC Providers by Estimated 2015 North American MTDC Revenue Category Figure 9: Sampling of North American MTDC Providers: $5-20m MTDC Revenue in PROFILES Critical Systems Realty Aligned Cologix CoreSite CyrusOne DataBank V

6 MULTI-TENANT DATACENTER NORTH AMERICAN PROVIDERS 2016 EXECUTIVE OVERVIEW DataSite Digital Realty DuPont Fabros Technology EdgeConneX Equinix Expedient Infomart Data Centers Involta Iron Mountain QTS Realty Trust RagingWire Data Centers ScaleMatrix Sentinel Data Centers T5 Data Centers TierPoint Zayo CONCLUSIONS AND RECOMMENDATIONS 19 CONCLUSIONS RECOMMENDATIONS FOR VENDORS RECOMMENDATIONS FOR SERVICE PROVIDERS RECOMMENDATIONS FOR END USERS RECOMMENDATIONS FOR INVESTORS FURTHER READING INDEX OF COMPANIES 21 VI