​What’s driving NZ’s multi-million dollar data centre demand?

Managed hosting services to outpace co-location with a $272 million market value projected for 2020.

Datacom's Data Centre in Kapua, Hamilton

Datacom's Data Centre in Kapua, Hamilton

New Zealand is a relatively early adopter of cloud services but the significant capital expenditure savings from using third-party data centres, coupled with the Government’s policies to adopt Infrastructure-as-a-Service (IaaS) has provided strong stimulus, particularly in the corporate sector and SME market.

Whilst the corporate sector has increased use of data intensive applications such as data mining and data analytics, consumer segments have increased consumption of videos, social networks, mobile data and gaming.

These factors have resulted in a need for increased amounts of data storage and computing capacity in New Zealand’s data centres.

As a result, the New Zealand data centre services market grew 16.4 percent over 2013, and in 2014 totalled $118 million.

According to Frost & Sullivan’s new report, New Zealand Data Centre Services Market 2015, a growth of 18 percent in data centre service revenues is forecasted for 2015 with managed hosting recording stronger growth than co-location which will ease with the increased migration to cloud services.

The market is expected to reach $272 million by 2020 with strong growth of virtual private cloud services seeing managed hosting growth outpacing that of co-location.

Phil Harpur, Senior Research Manager, Australia & New Zealand ICT Practice, Frost & Sullivan says that after the Christchurch earthquake, there has been increased concern over the impact of external events on business operations, resulting in a growing demand for disaster recovery and business continuity services.

“Multiple, connected, multi-tenanted data centres are the most effective and cost efficient way of providing these services,” Harpur says.

“To achieve higher economies of scale, a model of fewer, larger, centralised data centres is ideal. However, this is very difficult to achieve in New Zealand due to the relatively small size of the local market.

“Larger IT services providers, such as IBM, are looking to consolidate their data centre footprint across both Australia and New Zealand into smaller numbers of larger, newer and more efficient data centres in centralised locations, often though leasing arrangements with specialist third party providers.

“As New Zealand data centre customers adopt cloud services for a growing portion of their overall IT service needs, they migrate from co-location services and managed hosting to cloud services, with some companies migrating from on-premise IT systems directly to private cloud services, negating the need for core data centre services.”

Harpur says data centre services are in high demand from the Telco/IT Services sector as cloud providers and IT service providers grow their cloud service offerings.

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