We are at the forefront of an exciting period for data center design and innovation driven by what is occurring in three separate-but-fast-converging market segments: co-location businesses, managed services vendors and cloud providers.

Our view today is that the future, and fortunes, of each segment is inextricably linked and that the relationship of key conditions in each segment — capacity for co-lo, profit margin for managed services and technology innovation for cloud providers — will meaningfully define the opportunities, challenges and performance of what we see as a truly amalgamated marketplace in the next 10 years.  Briefly, here is what PGR’s network is reporting:

Capacity — Enterprises suffer a data center capacity shortage brought on by a dearth of viable real estate, a state of affairs that PGR’s network consistently characterizes as fundamental rather than temporary. The capacity squeeze is made worse by growing demand from SMBs among others that want to get out of the data center business with its acute heat/power problems.

Margin — Right now, SMBs and enterprises are willing to pay a premium for the value added by managed services providers. We believe this will result in continued high margins for managed services providers over the foreseeable future.

Technology innovation — While it is clear that elements like SAAS are accelerating, all of the technologies related to bill-back, security and private clouds and back-end support for performance enhancement among others are immature. A lot of heads are “in the clouds” right now and speculation about what is coming and what will occur as a result is intense.

Looking at the three segment reports above, it is clear that developments and conditions in one segment weigh strongly on the others. Thus, factors that impact co-location vendors inevitably affect the prices enterprises are willing to pay managed services providers and create opportunities for cloud providers to innovate to solve IT challenges. 

More to come.

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