The Changing Face of Colocation – Next Generation Data

The Changing Face of Colocation

By NGD 13 | February | 2018

Inside Networks – Colocation feature – February 2018

The changing face of colocation

The drivers redefining an industry born two decades ago    

By Simon Bearne, Commercial Director, Next Generation Data

Arguably the roots of the ‘colocation’ market can be traced back 20 years ago to the original dot com boom era. This created  demand from e-commerce businesses and ISPs for a more cost-effective way of housing of their growing ‘server farms’ and the idea of sharing secure IT spaces with others was born.

These days colocation is maturing and although the term has perhaps evolved more recently into a catchall for describing more than just securely hosting, processing and storing data - cloud hosting for example - the value proposition appears on first pass to be the same as ever. However, much has and is changing beneath the surface. This is redefining what users expect from colocation and will have growing implications for providers and users in the years to come.

Despite recent M&A activities there are still upwards of 200 colocation facilities in the UK but there is no one size fits all. While cost will always be an important factor to users it should not be the overriding decider. Colocation data centres are not commodities. Moving forward, older, smaller, and increasingly power strapped facilities will find it challenging to compete for the colocation business of increasingly sophisticated buyers.

Winds of change

Stepping back, there have been various drivers for change in colocation over the past decade, most notably the growing concerns over data security; advances in networking technology; more sophisticated remote diagnostics; and an exponential reduction in connectivity costs.

Low latency low cost fibre and the pre-existing ‘FUD factor’ about security seeded by 9/11 and London’s 7/7, combined to create the perfect storm conditions for steadily eroding traditional  CIO wisdom; where maintaining in house data centres and keeping them close to London’s exchanges was a prerequisite.

Today, a typical 1 Gb/s circuit between London and Wales, for example, costs circa £6000 per annum - compared to around £36,0000 15 years ago for 100 Mb/s.

Therefore, businesses can now achieve a far more balanced and geo diverse data centre strategy by retaining central London/ Docklands facilities (in house or colo) as needed for certain applications;  high frequency trading, for example. Businesses can also save on cost per sq ft and gain access to more stable and abundant power by connecting to out of town colocation facilities for the majority of other tasks.

As concerns over latency continue to diminish, enterprise organisations, SIs and service providers now have far greater choice in terms of physical data centre location. A few operators have already succeeded in establishing very large purpose-built colo facilities in regions where real estate and labour is considerably less expensive. While this translates into lower rates for users, of equal importance, those built in more rural areas are also out of harm’s way with significantly lower risk profiles than metro alternatives.

New Challenges

Clearly, improvements in latency and tumbling connectivity costs have helped to broaden the UK colocation market and make it more accessible and viable to more businesses. However, the sector faces other challenges as a result of growing Cloud, Big Data, IoT and HPC requirements. These are making additional demands on data centre technical infrastructure, power, cooling and connectivity.


Cloud computing and various ‘as a service’ subscription models such as IaaS, SaaS and PaaS have perhaps caused a blurring of the lines of the original colocation concept. Companies are quickly realising that they need many different types of cloud services to meet a growing list of user and customer needs.

For the best of both worlds, hybrid cloud is becoming increasingly popular. It offers a private cloud combined with the use of public cloud services which together can create a unified, automated, and well-managed computing environment. This is attractive to organisations requiring the flexibility, cost savings and elasticity of public services such as Microsoft Azure while still retaining control of sensitive applications and maintaining compliance.

But aside from the considerable power to rack considerations, hybrid cloud environments are only as good as the weakest link: the public cloud’s connection to the data centre. This has called for colocation data centres to bypass the internet with cloud gateways, allowing faster, more secure private connections directly into global public cloud network infrastructures. However, only a few colocation data centres are directly connected to these networks for allowing optimised performance and very low latency.

Another key factor to consider is a data centre’s level of engineering competence, necessary not only for configuring and interconnecting these complex hybrid environments, but also for helping businesses bring their legacy IT into the equation.


Big Data and the Internet of Things are major contributors to the High Performance Computing (HPC) requirements of both commercial and not for profit sectors. These environments demand power, cooling and connectivity to support clusters of very high density server racks, some pulling as much 60 kWs.  However, many colocation facilities in the UK are not served by sufficiently abundant levels of power, let alone direct to grid connections for reducing the potential of outages.

As a work around, most facilities must put in place UPS and auxiliary power systems capable of supporting all workloads running at the same time, along with overhead and enough redundancy to deal with any failure within the emergency power supply system itself.  This and the specialist cooling needs of HPC are a tall order for many colos today and as result most are unable to address this high growth market opportunity without significant upgrading.

Data Privacy and Compliance

Furthermore, colocation businesses perhaps more than any others are under increasing scrutiny from existing and potential users over where and how securely their data is being stored. With Brexit and GDPR on the near horizon this raises the stakes for data centre operators when it comes to the quality and compliance of their security and operational management procedures.

In summary, all of the above factors are aligning to make users, service providers and SIs more demanding in what they need and expect from their colocation providers: Scalable high quality facilities and high calibre engineering and management.

While colocation data centres are still generally categorised from Tier 1 – 4 in terms of levels of redundancy, resilience and security, and rated separately for their power usage efficiency (PUE), these alone can no longer be the only methods applied for facilities evaluation and differentiation.

For meeting modern business requirements increasingly knowledgeable and discerning users also demand hard evidence of data security and privacy compliance; power availability; connectivity options; uptime track records; and iron clad SLAs. The colocation business has evolved into something altogether more complex.


Author’s Biography

Simon Bearne is Commercial Director at Next Generation Data, operator of NGD, Europe's largest data centre campus. With a deep knowledge of cloud and colocation services provision, he has a wealth of business experience gained from senior positions at companies such as Claranet, Europe’s largest independent managed services provider, Colt, and Cable & Wireless Communications.