The Top 10 Colocation Hosting Trends

Updated: April 30, 2009


In its first-ever 2008 "Colocation Industry Trends Report," Web hosting and cloud computing service provider surveyed 212 of its clients and other hosting service providers. Industries represented in the responses included financial services , retail, social networking, health care, manufacturing, IT service networking, manufacturing, IT service providers, marketing and advertising, nonprofits, city governments and others. The size of entities surveyed ranged from 2 to more than 100,000 employees.


Optimism: Even in the midst of the worst recession in a generation, 11 percent of respondents expect 24-month revenue growth of 100 percent or greater. Forty percent forecasted 5 to 20 percent growth.

Lead Generation: Forty-four percent of respondents report that less than 20 percent of their sales leads are Web-driven. But 10 percent of respondents report getting more than 81 percent of their leads from the Web. Web-driven leads are among the least expensive. It seems that a significant portion of businesses still have that lesson to learn, leaving a competitive advantage in the hands of the rest.

Business Is Moving to the Web: More than half (56 percent) of respondents plan to increase their companies' Web presence by 25 percent or more over the next 24 months. A surprising 16 percent of respondents weren't sure whether their Web presence would grow, shrink or remain the same.

Reasons for Colocating: Performance, reliability and security led the list of reasons most cited by survey respondents for colocating their Web sites in a hosting provider's facilities.

"Improve reliability/availability" led the list with 67 percent of respondents citing it. "Improve operational efficiency/performance" came next with 49 percent. "Reduce/eliminate costs" was third at 45 percent. Scalability was important to companies expecting exponential growth to the tune of 39 percent. Risk mitigation was important to 36 percent of those surveyed. Compliance/regulatory requirements drove 19 percent of respondents to hosting services.

ROI Benefits Are Expected: Twenty-four percent of respondents expect their colocation moves to yield a return on investment within six months. Another 40 percent expect ROI within 12 months. Overall, 69 percent of respondents expect to see a return on their colocation investments. It may be that colocation service providers need to do a better job of explaining and quantifying the ROI factors such as increased uptime, higher customer retention due to improved Web experience, expenses avoided by not building a datacenter and so forth. On the other hand, extremely optimistic expectations such as an ROI within six months can lead to disillusionment; hosting service providers need to help prospective clients develop realistic ROI projections as well as the means to measure and quantify returns.

Distance Matters: Fully 36 percent of clients were 10 miles or fewer away from their colocated equipment. Another 19 percent were within 25 miles of their colocation datacenter. Still, a significant 14 percent were 250 or more miles from their colocation datacenters. Even more interesting is the fact that 60 percent of those extremely long-distance colocating clients are firms of less than $10 million per year. It is possible that smaller, cash-strapped firms are willing to endure longer drives to secure the lowest possible colocation costs.

Disaster Recovery and Business Continuity Are Still Neglected: Two-thirds of respondents agreed strongly with the statement, "If your servers were down for 24 hours or longer, the impact on your business would be catastrophic." But 20 percent of those highly concerned clients do not have a disaster recovery or business continuance plan. Thirty-four percent have no budget for disaster recovery or business continuance.

Types of Disaster Recovery Vary: Twenty-nine percent of respondents who have disaster recovery/business continuance plans in place rely on fail-over to a different geographical area. Twelve percent are geared for fail-over within the same datacenter. Eleven percent depend on high availability and fail-over within a virtualized environment. Ten percent use all three of the aforementioned methods, and 30 percent of respondents use other methods or are "unsure" of their disaster recovery/business continuance provisions.

Virtualization Still Has a Way to Go: Only 51 percent of respondents use virtualization within their in-house IT infrastructure, and only 32 percent use it in colocated servers. VMware was the overwhelming leader in virtualization software, with 56 percent of respondents using it. Microsoft and Xen were nearly tied at 16 and 13 percent respectively. "Other" virtualization solutions are used by 15 percent of respondents. A key benefit of virtualization remains uncertain, with 57 percent of respondents saying they expect no or an uncertain amount of reduction in datacenter space requirements during the next 24 months due to virtualization.

"Green" Doesn't Matter Much: Fifty-five percent of colocation clients are "unsure" whether their colocation datacenter invests in "green" initiatives to reduce its carbon footprint. Fifty-four percent say that a colocation provider's green initiatives make no difference in their decisions to use a particular provider.

Factor Most Important When Choosing a Colocation Provider: The lower numbers of respondents choosing "monitoring" and "expansion potential" does not necessarily mean these things are unimportant. If all colocation providers offer monitoring and expansion potential, then these are not factors that help choose one provider over another.

  • 78 percent - bandwidth
  • 61 percent - security
  • 44 percent - redundancy
  • 37 percent - power
  • 31 percent - disaster recovery options
  • 21 percent - expansion potential
  • 17 percent - monitoring

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