Survey: More Companies Ready to Outsource

Providers of colocation services and wholesale data center space compete hard for customers. But data center executives say the biggest growth opportunity is not winning a few more deals away from rivals, but tapping the huge market of companies who operate  their own data center space.

New data from one of the industry's leading players, Digital Realty Trust, suggests that a growing number of large companies are turning to an outsourcing model for their data centers. An annual survey of large data center users found that  only 51 percent of respondents who plan to expand their data centers in 2011 are considering the do-it-yourself approach for any of their upcoming data center projects, a decline of 6 percent from last year's results.

The survey, conducted by Campos Research, also found that 60 percent of respondents pursuing data center expansion in 2011 plan to lease space from a wholesale provider rather than building their own facilities, an increase of 7% over last year.

It’s not surprising that Digital Realty believes demand will be high, since the company is in the business of building and leasing data centers. But the findings align with the company's tracking of demand for data center space, which showed a significant jump in the first quarter of 2011. Digital Realty says it is now tracking potential customer requirements totaling about 2 million square feet of space, up from its previous level of 1.4 million square feet.

'Very Positive Uptick'
"We're seeing a very positive uptick in market activity," said Michael Foust, Chief Executive Officer of Digital Realty Trust (DLR). "We're definitely seeing a clear trend for corporate IT to be more oriented towards outsourcing.

"One key finding is how decisively the industry is moving toward a model that relies on the expertise and resources of data center specialists," said Foust. "The lease vs. own analysis has long been a consideration for the corporate enterprise customer. Increasingly, enterprises appear to be favoring the lease model as fewer companies are choosing to go it alone on these capital-intensive projects."

The survey reported multiple signs suggesting data center demand will remain strong for 2011 and into 2012:

Foust said two data points from this year's study support some of Digital Realty's anecdotal experience from our working with customers. "First, datacenter projects have become very high-profile discussions involving the highest levels of companies' management teams and second, new datacenter projects are being driven by the pursuit of energy efficiency and lower energy costs," said Foust.