Hyperscale providers to dominate data centre capacity by 2027, says new report

Hyperscale providers will account for more than half of worldwide data centre capacity by 2027, according to new research by Synergy Research Group. While cloud services have ballooned, actual on-premise data centre capacity will only marginally decrease.

Currently, hyperscalers account for 37% of global capacity, with almost 900 large data centres operated by this segment. Half of this capacity is in own-built, owned data centres. The other half is in leased facilities.

Meanwhile, non-hyperscale colocation capacity took 23%, and on-premise facilities account for 40% of total capacity. This is in stark contrast from five years ago when almost 60% of data centre capacity was in on-premise facilities.

In the next five years, hyperscale operators will account for over half of all data centre capacity. On-premise capacity will drop to 30%, which is a drop of two percentage points per year. Colocation share of total capacity will remain relatively constant.

Despite this, the total capacity of all data centres is expected to continue growing, as digitisation continues.

Cloud spending balloons, hardware softens

Spending on data centre hardware and software has only grown by 2% per year.

A decade ago, enterprises were spending over £62 billion ($80 billion) per year on IT hardware and software for their own data centres. In contrast, spending on nascent cloud infrastructure services stood at well under £7.7 billion ($10 billion).

Now in 2023, cloud services spending has swollen by an average 29% per year, reaching £191.6 billion ($247.1 billion). More recently, global public cloud revenue has surged past £388 billion ($500 billion).

Hyperscale operator growth was fueled by rapid development of more consumer-oriented digital services such as social networking, e-commerce and online gaming.

“As enterprises radically reshaped their IT investments and crimped spending on their own data centres, the leading cloud providers rapidly built out huge global networks of hyperscale data centres,” said Synergy.

As more options became available, enterprises maintained or grew spending on data centre equipment, but pushed this spending to off-site, colocation facilities.

“On-premise data centres will not disappear any time soon, but their scale is being increasingly dwarfed by hyperscale and colocation companies,” added Synergy.

Synergy’s research was based on analysis of the data centre footprint and operations of 19 of the world’s major cloud and internet service firms. This included the largest operators in SaaS, IaaS, PaaS, search, social networking, e-commerce and gaming. The colocation and leased data centres research is based on Synergy’s in-depth tracking of the colocation market, including quarterly data on over 230 individual companies.

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