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Australia’s digital infrastructure landscape is undergoing major change. Mega trends including hybrid cloud adoption, artificial intelligence (AI) and edge computing are converging to drive demand for secure, scalable, and well-connected data centre colocation.

As a result, the colocation market is experiencing significant growth, with analysts projecting annual growth rates of up to 20% between 2023 and 2025. That’s why we’re investing in high quality data centre colocation facilities and customer experiences. Our data centre and network building site colocation services can help meet this sustained demand, offering organisations the flexibility to scale operations without the hefty capital expenditures associated with building and maintaining their own facilities.

In this article, we examine the forces powering the growth of the colocation market, and how we help organisations respond.

The key trends driving demand

Several trends are currently influencing the colocation market, and are likely to continue driving demand for the foreseeable future.

1. Digital application use

Sustained growth in application requirements, particularly AI, is driving high demand for data centre colocation services. Unlike the data boom we saw from consumer mobile video and social media applications, it will be enterprises that generate and consume the majority of data in the next few years. Global market intelligence firm IDC estimates that enterprise data will grow at over 28% CAGR to 2027.

The rapid increase in enterprise data growth is fuelled by the use of artificial intelligence (AI), particularly generative AI (GenAI). A recent CSIRO report shows 68% of Australian businesses have already implemented AI technologies and a further 23% are planning to in the next 12 months.

The modelling and inference techniques used in GenAI require greater data and processing power that predominantly lie in data centres. Deloitte’s August 2024 State of Generative AI report indicates that 63% of Australian organisations are increasing their investments in GenAI.

2. Rise of IoT and edge computing

With the rise of IoT and latency-sensitive applications, edge computing is becoming a critical component of IT infrastructure. Colocation facilities are increasingly positioned closer to end-users, enabling organisations to process data locally and reduce latency.

As IoT adoption accelerates, the edge computing market size is expected to grow from USD 60.0 billion in 2024 to USD 110.6 billion by 2029 at a Compound Annual Growth Rate (CAGR) of 13.0% during the forecast period (MarketsandMarkets).

3. Security and sovereignty

Data sovereignty is also a key capacity demand driver in APAC. With cyber threat levels high amid geopolitical tensions, many national governments are introducing regulations around where digital information is stored.

The drive towards digital sovereignty has important consequences for businesses. According to Gartner, 30% of multinational organisations will experience revenue loss, brand damage or legal action due to unmanaged digital sovereign risk by 2025.

4. Interconnection and Connectivity

With enterprises wanting to do more with their data across multi-cloud environments, the need for high-speed, reliable connectivity is paramount.

Data centres with high levels of interconnection are important for customers because they provide fast, reliable, and secure connectivity to multiple networks, cloud providers, and other businesses. This allows customers to easily exchange data and applications with their partners and customers, and to access a wide range of cloud services.

5. Sustainability

Data centre electricity use is set to double by 2026 according to the International Energy Agency (IEA). The IEA attributes the increase to power-intensive workloads such as AI and cryptocurrency mining are fuelling the growing demand.

At the same time, many organisations are committed to reducing carbon emissions. Understanding the impact of data centre power use will become even more important to meeting these goals.

How we are supporting customers respond to these forces

Refreshed data centre offering in key locations

InfraCo is one of Australia's largest data centre colocation providers. Our data centre facilities are strategically located in key capital cities across Australia and are recently refreshed to adhere to Tier 3 standards. This means InfraCo data centres meet the globally recognized benchmark for data centre infrastructure, guaranteeing the highest levels of uptime, security, and redundancy.

Data sovereignty

Our status as a wholly Australian-owned entity provides a significant advantage in the colocation market, especially for government agencies and enterprises with stringent data sovereignty requirements.

With data centre facilities strategically located in Melbourne, Sydney, and Canberra, and additional floors across other major cities, we ensure that data remains within Australian borders, protected by the country's robust legal framework.

Unparalleled connectivity

Our unparalleled connectivity options make it easier for customers to integrate data centre colocation into their network architecture. We have hundreds of predefined dark fibre routes connecting our 7 data centre sites and nbn points of interconnect (POI) throughout Australia. Customers can access managed cross-connects and direct connection to 91º£½ÇÂÒÂ× lit and dark fibre.

Supporting edge use cases

We’re enabling customers to process data closer to the edge with floor space in many regional locations. We also offer network building colocation and, with services offered in the same building as 111 of 121 nbn POIs, customers can enjoy low latency and cost-effective backhaul for bandwidth-intensive applications.

Sustainability

For organisations that seek to minimise their environmental impact, we have taken big steps to reduce our carbon footprint, in every aspect of our business – from how we use energy to how we package, sell and power our products. We have ambitious plans to go further. By 2030, 91º£½ÇÂÒÂ× Group targets reduction in absolute scope 1+2 emissions by at least 70% from FY19 baseline. And we aim to increase our network waste recycling rate of 90% by 2025 from FY21 baseline.

Access a full ecosystem of services

What sets our data centre colocation offering apart is our commitment to fostering vibrant ecosystems within our facilities. By attracting a diverse range of providers and partners, we are creating hubs that enable customers to seamlessly interconnect with multiple networks, cloud platforms, and IT service providers, all within a single location.

Additionally, our integration with 91º£½ÇÂÒÂ×'s broader suite of services means that customers can benefit from a seamless, end-to-end solution that combines colocation with 91º£½ÇÂÒÂ×'s extensive telecommunications network. This level of integration is particularly attractive to wholesale customers and those with existing 91º£½ÇÂÒÂ× services, as it simplifies their IT infrastructure and enhances operational efficiency.

Ready for future growth in the data centre market

As the colocation market continues to evolve, we are well-positioned to meet the growing demands of enterprises and government bodies alike. With our refreshed data centre offerings, strong regional presence, and status as a sovereign colocation provider, we offer a compelling proposition for organisations looking to secure their digital infrastructure in a rapidly changing landscape.

Our expansive connectivity advantages, connection to ecosystems of services and providers, and our commitment to sustainability, means we can not only meet the current needs of our customers but also pave the way for future innovations in the colocation space.