As companies look for easier ways to process a growing volume of data, without the problems associated with in-house data centers, the uptake of data center services will continue to rise says a new survey.

The market is expected to see a compound annual growth rate of 16 per cent up to 2018 despite several restraints. The United Kingdom, Germany, France and Benelux are predicted to be the largest markets in the region.

The cost advantage of outsourcing as well the growth in cloud, machine-to-machine connectivity and content-heavy applications is lending momentum to the European data center services market.

New analysis from Frost & Sullivan, European Data Centre Services Market, which covers the retail colocation and managed hosting segments, finds that retail colocation will witness lower growth rates than managed hosting due to its market maturity.

The retail colocation segment generated revenues of $2.83bn in 2013 and is estimated to reach $5.27bn in 2018; managed hosting revenues will increase from $2.01bn to $4.90bn over the same period.

“The pressing need to focus internal resources on innovative IT tasks and capitalise on economical IT management services compel enterprises to turn to managed hosting providers for data centre services,” says Frost & Sullivan Information and Communication Technologies Research Analyst Shuba Ramkumar. “The growth of cloud services will also drive the colocation services market in the short term.”

In the long term, however, increasing efficiency and security of the cloud will challenge the growth of the retail colocation market.

An additional problem is that organisations across Europe are bound by regional data laws that complicate outsourcing buying decisions. The location of data centers, therefore, becomes an important consideration for users when choosing a provider.

The regional nature of European organisations also means that many of them are wary of foreign companies and prefer local providers. These cultural and language barriers are especially strong in countries such as France, Spain, and Italy says Ramkumar.

“In order to widen their customer base across Europe, it is important for providers to offer services from a data center located within a region,” advises Ramkumar. “At the same time, they must provide efficient IT support as well as ensure data confidentiality and security to win the trust of potential customers.”

Due to the need to implement different infrastructure frameworks based on application type, enterprises will use traditional data center services alongside the adoption of cloud services. As a result, the European data center services market is focussing on more hybrid data centre services that combine colocation, managed hosting and cloud solutions.