China's carrier-neutral colocation market is predicted to grow at a compound annual growth rate (CAGR) of 40 per cent through to 2016, according to a report by DCD Intelligence.
Increased use of colocation facilities by enterprises that want to bypass traditional interconnection routes will drive this growth in the coming years.
This growth is high as compared to China's 20 percent CAGR for the entire data centre market.
The colocation market in China is ruled by the state-owned telecoms carriers but the country is now welcoming several carrier neutral colocation providers.
However, many of these providers depend on the state-owned companies for space and network provision.
"Inherent complexities involved in network interconnectivity in the country have led to bottlenecks as Internet traffic has increased," said DCD Intelligence analyst Hawkins Hua. "Although the market is still dominated by the state-owned telecom carriers, there is a growing market of carrier-neutral providers who are proving popular with enterprises."
Stringent regulations for foreign ownership
The mass influx of international colocation providers is prevented by strict government policies related to foreign ownership of China-based companies.
These providers also have a tough time establishing a business presence in this country. Despite the odds, multinational providers are tapping this lucrative market by forming strategic partnerships with locally based companies.
These multinational providers can expect a good time ahead as increased complexity of IT infrastructure and applications will encourage enterprises to outsource instead of operating their own facilities.
Outsourcing will also free these enterprises from dealing with power costs and staffing issues.
DCD Intelligence says companies in China will decide their provider based on their infrastructure reliability, security and scale. These providers should also be able to show interconnectivity between networks and have wide geographic coverage of facilities.
Sign up for MIS Asia eNewsletters.