LatAm Data Center Market Expands With Brazil Leading the Way

A new report forecasts that the market will grow to almost twice the size over the next five years, saying businesses are realizing that outsourcing infrastructure management can yield high dividends.

data center

The data center services market in Latin America generated $2.87 billion in revenue in 2015, with Brazil grabbing the largest slice of the pie, according to a new Frost & Sullivan study.

The report forecasts that the market will grow to almost twice the size over the next five years, saying businesses are realizing that outsourcing infrastructure management can yield high dividends.

Across the region, traditional data center providers are expanding their existing facilities or building new ones, with private equity firms continuing to invest in the sector.

As recently as last week, Brazilian data center company Ascenty announced that it would soon open eight co-location facilities in Rio de Janeiro alone.

As data centers have increased in number, service providers have started to see their profit margins thinning. The analysts firm calls it ‘commoditization’ and suggests to service providers that they offer managed services to combat price erosion.

“Due to higher competition and client expectations, simply delivering an efficient data center service is no longer adequate,” says the report.

Brazil accounted for 47.6% of the data center services market in Latin America, with Mexico following close behind with 25.8% of the market share.

Growing demand for IT solutions is driving the demand for data center services. “The need for IT solutions is no longer exclusive to the IT sector,” said Frost & Sullivan Analyst Mauricio Chede. “Fields such as marketing, sales and finance are demanding and acquiring IT solutions for their operations.”

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Banking and finance, government, information technology (IT), and telecom are the most likely verticals to outsource, though retail, healthcare, and education are increasingly opting to do so.

However, the research firm has warned that demand for dedicated hosting may decline once cloud services — especially infrastructure-as-a-service (IaaS) — gain momentum.

The good news is that some foreign cloud service providers with no local infrastructure are renting space in regional data centers.

The research also says the market will reach $4.37 billion by the end of 2021.

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