Data Center Market Size, Share & Industry Analysis, By Component (Hardware, DCIM (Data Center Infrastructure Management) Software, and Services), By Data Center Type (Colocation, Hyperscale, Edge, and Others), By Tier Level (Tier 1 and Tier 2, Tier 3, and Tier 4), By Data Center Size (Small, Medium, and Large), By Industry (BFSI, IT & Telecom, Healthcare, Government, Manufacturing, Retail & E-commerce, and Others), and Regional Forecast, 2024-2032

The global data center market size was valued at USD 219.23 billion in 2023 and is projected to grow from USD 242.72 billion in 2024 to USD 584.86 billion by 2032, exhibiting a CAGR of 11.6%. North America dominated the global market with a share of 39.16% in 2023.

A data center is an ecosystem of technologies, businesses, and services involved in the development, utilization, and operation of data center facilities. It encompasses various components, including hardware, software, and services. The hardware includes server storage devices, racks, networking equipment, and other hardware used to store and distribute digital data and services. The market is dynamic and competitive, with continuous innovation in designs, operational practices, and technologies, such as cloud computing and edge computing, to meet the evolving needs of organizations and businesses across industries.

The COVID-19 pandemic swiftly transitioned to online education, remote work, digital entertainment, e-commerce, and telehealth. This rise in online activity led to increased demand for data center services to support the growing volume of digital data, services, and applications. Also, the pandemic sped up the adoption of cloud computing services, as organizations wanted to scale and adapt their IT infrastructure to meet changing business needs.

In the scope of work, we have included solutions offered by Schneider Electric, ABB Ltd., IBM Corporation, Cisco System, Inc., Huawei Technologies Co., Ltd., Hitachi Ltd, and others.

IMPACT OF GENERATIVE AI

Mounting Demand for Computational Power in Data Centers to Drive Market Development

Generative AI models, especially those based on deep learning, require significant computational resources for training and interference. This can lead to increased demand for high-performance computing infrastructure, driving the need for more powerful data centers. Generative AI models often require large data sets for training, which necessitates robust data storage and management solutions. Data centers will need to provide scalable and efficient storage solutions to handle the growing volume of training data. The incorporation of generative AI technology enables data storage centers with high accuracy, minimal interventions, consistent performance, and predictable outcomes.

Data Center Market Trends

Increasing Focus on Adoption of Hybrid and Multi-Cloud Strategies Fuels Market Growth

The data center market is continuously evolving, driven by advancements in technology, changing businesses, and emerging industry requirements. Organizations are increasingly adopting hybrid and multi-cloud strategies to leverage the benefits of public cloud services, private cloud environments, and on-premise infrastructure. This trend is driving the demand for interconnection platforms, colocation services, and hybrid cloud management solutions that enable seamless integration, workload mobility, and data portability across diverse cloud environments. Moreover, modular and prefabricated data center solutions are gaining popularity due to their flexibility, scalability, and rapid deployment capabilities. These pre-engineered modules can be quickly assembled and deployed to meet changing capacity requirements, enhance operational efficiency compared to traditional brick-and-mortar facilities, and reduce construction costs and time. For instance,

• September 2022: Dell Technologies and Red Hat entered into a partnership to simplify the deployment and management of on-premise infrastructure in multi-cloud environments and across data centers.

These factors play an important role in increasing the adoption of hybrid and multi-cloud deployment in businesses.

Data Center Market Growth Factors

Increased Digitalization and Cloud Adoption among Industries Drives Market Growth

The rapid shift toward digital transformation across industries is driving the demand for data centers. Organizations are increasingly adopting cloud services for flexibility, scalability, and cost efficiency. The growth of cloud computing, including private, public, and hybrid clouds, is significantly boosting data center investments.

In addition, the rollout of 5G networks and the growing demand for high bandwidth, low-latency applications are driving the deployment of edge data centers among small businesses. These facilities bring computing resources closer to end-users and devices, supporting real-time processing and reducing latency for applications, such as smart cities, autonomous vehicles, and AR/VR.

RESTRAINING FACTORS

Significant Initial Investments and Operational Costs May Stifle Market Growth

The data center requires a significant initial investment in infrastructure, including power and cooling systems, real estate, IT hardware, and network equipment. This initial high investment can be a barrier for SMEs or startup businesses with limited financial resources. Moreover, this facility requires high operational costs for electricity, cooling, security, staffing, and maintenance. These costs can be substantial for large businesses as increasing operational costs can strain the budget and reduce profitability for data center operations.

Data Center Market Segmentation Analysis

By Component Analysis

Growing Need of Reliable and High-Performance Infrastructure Boosted the Demand for Hardware Equipment

Based on component, the market is divided into hardware (power systems, cooling systems, servers, networking devices, and others), DCIM (data center infrastructure management) software (on-premises and cloud), and services.

The hardware segment captured a larger share of the market in 2023, as it provides the foundation for building reliable, high-performance infrastructure to support modern computing needs, ranging from traditional enterprise applications to emerging technologies, such as artificial intelligence and big data analytics. Also, this hardware can be scaled up or down to meet changing demands, allowing organizations to expand their computing resources as needed without significant downtime.

The DCIM (data center infrastructure management) software segment is expected to grow at the highest CAGR during the forecast period, as it provides a centralized platform for managing and monitoring all aspects of data center infrastructure, including networking equipment, cooling systems, storage devices, servers, and power distribution units. This centralized view enhances control and visibility, enabling supervisors to oversee and coordinate operations efficiently.

By Data Center Type Analysis

Growing Demand for Cost Effective Solutions among Enterprises Fueled Demand for Colocation Facilities

Based on data center type, the market is categorized into colocation, hyperscale, edge, and others (managed and modular).

The colocation segment captured the largest market share in 2023. Colocation facilities offer flexible scalability options, allowing tenants to quickly and easily scale their IT infrastructure according to changing business needs. Sharing infrastructure resources with other tenants reduces upfront capital expenditure for building and maintaining a private data storage facility. Additionally, economies of scale enable colocation providers to offer cost-effective solutions for security and connectivity, resulting in lower operational expenses for tenants.

The hyperscale segment is expected to grow at the highest CAGR during the forecast period, as they are designed to scale rapidly and efficiently to support massive amounts of data and workloads. Their architecture allows for seamless expansion of computing, storage, and networking resources to accommodate growing demand without sacrificing performance or reliability.

By Tier Level Analysis

Increasing Demand for Redundant Connectivity Drives Demand for Tier 3 Data Centers

Based on tier level, the market is classified into tier 1 and tier 2, tier 3, and tier 4.

The tier 3 segment captured the largest share of the market in 2023, as it has redundant network connectivity with multiple carriers and internet service providers, ensuring diverse and resilient communication pathways. This helps minimize the risk of network outages and ensures reliable connectivity for mission-critical applications and services.

The tier 4 segment is expected to grow at the highest CAGR during the forecast period as it implements advanced physical security measures, such as biometric access controls, intrusion detection systems, surveillance cameras, and security portals, to protect infrastructure assets from unauthorized access or theft. Tier 4 centers also employ cybersecurity measures to safeguard against cyber threats and data breaches.

By Data Center Size Analysis

Increasing Focus on Adoption of Diverse Connectivity Options Boosted Demand for Large Data Centers

Based on data center size, the market is divided into small, medium, and large.

Large data centers captured the largest share of the market in 2023 as they offer access to a wide range of network service providers, cloud providers, and internet exchanges, enabling tenants to establish low latency, high-speed connections to their preferred carriers and cloud platforms. This enhances connectivity options, improves network performance, and supports hybrid cloud and multi-cloud deployments.

Small data centers are expected to grow at the highest CAGR during the forecast period, as they are more cost-effective to build, operate, and maintain compared to large-scale facilities. They require less initial investment in real estate, equipment, and infrastructure, making them an attractive option for businesses with limited budgets or smaller IT requirements.

By Industry Analysis

Increasing Popularity of Digital Transformation Initiatives in IT & Telecom Propel Market Growth

Based on industry, the market is categorized into BFSI, IT & telecom, healthcare, government, manufacturing, retail & e-commerce, and others (media & entertainment).

The IT & telecom segment captured the highest market share in 2023. IT & telecom companies are undergoing digital transformation initiatives to modernize their infrastructure, applications, and services. Data centers play an important role in supporting these initiatives by providing the computing power, storage capacity, and networking capabilities needed to deploy new technologies and deliver innovative digital services.

The BFSI segment is expected to grow at the highest CAGR in the coming years, as the BFSI sector deals with sensitive financial and personal data, making security and compliance paramount. Data centers offer secure environments equipped with robust physical and cybersecurity measures to protect against data breaches and ensure compliance with industry regulations, such as the General Data Protection Regulation (GDPR) and various financial regulations.

REGIONAL INSIGHTS

By region, the market has been analyzed across five major regions: North America, Europe, Asia Pacific, the Middle East & Africa, and South America.

North America held the largest data center market share in 2023. The rapid adoption of cloud services, AI, and big data applications has fueled a surge in data center demand in the region. Enterprises are increasingly utilizing generative AI and other advanced technologies, which necessitate enhanced data processing capabilities and robust infrastructure. Substantial investments from key players, such as Schneider Electric, IBM, Cisco, and others, fuel market expansion.

Asia Pacific is expected to grow at the highest CAGR over the projected timeframe. The region experienced higher growth that fueled demand for data center capacity globally, and is expected to continue, with total supply projected to increase from 11.1 GW in 2023 to 26.7 GW by 2028. Furthermore, with a growing population and growing digital demands, Indonesia has become a key market. Major investments are being made to develop hyperscale data centers, particularly in Jakarta and Eastern Java. For instance,

• In May 2024, Cisco Systems launched its first edge data centers to expand its security footprint in Indonesia. This facility helps customers in financial services and the public sector to align with local data regulations and compliance requirements.

Europe is estimated to grow at a prominent CAGR in the coming years and has an extensive and advanced network infrastructure, including widespread fiber optic networks and high-speed internet connectivity. This ensures low latency and high-speed data transmission, which is crucial for modern applications, such as real-time data processing and cloud computing. Germany, Ireland, and the Netherlands, host major data center hubs with cutting-edge technologies and high-performance computing capabilities, fostering innovation and supporting digital transformation initiatives. The region attracts substantial investments from global technology providers and local players, owing to its central location globally, which continuously drives the market growth. For instance,

• In June 2023, IBM Corporation developed its first European Quantum Data Center facility in Ehningen, Germany. It is designed to match the requirements of companies, research institutions, and government agencies.

The Middle East & Africa is expected to showcase noteworthy growth during the forecast period. The region is undergoing significant digital transformation, which is enhancing economic growth. Investments in data centers support this by providing critical infrastructure for AI, cloud computing, and IoT technologies. For instance, Microsoft’s new data centers in the UAE and South Africa are expected to create significant economic opportunities, including local innovation and job creation.

Moreover, the market in South America is increasing steadily, owing to the growing demand for digital transformation initiatives, cloud services, and expansion of e-commerce and online services.

List of Key Companies in Data Center Market

Top Companies Emphasize Partnerships to Uphold Their Supremacy in the Market

Leading companies are concentrating on intensifying their geographical presence globally by offering industry-specific solutions. Major players are focusing on mergers and acquisitions with local players tactically to maintain their command across regions. Key players are introducing novel services to boost their consumer base. They are continuously investing in R&D efforts for product improvements. Therefore, prominent companies are quickly applying these tactics to withstand their competitiveness in the market.

List of Key Companies Profiled:

• Schneider Electric (France)


• Cisco Systems, Inc. (U.S.)


• ABB Ltd. (Switzerland)


• Hewlett Packard Enterprise Development LP (U.S.)


• Dell Technologies (U.S.)


• Hitachi Ltd (Japan)


• Huawei Technologies Co., Ltd. (China)


• NTT Communications (Japan)


• Comarch SA (Poland)


• IBM Corporation (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• April 2024: Schneider Electric engaged in a partnership with Digital Realty, a provider of colocation and interconnection solutions. Through this partnership, the company aims to maintain the life of the mission-critical systems at the PAR5 data storage facility.


• March 2024: Eaton announced the launch of a novel modular data center solution for enterprises looking to meet requirements for machine learning, artificial intelligence, and edge computing technologies.


• January 2024: NTT Data launched a new data center facility in Delhi, India, which is spread across six acres and provides 52.8MW critical IT load in two data storage centers.


• July 2023:  Comarch SA opened a new data center facility in Arizona, U.S., which is developed to meet the requirement for highly secure and reliable private cloud & colocation services in the U.S.


• August 2022: Dell Technologies, in collaboration with NVIDIA, announced a new data center solution designed for the era of AI. It provides AI training, data science, data processing, and zero-trust security capabilities to businesses globally.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product/service types, and leading applications of the product. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that contributed to the growth of the market in recent years.

Report Scope & Segmentation

ATTRIBUTE	DETAILS
Study Period	2019-2032
Base Year	2023
Estimated Year	2024
Forecast Period	2024-2032
Historical Period	2019-2022
Growth Rate	CAGR of 11.6% from 2024 to 2032
Unit	Value (USD Billion)
Segmentation	By Component Hardware Power Systems Cooling Systems Servers Networking Devices Others (Racks) DCIM (Data Center Infrastructure Management) Software On-premises Cloud Services By Data Center Type Colocation Hyperscale Edge Others (Managed, Modular) By Tier Level Tier 1 and Tier 2 Tier 3 Tier 4 By Data Center Size Small Medium Large By Industry BFSI IT & Telecom Healthcare Government Manufacturing Retail & E-commerce Others (Media & Entertainment) By Region North America (By Component, Data Center Type, Tier Level, Data Center Size, Industry, and Country) U.S. Canada Mexico South America (By Component, Data Center Type, Tier Level, Data Center Size, Industry, and Country) Brazil Argentina Rest of South America Europe (By Component, Data Center Type, Tier Level, Data Center Size, Industry, and Country) U.K. Germany France Italy Spain Russia Benelux Nordics Rest of Europe Middle East & Africa (By Component, Data Center Type, Tier Level, Data Center Size, Industry, and Country) Turkey Israel GCC North Africa South Africa Rest of the Middle East & Africa Asia Pacific (By Component, Data Center Type, Tier Level, Data Center Size, Industry, and Country) China India Japan South Korea ASEAN Oceania Rest of Asia Pacific