Legacy Services Update

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Separation between legacy and next-generation continues. What is the current outlook for legacy infrastructure services?

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Executive Summary

The infrastructure services sector contin- ues to mature and evolve. And as this plays out, there are increasingly clearer lines of separation between traditional services and the next-generation services (primarily hyperscale cloud) that are flourishing and serve as the engine behind the sector’s growth. The separation is evident in the numbers. Over the last 12-18 months, there have been meaningful declines in the performance of key segments such as retail colocation and standard managed hosting.

The declines are symptomatic of where the sector is headed. To this point, these segments have been able to withstand the headwinds presented by hyperscale clouds. But the continued pressure is taking its toll and it is gradually more apparent that a new phase of this transition period is underway. The bottom line: we continue to move closer to a new world order that is hyperscale-centric and driven by value-add and specialization.

None of this is to say that traditional services are not in demand or soon to fade into obscurity. That would be an overstatement. Traditional services still comprise the majority of the wider infrastructure services market. But transformation across the sector is being felt more directly and taking shape at an accelerating pace.

This report takes a closer look at some of the different moving parts within three legacy segments: retail colocation, standard managed hosting and SMB hosting. How is this change going to impact providers and what is the outlook?