M&A demand for managed data storage services

Data is often referred to as the new oil, underscoring its value in the modern economy. Companies rely on data to understand market trends, optimise operations, enhance customer experiences and drive innovation. However, the strategic value of data can only be realised if it is properly stored, managed and analysed. Managed data storage services provide the infrastructure and expertise necessary to ensure that data is accessible, secure and organised in a way that supports business goals. The increasing need for data storage solutions has led to a surge in M&A activity in the sector, making up 39% of the data & security transactions recorded in our Q2 2024 M&A report, including the acquisition of specialist data centre 2bm by Keysource.

Market expansion

The managed data storage industry has witnessed significant growth in recent years, driven by the increasing reliance on data across all sectors. According to industry reports, the managed data storage market is expected to continue its upward trajectory, with a compound annual growth rate of over 10% through the next decade. This growth is fuelled by the rapid adoption of cloud computing, the proliferation of data-intensive applications and the rising demand for secure and scalable storage solutions.

Cloud computing revolution

One of the primary drivers of the managed data storage industry’s growth is the widespread adoption of cloud computing. Cloud-based storage solutions offer unparalleled scalability, accessibility and cost efficiency, making them an attractive option for businesses of all sizes. Managed data storage providers have capitalised on this trend by offering cloud-based services that enable companies to store and manage vast amounts of data without the need for on-premises infrastructure.

The shift to remote work, accelerated by the Coronavirus lockdown, has further boosted the demand for cloud storage solutions. As businesses adapt to new work models, the need for secure, remote access to data has become more critical than ever, contributing to the growth of the managed data storage market.

Managing data storage in-house is expensive and resource-intensive, requiring significant investment in hardware, software and IT personnel that is out of reach for most SMEs. By offering a cost-effective alternative, service providers capitalise on this gap in the market by providing scalable outsourced data storage to meet the needs of SME clients. These companies then leverage advanced technology and expertise without the burden of managing it in-house.

Big data and analytics

The rise of big data and advanced analytics has also played a crucial role in the expansion of the managed data storage industry. However, the processing and storage of large datasets require sophisticated infrastructure and expertise. Managed data storage providers offer the tools and services needed to store, manage and analyse big data, enabling companies to harness its full potential.

Moreover, as artificial intelligence and machine learning technologies become more prevalent, the demand for managed data storage solutions is expected to grow further. These technologies rely on vast amounts of data to train models and generate insights, necessitating secure and scalable storage solutions.

Data privacy and security concerns

Data breaches and cyber attacks have become increasingly common, with severe consequences for businesses and individuals alike. As a result, there is growing awareness of the importance of data privacy and security. Managed data storage providers have responded by offering enhanced security features, such as end-to-end encryption, multi-factor authentication and continuous monitoring. These security measures not only protect data but also help businesses maintain customer trust and comply with regulatory requirements.

The introduction of stringent data protection regulations, such as GDPR, has further emphasised the need for secure data storage solutions. Managed data storage providers play a critical role in helping businesses navigate these complex regulatory landscapes, which is particularly helpful for SMEs who may not have the resources to ensure a secure, compliant data storage solution in house.

Technological advancements

The managed data storage industry has benefited from rapid technological advancements, particularly in storage technologies and networking. Such innovations as solid-state drives (SSDs), non-volatile memory express (NVMe) and high-speed data transfer protocols have improved the efficiency, speed and reliability of data storage solutions. Managed data storage providers leverage these advancements to offer cutting-edge services that meet the evolving needs of their clients.

In addition to hardware innovations, advancements in software (such as data compression, deduplication and automated data management) have enhanced the capabilities of managed data storage services. These technologies enable businesses to store more data in less space, reduce storage costs and improve data management efficiency.

Conclusion

As businesses rely more and more on data, the managed data storage industry is well-poised to provide essential data services to SMEs who do not have the resources to ensure a secure, scalable and efficient solution in-house. The rise of AI and machine learning will add further demand for data management leading to growing demand for these services.

We anticipate a continued increase in M&A activity in this sector as acquirers seek to add these services to their existing offerings. If you are looking to sell a business offering managed data storage services, or are looking to acquire these services as part of your M&A strategy, please reach out to our Corporate Finance team to discuss how we can help you achieve your goals.