No captionNew Zealand is a relatively early adopter of cloud services but the significant capital expenditure savings from using third-party data centres, coupled with the Government\u2019s policies to adopt Infrastructure-as-a-Service (IaaS) has provided strong stimulus, particularly in the corporate sector and SME market.Whilst the corporate sector has increased use of data intensive applications such as data mining and data analytics, consumer segments have increased consumption of videos, social networks, mobile data and gaming. These factors have resulted in a need for increased amounts of data storage and computing capacity in New Zealand\u2019s datacentres, reports Frost Sullivan.The research firm says the New Zealand datacentre services market grew 16.4 per cent over 2013, and last year totalled $118 million.A growth of 18 per cent in data centre service revenues is predicted for 2015 with managed hosting recording stronger growth than co-location which will ease with the increased migration to cloud services, according to Frost Sullivan\u2019s new report, New Zealand Data Centre Services Market 2015.The report forecasts the local market to reach $272 million by 2020. Strong growth of virtual private cloud services will see managed hosting growth outpacing that of co-location.Phil Harpur, , for Frost Sullivan, says after the Christchurch earthquake, there has been increased concern over the impact of external events on businessoperations. This resulted in a growing demand for disaster recovery and business continuity services.Phil Harpur, senior research manager, Australia New Zealand ICT practice, Frost SullivanDigital media organisations were among the first category to migrate to public clouds and will be a key driver of growth within data centres over the next five years, as services such as online video and gaming become more popular.Phl Harpur, Frost Sullivan\u201cMultiple, connected, multi-tenanted datacentres are the most effective and cost efficient way of providing these services,\u201d says Harpur. To achieve higher economies of scale, a model of fewer, larger, centralised data centres is ideal. However, this is very difficult to achieve in New Zealand due to the relatively small size of the local market, he states.Larger IT services providers, such as IBM, are looking to consolidate their data centre footprint across both Australia and New Zealand into smaller numbers. of larger, newer and more efficient data centres in centralised locations, often through leasing arrangements with specialist third party providers.\u201d\u201cAs New Zealand data centre customers adopt cloud services for a growing portion of their overall IT service needs, they migrate from co-location services and managed hosting to cloud services, with some companies migrating from on-premise IT systems directly to private cloud services, negating the need for core datacentre services.\u201dThe report notes datacentre services are in high demand from the telco\/IT services sector as cloud providers and IT service providers grow their cloud service offerings. High growth in data traffic over the last few years has also seen the internet\/media industry displaying robust growth in use of datacentre services. Digital media organisations were among the first category to migrate to public clouds and will be a key driver of growth within data centres over the next five years, as services such as online video and online gaming become more popular.The education sector has likewise increased adoption of outsourced data centre services, although a relatively slow adopter of cloud services compared to some overseas markets, says Harpur. Most New Zealand educational institutions still have a significant proportion of their IT systems on-premise, though a few of them, such as the Christchurch Polytechnic Institute of Technology have adopted the cloud relatively fast.The report points out several challenges for data centre providers.Securing sites in CBD locations (where property prices are at a premium and continue to rise; especially in Auckland), and gaining access to sufficient power is increasingly challenging. New Zealand\u2019s relatively small market size and the lack of suitable locations to build additional capacity exacerbate this issue making it increasingly difficult for data centre owners to plan for additional capacity, the report states.Send news tips and comments to email@example.comFollow Divina Paredes on Twitter: @divinapFollow CIO New Zealand on Twitter:@cio_nzSign up for CIO newsletters for regular updates on CIO news, views and events.Join us on Facebook.