On-site data centres on the decline while cloud market continues strong growth

synergy research dci_Q217

On-site data centres have declined by around 18 per cent while the private and public cloud markets combined have grown by a total of more than 50 per cent, according to a new report. 

Overall, quarterly spend on all data centre hardware and software grew by 5 per cent, according to Synergy Research, which analysed figures from the past 24 months.

The largest segment of growth in the data centre infrastructure market was public cloud, which saw an increase of 35 per cent.

In this segment, another interesting new development was noted: more of the infrastructure consisted of so-called “white box” suppliers.

White-box suppliers are those companies which are not as well known as the market leaders, such as HPE, IBM, Cisco and Dell.

HPE is thought to be the leading supplier of servers to data centres, and its business was down 8 per cent in the second quarter of 2017, according to a separate report by IDC.

In the IDC report, white-box suppliers are categorised under “original design manufacturers” and “others”.

Together, these two categories accounted for almost as much as the five leading brand-name equipment suppliers – HPE, Dell, IBM, Cisco and Lenovo.

These reports suggest that there has come a turning point where white-box suppliers will overtake the revenue share of the brand names in the next year or two.

This scenario has been predicted by knowledgable experts for some time, because more open standards and software-defined networks mean that a variety of commodity hardware can be included in infrastructure configurations.

In the past, the brand-name companies may have used proprietary connection systems which made mixing and matching more difficult or even impossible.

Moreover, very often the brand name equipment was significantly more expensive, still is.

And while the market is said to be growing at a lower percentage rate in terms of revenue, that may be because the white-box equipment is significantly cheaper – unit sales may well be strong.

According to Synergy Research, the private cloud infrastructure market has grown by 16 per cent.

It adds that spending on traditional, non-cloud data center hardware and software has dropped by 18 per cent.

ODMs in aggregate account for the largest portion of the public cloud market, with Cisco being the leading individual vendor, followed by Dell EMC and HPE.

The Q2 market leader in private cloud was Dell EMC, followed by HPE and Microsoft.

The same three vendors led in the non-cloud data center market, though with a different ranking.

Total data center infrastructure equipment revenues, including both cloud and non-cloud, hardware and software, were over $30 billion in the second quarter, with public cloud infrastructure accounting for over 30 per cent of the total.

Private cloud or cloud-enabled infrastructure accounted for over a third of the total.

Servers, OS, storage, networking and virtualization software combined accounted for 96 per cent of the Q2 data center infrastructure market, with the balance comprising network security and management software.

By segment, HPE is the leader in server revenues, while Dell EMC has a strong lead in storage and Cisco is dominant in the networking segment.

Microsoft features heavily in the rankings due to its position in server OS and virtualization applications. Outside of these four, the other leading vendors in the market are IBM, VMware, Huawei, Lenovo, Oracle and NetApp.

John Dinsdale, chief analyst and research director at Synergy Research, says: “With cloud service revenues continuing to grow by over 40 per cent per year, enterprise SaaS revenue growing by over 30 per cent, and search / social networking revenues growing by over 20 per cent, it is little wonder that this is all pulling through continued strong growth in spending on public cloud infrastructure.

“While some of this is essentially spend resulting from new services and applications, a lot of the increase also comes at the expense of enterprises investing in their own data centers.

“One outcome is that public cloud build is enabling strong growth in ODMs and white box solutions, so the data center infrastructure market is becoming ever more competitive.”