I’ve recently come across a wide array of market research on the IT and data center markets that I believe gives some fascinating insights into where the market might be headed.
Underlying data center growth drivers are healthy
Data center construction and remodeling looks to be on the upswing through 2015 and beyond. There’s certainly no shortage of demand. Cisco predicted late last year that data center traffic will nearly triple by 2018, growing to 8.6 zettabytes/year. (A zettabyte is a trillion gigabytes.)
IDC reported in early March that worldwide server revenues continue to grow quarter-over-quarter and predicted aggressive growth, driven by the adoption of Internet of Things and increasing amounts of data, network traffic and demand for real-time analytics.
In another report, IDC concluded these factors will continue to drive data center growth, peaking at 8.6 million data centers and 1.94 billion square feet in the next few years. Most of this growth will be in service provider data centers, as internal enterprise data center server rooms and closets decline in quantity.
Makeup is changing
Who is buying and operating the IT and data center space looks to be changing and consolidating dramatically. Enterprises are turning to cloud and colocation to house their data — it’s simply becoming too capital intensive and too time consuming to build and operate your own facility for most organizations.
Hyperscale, colocation and hosting data centers will represent the overwhelming majority of IT and physical infrastructure spend in the next few years. IDC predicts that by 2016, hyperscale data centers will house more than 50% of raw compute capacity and 70% of raw storage capacity worldwide. By 2017, 60% of data center–based IT assets that organizations rely on to conduct business and deliver services will be in colocation, hosting, and cloud data centers.
451 Research data shows that the global colocation market is now a $25 billion/year business, with the top 10 providers generating over a quarter of that revenue, and the top 60 accounting for over half. And IDC noted the top four customers in the server market — all cloud service providers — accounted for more than 20% of all servers shipped worldwide.
Exciting and challenging
The growth in mega-sized hyperscale, colocation and cloud data centers presents an exciting challenge for data center equipment providers. The technical and economic sophistication of the major operators is astounding and is one of the reasons why more and more enterprises are handing over data center construction and operation to these firms.
Each of these operators has a “secret sauce” — a blend of design philosophy, process and equipment preference that makes their data centers unique from each other. (Compare the Yahoo! computing coops with the Facebook Open Compute–based data centers.) And as more and more data center spend goes to these relatively few buyers, the demands to operate within each operator’s secret sauce — and the rewards for doing so — will continue to increase. A given major operator wants what it wants — and it’s likely to get it given the size of its spend, even though it may be totally different from what the next major operator wants.
The trends in the market are healthy overall, but show a dramatic surge in the importance of a relatively few major customers. Data center equipment manufacturers are in for interesting times as they try to juggle the disparate needs of these large accounts.