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Hyperscale datacentre growth sees demand for OEM hardware soar, research shows

Synergy Research Group lifts the lid on how the growth of hyperscale datacentre operators is developing around the world, as well as the impact this is having on demand for hardware from legacy IT suppliers

Despite the growing demand for locally hosted cloud services, the United States is still home to the world’s largest proportion of datacentres, Synergy Research suggests.

The analyst’s recent audit of the world’s cloud and internet datacentre sites suggests the US is the location of around 45% of the world’s major facilities.

Trailing way behind in second and third place is China and Japan, with an 8% and 7% share respectively, followed by the UK, which houses around 5% of these server farms.

The companies with the broadest datacentre footprint are public cloud providers, Amazon Web Services, Microsoft and IBM, with each boasting 40 or more datacentres around the world.

The internet service provider community, which includes the likes of Apple, Twitter, Facebook, LinkedIn and Yahoo, has a tendency to favour US-based datacentres, the research adds.

At present, Synergy estimates the number of hyperscale datacentres operated by both groups will hit 300 this year and exceed 400 by the end of 2018.

“What is remarkable is that the US still accounts for nearly half of all hyperscale datacentres, reflecting the US dominance of cloud and internet technologies,” said John Dinsdale, a chief analyst and research director at Synergy Research Group.

“While other countries are now featuring more prominently due to either their scale or the unique characteristics of their local markets, the major players continue to invest heavily in US datacentre operations.”

Sales of cloud-enabling hardware soar

Meanwhile, a separate Synergy Research report suggests cloud infrastructure equipment revenues are on course to hit $70bn in 2016, as service providers and enterprises rush to build private and public cloud-enabling hardware stacks.

According to the market watcher’s third quarter cloud infrastructure tracker, the revenue generated by sales of cloud-enabling hardware are growing at a double-digit pace, fuelled by the growing demand for off-premise services.

The report tracks sales of the servers, storage, networking, security and management software used to create both public and private cloud environments within corporate, service provider and hyperscale datacentres.

HPE has led the cloud infrastructure market for seven successive quarters, with Cisco following closely behind, fuelled in no small part by the growing demand for its server hardware.

Cisco’s performance is largely down to the strong sales of its networking equipment, but the firm is seeing sales of its server technology gaining traction too.

However, future quarters could see Cisco and HPE squeezed out of the top two by the collective performance of the OEM hardware manufacturers. Their share of the market has rapidly grown over the course of the past 12 months, thanks to high demand for their products from the hyperscale cloud provider community.

This is significant as hyperscale cloud firms are becoming increasingly reliant on OEMs to create bespoke hardware tailored specifically to the performance and functionality requirements of their customers, which could see traditional hardware suppliers squeezed out over time.

“HPE and Cisco have been in a closely contested leadership battle in this market for the last sixteen quarters, over which time their total revenues are virtually identical,” the analyst house said, in a statement.

“Across the different types of cloud deployment, Cisco continues to hold a commanding lead in public cloud infrastructure while HPE has a clear lead in private cloud.”

Synergy’s analysts also name-checked HPE as a major challenger within the storage segment, where its main competition is Dell-EMC. The newly-merged entity is ranked second place in the server segment too.

Read more about cloud infrastructure trends

The third quarter marks the first time Dell-EMC’s collective contribution to the cloud infrastructure market has been tracked, securing both firms a sizeable rise in market share as a result.

Before factoring in EMC’s contribution, Dell’s share of the cloud infrastructure market had remained steady at the 7% mark since around late 2014, before shooting up to around 11% in Q3.

Rounding out the rest of the top five is Microsoft in fourth place, secured through sales of its server operating system and virtualisation software, followed by IBM, who Synergy credits with having a strong position within all the tracked sectors.

Dinsdale said the data highlights how the enterprise market’s growing acceptance and appetite for public cloud services is affecting the fortunes of some hardware suppliers.

“Growth in private cloud infrastructure is slowing down as enterprises shift more attention and workloads to the public cloud, but that means there is a continued boom in shipments of infrastructure gear to public cloud providers,” he said.

“For traditional IT infrastructure suppliers, there is one fly in the ointment. Hyperscale cloud providers account for an ever-increasing share of datacentre gear, and many of them are on a continued drive to deploy own-designed servers, storage and networking equipment, manufactured for them by OEMs [original equipment manufacturers].”

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