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Data centers are going to undergo substantial changes over the next few years due to both technological and geopolitical influence, with the results being significant challenges to traditional infrastructure resource providers, such as Intel and Advanced Micro Devices, according to Gartner analysts.
In a report released Sept. 11, the analyst said data centers will be disrupted by such changes as the rising influence of top-tier cloud providers, increasing competition among traditional data center infrastructure vendors, growing economic tensions between companies in the West and those in the East—particularly China—and a shift to open-source software and white-box makers by buyers that distrust larger multinational corporations.
“Elements of [these disruptions] are already in play, and will become visible no later than early 2016; however, radical action by just one significant player could accelerate the market disruption of any of the factors,” Joe Skorupa, vice president and distinguished analyst at Gartner, said in a statement.
Right now, the major data center vendors are living with what Skorupa calls an “uneasy peace.” They’re still happy to being pulling in gross margins of 50 percent or more on their networking and storage hardware and infrastructure software, so they’re reluctant to upset the status quo too much. However, they’re also feeling the pressure from the rapid changes the data center is undergoing, particularly as more workloads move to external cloud provides that are less likely to buy expensive off-the-shelf technology products, opting instead for open-source software and manageability embedded in the products, the analysts said.
“Underneath this calm surface, increasing market pressures are driving a change in vendor behaviors, which, along with the four disruptive factors, make the market ripe for a period of major disruption,” Skorupa said. “These behaviors will become more obvious as the pace of change increases.”
The last several years have seen an increase in competition between what had been longtime partners. For example, Cisco Systems entered the server industry in 2009 with the launch of its United Computing System (UCS) converged data center solution. Soon after, Hewlett-Packard began expanding its networking capabilities, including through its acquisition of 3Com.
However, there is the possibility that one of these major data center players might enter an adjacent market with a new product, or touches off a major price war with the idea that it could benefit from being a first mover. Or a company that deals in disruptive technology feels it can’t be any stronger and decides to throw the first punch, or an established player leverages disruptive technologies—from software defined networking and software-defined storage (SDN) to extreme low-power processors to Web-scale integrated infrastructure—to get into new markets, the analysts said. Any of those scenarios could accelerate the changes occurring in the data center.
The growing influence of such big cloud provides as Google, Facebook, Amazon and Microsoft and the shift from in-house enterprise applications to mobile and consumer apps is putting new demands on data centers for greater flexibility, scalability and automation, according to Gartner. These cloud providers also are increasing the utilization of their systems, increasing efficiency and reducing the demand on the total amount of compute power needed and, thus, the price of data center infrastructure.
The ongoing tension between the United States in the West and Eastern countries—particularly China—will continue to roil the data center market, according to Gartner analysts. China has been heavily subsidizing hi-tech companies in the country to try to shrink the innovation gap between those vendors and their Western competitors. In addition, the analysts noted a $100 billion development program created by Brazil, Russia, India, China and South Africa.
Data Centers Face Major Disruptions in Near Future: Gartner
U.S. lawmakers have been vocal about their distrust of China’s government and companies from the country—such as Huawei—worrying that products from these countries could house secret backdoors that would give Chinese officials entrée into U.S. government networks. That has helped stoke increasing anti-U.S. sentiment in China.
The analysts are predicting that the combination of deep investments, respected brands like Huawei and Lenovo, solid original design manufactures (ODMs) in Taiwan and the electronics market in China—along with the distrust of the United States—will increase China’s share of the data center infrastructure space by 2 percentage points by the end of 2017.
Finally, what Gartner calls the “Snowden Effect”—referring to Edward Snowden, the ex-National Security Agency analyst who leaked a broad range of agency secrets—has driven more tech buyers to view large multinational vendors as untrustworthy. For example, reports linked to the Snowden leaks indicated that the U.S. government had compromised systems from Cisco Systems, Dell and other U.S. vendors to help with its espionage activities, leading those companies to deny working with the U.S. agencies.
Such distrust has led buyers to shift some of their focus to open-source software and hardware and technologies developed in-country. The result is growth among local, smaller assemblers and sales by white-box suppliers, they said. While some international suppliers will be able to keep their positions for several years, vendors like Intel and AMD will see increased competition from ARM and its manufacturing partners for smaller server workloads.
In addition, flash storage will grow in importance, software makers will have to invest money to ensure that their applications are compatible with a greater range of hardware—or decide which hardware makers to work with—and the infrastructure tool market will become more fragmented.