Data Center Hardware Market Booming for Variety of Reasons
The business of selling data center hardware designed to Open Compute Project specifications is booming — and not simply because of the insatiable demand from the handful of hyperscale cloud platforms that are this type of gear’s biggest consumers.
Omdia, the research firm the OCP Foundation has turned to for taking the pulse of the market for its hardware outside the companies that sit on its board, estimates that the market grew 40% last year, reaching $3.6 billion in revenue, or nearly 2.3% of the total market for servers, storage, network, rack, power, peripherals, and so on. (Servers represent the bulk of the revenue.)
This post originally appeared on Channel Futures’ sister site, Data Center Knowledge. |
Again, that’s the estimated size of the “non-board OCP” market. It doesn’t include all the iron Facebook, Microsoft, and (to a much smaller degree) Rackspace have wheeled onto the concrete floors of their computing facilities.
Omdia expects the market to grow another 46% this year, to $5.3 billion. The firm projects it to more than double by 2023, to $11.8 billion. That’s average annual growth of 36% a year for the next three years.
Until this year, Facebook, Microsoft and Rackspace were the only companies that operate their own data centers and don’t sell gear with seats on the board. The foundation announced this week during its virtual summit that Google has joined the board, becoming a fourth.
Even though there are non-board hyperscalers – such as Amazon, Baidu, and until this week, Google – this is not a scenario where a few big buyers are responsible for ballooning total market numbers. (Omdia considers a company “hyperscale” if it has 3 million square feet of data center space or more.)
“The non-board category is exactly where there are many small purchases from different companies that are accounting for the total market value,” Vladimir Galabov, principal analyst, data center compute, at Omdia, told Data Center Knowledge. (Disclaimer: Omdia and Data Center Knowledge are sister brands under the Informa Tech umbrella.)
The three non-board hyperscalers mentioned above started deploying OCP hardware in their data centers only recently, he said. The verticals responsible for most of the non-board OCP market are tier-two cloud service providers, telcos, and private and public sector enterprise IT shops.
Tier-two cloud companies were responsible for about 45% of the market in 2018. Last year they drove about 30% of revenue, and Omdia expects them to drive slightly less than 30% in 2020.
Omdia says telecommunications will grow its share of revenue the most between now and 2023. Telcos are investing in edge computing infrastructure, much of it going into their central offices to support virtualization of network functions.
Telco investment in 5G infrastructure is also driving some investment in edge computing for applications 5G is expected to enable. So says Cliff Grossner, senior director, research, and technical fellow at Omdia. But a big portion of the telco spend, he told us, has nothing to do with 5G. For example, in the U.S., 5G is not a big factor for telco investment in OCP hardware, he said.
As you can see from the Omdia chart (right), non-board hyperscalers’ role within the overall market has shrunk substantially since 2016 and 2017, and it’s not expected to grow much into the foreseeable future. Enterprises, telcos and tier-two cloud providers are the big non-board OCP buyer categories going forward.
COVID-19 Headwinds and Tailwinds Likely to Balance Each Other Out
The Omdia analysts said they did not expect the COVID-19 pandemic to have a meaningful impact on their forecast because of the wide variety of user verticals represented in the total numbers.
Tier-two cloud providers and telcos have seen an increase in demand as a result of the pandemic-driven lockdowns, Galabov said. He expects them to invest in equipment to satisfy that demand, not cut back on orders.
But pullbacks are very likely in the enterprise category, especially by government agencies, which have had to spend huge resources to address the crisis while seeing tax revenue decline sharply. As far as the public sector is concerned, it’s safe to assume that “any refresh of equipment that can be delayed will be delayed,” he said.
These are very uncertain times for many private-sector industries, and …
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