Data center buildout continued strong growth in 2018

telecomasia.net

Synergy Research Group (SRG) revealed that across six key enterprise infrastructure segments – data center servers, switches and routers, collaboration: hosted and cloud, collaboration: on-prem, network security, WLAN – vendor revenues from Q4 2017 to Q3 2018 have increased by almost 13% on an annualized basis, as aggregate revenues for the last four quarters reached $125 billion.

Data center servers comprise the largest segment of the market and it was also the highest-growth segment, up almost 26% due to more highly featured configurations and higher ASPs. Switches and routers is the second-largest segment and it experienced growth of 3%. Hosted and cloud collaboration was the second highest growth segment, up 22% and benefiting in part due to a decrease in spending on on-premise collaboration products. Meanwhile spending on both network security and WLAN increased moderately from the previous year.

Figure 1: Enterprise Infrastructure Market Size & Growth

Enterprise Infrastructure Market Size & GrowthSource: Synergy Research Group

Cisco remains the dominant enterprise vendor, being the market leader in most of the segments. In aggregate across all of the segments Cisco’s market share over the last four quarters was 23%, down two percentage points from the preceding four quarters. This was due primarily to the large and substantially higher growth server segment, where Cisco is only ranked as the fifth placed vendor. Across the other segments, its market share remained relatively constant.

HPE is the second ranked enterprise vendor with a market share of 11% across the six segments. It is the leader in data center servers, the number two ranked vendor in WLAN and ranked third in switches & routers.

Beyond these two, other vendors who lead or are ranked second in the segments are Dell EMC (enterprise data center servers), Huawei (switches and routers), Microsoft (collaboration), and Check Point (network security). Other major vendors who have achieved particularly high 2018 growth rates in these highly competitive markets include Lenovo, Inspur, twilio, RingCentral, Ubiquiti and Palo Alto Networks.

“After some pretty anemic growth in the previous years we saw enterprise spending on IT infrastructure pick up at the end of 2017 and continue to grow strongly throughout 2018,” said Synergy Research Group’s founder and chief analyst Jeremy Duke.

“Despite the booming demand for public cloud services, 2018 saw strong growth in enterprise spending on private data center equipment. We also saw the ongoing swing in emphasis away from on-premise collaboration products and towards hosted and cloud collaboration solutions. 2018 turned out to be a standout year, but our forecasts do still show continued steady growth over the next five years.”

Asked whether there is any global data center trend specific to the telecom sector, SRG chief analyst and research director John Dinsdale commented that major telcos have not done well in the data center space. He cited brands like Verizon, AT&T, CenturyLink and Windstream as having sold their data center business units. “Tata Communicatons has mostly pulled out; Telstra and Telefonica are reported to be investigating their options. There are exceptions, with the big telcos in China and Japan being the main ones, but generally speaking telcos have not done well in the world of data centers,” he added.

SRG estimated that in 2018, a total of 68 deals close with an aggregate value approaching $16 billion. While the number of deals rose, the total value dropped compared to 2017.

Dinsdale noted a clear trend towards enterprises not wanting to own or operate their own data centers, as CIOs focus more on features and services that they can provide to their internal clients and less on the complexities of running data centers.

“As enterprises increasingly look to various outsourcing options, this is driving specialist data center operators to increase both the scale and the reach of their data center footprint. This bulking up is often best accomplished, or sped up, by acquiring other data center operators. We expect to see a lot more data center M&A over the next five years,” concluded Dinsdale.

 

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