Network expansion to drive Super 7 webscale ICT capex

16 Mar 2018

The latest Technology Business Research (TBR) 1Q18 Webscale ICT Market Landscape report suggests that Super 7 webscale ICT capex will grow at a 19.5% CAGR to over $63 billion in 2022 as these companies continue to invest in network capacity to support traffic growth, as well as data center builds and expansions to support their cloud businesses.

Super 7 refers to the 7 of the world’s largest technology firms offering cloud services to global companies. These companies have been aggressively building large data centers globally.

Microsoft and Alphabet (aka Google) are leveraging strong ICT capex spend to help Azure and Google Cloud close the market share gap with Amazon Web Services (AWS).

Additionally, the Super 7 are developing machine learning (ML) and artificial intelligence (AI) features that will become table stakes for cloud providers, though development is not capex-intensive. Cloud providers are investing in AI and ML to differentiate their core solutions, but the market for these technologies is nascent.

“AWS is the leading IaaS provider by revenue, but Microsoft Azure and Google Cloud are growing revenue faster than the incumbent due to years of data center investment across geographies.

Microsoft is closing the gap quickly and will challenge AWS in the short term, while Google, which was later to the market, is more of a long-term threat,” said Michael Soper, a senior analyst at TBR. “Beyond data centers, webscale companies are making undersea cable investments to support cloud and video traffic growth. Alphabet, Amazon, Facebook and Microsoft will continue to build these networks to carry traffic across oceans and typically partner with each other as they do so.”

After significant ramp-up in network infrastructure and services spending among the Super 7 in 2017, incumbent vendors will likely experience volatility in the webscale market in 2018. Vendors are coping with a lower level of loyalty from webscale companies, when compared to their traditional customers, as they leverage contract manufacturers and/or their own design teams for new infrastructure.

The success of original design manufacturers (ODMs) such as Quanta, Arista, SuperMicro and Celestica, along with new efforts to capitalize on the webscale market from IT services providers, will further fragment the supplier landscape, according to TBR.

TBR lists the Super 7 as Alibaba, Alphabet, Amazon, Baidu, Facebook, Microsoft and Tencent.

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