Cloud Market Leads to Shrinking Market for Data-Center Servers and Routers

2017-01-10 14:36 Posted by: Judy in Cloud Computing, News Go to Comment

According to the latest statistics released by analyst firm Synergy Research, operator and vendor revenues from the main cloud services and infrastructure has reached $148 billion in 2016, increasing by 25%.

Just as many experts expected, the highest growth rates appear in Platform as a service (PaaS) and infrastructure as a service (IaaS), reaching 53%, while the infrastructure services of hosted private cloud and enterprise SaaS also develops rapidly, respectively at 35% and 34%. As with the booming cloud market, Microsoft and Amazon Web Services (AWS) become the biggest beneficiaries of PaaS and IaaS, along with IBM and Rackspace leading the way in hosted private cloud.

According to the researchers, the total investment in hardware and software for building cloud infrastructure has exceeded $65 billion in the four quarters ending September 2016. Though spend on private cloud contributes to over 50% of the overall total, the growth rate of public cloud spend is much higher. Other more, unsurprisingly, unified comms as a service (UCaaS) keeps growing steadily.

If 2015 is tagged as the year of cloud becoming mainstream, then 2016 should be the year of cloud starting to increase its dominance over many IT fields. Some essential barriers to growth and popularity of cloud computing have already been removed, as the founder and chief analyst of Synergy Research Group—Jeremy Duke said in a statement, which is especially evident on side of public cloud. Duke also added that cloud technologies are delivering the ongoing value to people and generating massive revenues for cloud service providers as well as technology vendors. More importantly, it will keep a very strong growth for many years to come.

On the contrary to cloud computing rapidly growing, the past year saw a shrinking in market for data-center servers, switches and routers. Just in the case of data-center servers, the new data from Synergy Research indicates that the sales revenue in this market has declined around 5% year-over-year in the past year. Many market leaders as IBM, HPE, Lenovo, Dell EMC, and Cisco have directly been affected by it.

But just as another chief analyst of Synergy Research John Dinsdale explained in an email, it is an inevitable trend that more and more workloads being pushing onto the public cloud makes the needs for on-premises enterprise data centers constrained and diminished. A growing number of public cloud companies tend to making use of self-designed servers that are manufactured under contract by ODMs, substantially reducing the market opportunity for servers. However, makers of service-provider servers are whom being worst affected in this event, instead of makers of enterprise servers.

Currently, both Microsoft and Amazon Web Services are switching to manufacture more of their own gear from generic or custom components.

The market for data-center servers is valued at about $32 billion worldwide, the growth rate of which has decreased to 6%, which is as much as that of enterprise telepresence and voice systems. The growth of hosted solutions and cloud becomes the main disruption to the market: the markets have been redefined and new competitors are enabled to emerge.

In addition to data-center servers market declining, switches and routers grew by only 1% last year. The market, which is valued at $27 billion and led by HPE and Cisco, is getting squeezed as cloud computing matures, because not only some hardware are gradually being replaced by software but also the public-cloud companies start building some of balance on their own.

Predictably, the cloud computing market, no matter public, private, or hybrid cloud, will continue to rapidly grow in 2017 as more and more people are seeking to benefit from the economies of scale of cloud to build websites or applications through, for instance, purchasing a cloud hosting solution. But other traditional fields like commercial servers, switches and routers are likely to remain uncertainty if there is no critical technological innovation. 

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