Following successive quarters of decline, enterprise spending on datacentre infrastructure appears to be rallying, fuelled in part by rising component costs and demand for private cloud deployments.
That’s according to Synergy Research Group’s second-quarter datacentre infrastructure market tracker, which shows a 28% increase in the amount of money spent on datacentre hardware and software over the past 24 months.
Much of this growth can be attributed to the growing demand for public cloud-enabling datacentre hardware and software. This, in turn, has benefited suppliers in this space, which are reporting 54% revenue growth over the same time period.
“We are seeing cloud service revenues continuing to grow by 50% per year, enterprise SaaS [software-as-a-service] revenues growing by over 30%, search/social networking revenues growing by over 25%, and e-commerce revenues growing by over 40%, all of which are driving big increases in spending on public cloud infrastructure,” said John Dinsdale, chief analyst at Synergy Research Group.
According to Synergy’s own calculations, total datacentre infrastructure equipment revenue hit $38bn in the second quarter of 2018, with public cloud-enabling technology accounting for around a third of this spend.
The analyst house has also picked up on a sudden surge in spending on infrastructure for use in enterprise facilities, particularly where private cloud-enabling technologies are concerned.
“Growth for enterprise datacentre infrastructure has been much lower, and spending was actually in slow decline until the recent spike in server demand and pricing gave vendor revenues a boost,” Synergy Research Group said in a statement.
“Within the enterprise, it is private cloud infrastructure that is driving spending, with a 45% increase since the second quarter of 2016.”
From a supplier perspective, Dell EMC is leading the private cloud market, followed by Microsoft and HPE, Synergy’s research shows, while on the public cloud-enabling infrastructure side, it is the white-label, original design manufacturers (ODMs) who are ruling the roost.
“ODMs in aggregate account for the largest portion of the public cloud market, with Dell EMC being the leading individual vendor, followed by Cisco and HPE,” said Synergy.
Rising cost of hardware
It is not just the growing demand for private cloud deployments that has caused enterprise spending on datacentre infrastructure to surge. Ongoing component shortages are also driving up the average selling price of kit, which is having an impact too.
It is a trend fellow IT analyst house Gartner has previously flagged as having a dampening effect on server shipments across Europe, the Middle East and Africa (EMEA) in recent quarters, as increased prices have caused some enterprises to delay server refresh projects.
Despite this, and as a direct consequence of the price hikes, the amount of revenue generated by sales of these servers has risen.
In particular, it is the supply of semiconductors, and consequently dynamic random access memory (DRAM), that appears to have hit the datacentre infrastructure market hard in recent months.
Industry watchers have attributed the shortages to a mix of issues, including the explosion in hyperscale cloud datacentres, growing demand for internet-connected devices, and the supply chain disruption caused by a series of mergers and acquisitions in the server component space.
There is also evidence, Synergy said, to suggest enterprises are also buying more expensive datacentre equipment, as they opt for systems that can handle the increasing workload complexities associated with running hybrid cloud environments.