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Why oil price collapse will accelerate datacentre investment in 2016

Why oil price collapse will accelerate datacentre investment in 2016

“Datacentres, with their monolithic energy consumption, will benefit from cheaper electricity as wholesale gas prices decline."

Oversupply of oil in the global economy is set to accelerate datacentre investment, with the large data centre segment set to grow eight percent in 2016.

So says research analyst firm Canalys, which claims the growth will stem from enterprises and service providers becoming more ambitious with the size of their facilities.

Oil prices have declined more than 70 per cent since mid-2014, and will remain low as production ramps up across the US and Middle East.

“Data centres, with their monolithic energy consumption, will benefit from cheaper electricity as wholesale gas prices decline,” says Ben Stanton, Research Analyst, Canalys.

“Investment will focus on larger facilities, as energy becomes less of a constraint on operating costs.”

For Stanton, cheaper oil will accelerate a market that is already growing.

“Pre-eminent Cloud service providers have already reacted to data sovereignty concerns by investing in the expansion of their global Cloud footprint,” he claims.

“This will continue and industry standard servers, network security and virtualisation technologies will become key growth categories.”

Stanton believes incumbent data centre infrastructure vendors will pivot their focus towards high-end large and hyper-scale facilities, but will face stiff competition from cheaper ODM alternatives.

“Oil prices will amplify data center investment this year, but that is just one part of the story,” he adds. “Software-defined environments are unlocking more value in hardware than ever before.”

As such, Stanton says customers are being forced to rethink their IT strategies with features such as agile on-demand and as-a-service offerings, faster application deployment, and greater infrastructure flexibility and scalability.

Additionally, sales processes are becoming increasingly applications-led, which lends itself nicely to digital transformation projects involving big data, analytics and IoT.

“But infrastructure vendors will not have it all their own way,” Stanton adds. “Hardware will become increasingly commoditised as profit margins transition to software and services.

“As ASPs fall, shipment values will soften. We forecast that worldwide data centre infrastructure value will exceed $US135 billion in 2016, which represents 4.4 percent growth, but we would expect unit growth to exceed this considerably.”


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