Menu
​Mainstream hardware vendors under threat as data centre disruption deepens

​Mainstream hardware vendors under threat as data centre disruption deepens

Data centre profits slip as customers accelerate transformation initiatives.

The steady creep of virtualisation across customer data centres continues to compound public cloud attrition, shrinking server, storage and networking hardware profit pools.

During the second quarter of 2016, Technology Business Research findings show that revenue for incumbent data centre hardware vendors shrank 4.3 per cent year‐to‐year, as gross profit dollars declined 5.4 per cent.

“Increasing pressure from lines of business to move with greater agility and productivity, coupled with the maturity of new architectures such as hyper-converged platforms, is significantly disrupting the data centre market,” TBR data centre senior analyst, Krista Macomber, said.

“At a quickening pace, customers are embracing software‐defined functionality and service‐based delivery for business‐critical workloads and data centre consolidation initiatives.

“For mainstream hardware vendors, this shift necessitates business model evolutions that are equally as radical to remain relevant.”

Macomber said data centre revenue pools continued moving toward industry‐standard servers (ISS) during 2Q16, with the segment’s contribution rising 180 basis points year‐to‐year to 39.8 per cent of benchmarked revenue.

“Customers are turning to the more cost‐effective and flexible nature of ISS technology compared to more traditional, siloed deployments of proprietary servers and high‐end storage arrays as the foundation upon which they build out their digital front offices,” Macomber explained.

Meanwhile, Macomber said the “aggressive advent” of hyper-converged platforms and the need for more centralised and programmable IT administration are sparking investment in software‐defined networking functionality, resulting in early commoditisation of data centre switches and routers.

Consequently, gross margin for benchmarked vendors shrank 50 basis points year‐to‐year to 41.5 per cent.

“Dell’s acquisition of EMC, Hewlett Packard Enterprise’s plans to reduce emphasis on noncore capabilities, and Brocade’s purchase of Ruckus Wireless all point to a shifting data centre environment,” TBR data centre research analyst, Stephanie Long, added.

“This requires vendors to compete not only comprehensively but also with a stronger focus on customers’ evolving, infrastructure‐level pain points.

“Shrinking opportunities to differentiate on hardware and consolidation of the vendor landscape will result in a highly competitive market for the foreseeable future.”

Looking ahead, Long said customers’ data centre modernisation initiatives are influencing vendors’ financial performance globally, with Asia Pacific being the only major region to experience year‐to‐year revenue growth in 2Q16 for benchmarked vendors, per TBR estimates.

Consequently, TBR believes short‐term geopolitical challenges exacerbated revenue declines in EMEA, while the volume of traditional revenue streams in the Americas led to a more significant impact from commoditisation on financial performance.

In this environment, vendors will focus on faster‐growing revenue opportunities in emerging countries such as India, where TBR customers are investing in maturing technologies such as hybrid cloud computing for greenfield data centre build‐outs.


Follow Us

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Technology Business Research

Events

Featured

Slideshows

Meet the Reseller News 30 Under 30 Tech Awards 2020 winners

Meet the Reseller News 30 Under 30 Tech Awards 2020 winners

This year’s Reseller News 30 Under 30 Tech Awards were held as an integral part of the first entirely virtual Emerging Leaders​ forum, an annual event dedicated to identifying, educating and showcasing the New Zealand technology market’s rising stars. The 30 Under 30 Tech Awards 2020 recognised the outstanding achievements and business excellence of 30 talented individuals​, across both young leaders and those just starting out. In this slideshow, Reseller News honours this year's winners and captures their thoughts about how their ideas of leadership have changed over time.​

Meet the Reseller News 30 Under 30 Tech Awards 2020 winners
Reseller News Exchange Auckland: Beyond the myths — how partners can master cloud security

Reseller News Exchange Auckland: Beyond the myths — how partners can master cloud security

This exclusive Reseller News Exchange event in Auckland explored the challenges facing the partner community on the cloud security frontier, as well as market trends, customer priorities and how the channel can capitalise on the opportunities available. In association with Arrow, Bitdefender, Exclusive Networks, Fortinet and Palo Alto Networks. Photos by Gino Demeer.

Reseller News Exchange Auckland: Beyond the myths — how partners can master cloud security
Reseller News welcomes industry figures at 2020 Hall of Fame lunch

Reseller News welcomes industry figures at 2020 Hall of Fame lunch

Reseller News welcomed 2019 inductees - Leanne Buer, Ross Jenkins and Terry Dunn - to the fourth running of the Reseller News Hall of Fame lunch, held at the French Cafe in Auckland. The inductees discussed the changing face of the IT channel ecosystem in New Zealand and what it means to be a Reseller News Hall of Fame inductee. Photos by Gino Demeer.

Reseller News welcomes industry figures at 2020 Hall of Fame lunch
Show Comments