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​How the modernisation of the data centre is impacting incumbent vendors

Data centre customers shift from cumbersome and proprietary legacy systems to automated and virtualised functionality deployed on standards‐based hardware.

Data centre revenue pools and market share are in flux, as customer migrations to modern environments shrink core profit pools and disrupt vendor share.

Findings from Technology Business Research report that customers across the globe are building out modern implementations of converged, scalable and flash‐accelerated IT infrastructure to support business advantage in the digital era.

The knock-on effect is a driving of overall data centre server and storage revenue, up at a two per cent from 2016 to 2021, to just under $US89 billion.

However, the pace at which customers are paring back spend on legacy systems is driving financial turbulence and the need to dramatically adapt long‐standing business models for incumbent vendors.

“IT departments today face substantial pressure to transform from cost centres into agile and innovative drivers of productivity,” TBR data centre senior analyst, Krista Macomber, said.

“To address this need, data centre customers are shifting from cumbersome and proprietary legacy systems to automated and virtualised functionality deployed on standards‐based hardware.

“Data centre hardware vendors are adapting in kind, developing more agile, partner‐supported innovation models while applying major acquisition and divestiture activity to maximise share of shrinking profit pools.”

Looking ahead, the advent of hyper-converged platforms - which serve as fast, simplified on‐ramps to software‐defined data centre functionality - and hyper-scalable cloud data centres will drive the industry‐standard server (ISS) segment to contribute more than 52 per cent of global server and storage revenues by 2016.

Meanwhile, the flash storage segment will grow to exceed 20 per cent of this revenue pool, as declining price points and ongoing improvements to reliability and density encourage customers to utilise the technology to address growing data storage and access requirements with improved efficiency, latency and performance compared to spinning disk alternatives.

“As customers’ underlying data centre architecture requirements are disrupted, the vendor landscape is disrupted in kind,” TBR data centre research analyst, Stephanie Long, added.

“This trend is exemplified by the recent creations of Dell Technologies and Hewlett Packard Enterprise, as well as ongoing growth to original design manufacturers, pure plays in markets such as flash storage, and virtualisation software providers.

“From a long‐term perspective, however, the vendor landscape is likely to consolidate as customers seek to purchase holistically and to bridge large investments in legacy infrastructure with new technologies.”