DataCenterNews Asia - Data center hardware revenue down as focus moves to software

Graph_up_down.jpg

Data center hardware revenue down as focus moves to software

Demand for hardware for data centers is down globally with storage and proprietary server revenues falling as the value proposition of storage solutions shifts from hardware to software.

Technology Business Research says vendors average revenue and gross profit year on year slipped in the fourth quarter of 2015. Globally, revenue was down 1% to $23 billion for the benchmarked vendors.

Asia Pacific, however, saw average benchmarked revenue grow, as United States-based vendors leveraged alliances in the region to gain market share. TBR notes that HPE achieved its largest quarterly networking revenue in China to date, with revenue in the region improving due to new customers brought in by its deal with Tsinghua Holdings, which is expected to be finalised at the end of May.

Globally, networking hardware revenue bucked the downward trend to record the highest growth in the data center ecosystem, with leaders Dell, HPE, Huawei and Juniper all achieving year to year revenue growth in the segment.

Industry standard servers also saw shipments increase.

Krista Macomber, TBR data center senior analyst, says industry standard servers are having a growing impact on the global data center hardware market, taking an increasing share of the market and retaining the largest share of total revenue, at 38% for Q4.

“TBR estimates average ISS unit shipments increased 1.8% year to year, indicating the growing impact of hardware commiditisation and the low pricing strategies used by vendors such as Lenovo and Huawei.

Storage accounted for 30% of the Q4 data center revenue mix, with networking taking 24% and proprietary servers accounting for just 8%.

TBR says commoditsation of high-end storage hardware and competitive pricing across the storage market, drove proprietary server revenue down 0.4% and storage revenues down 7.7% year on year.

“These areas’ declines stem from the challenged value proposition of traditional storage hardware as customers increasingly migrate less critical workloads to public cloud solutions, creating a shift in sales opportunities to ISS and networking segments,” TBR says.

The research company says it believes vendors wll increase their investments in emerging areas, such as flash, object storage and hyperconverged, as they seek to counter the declines. The company notes that vendors have already avoided more severe declines by adjusting their go-to-market portfolios and selling models to capture emerging opportunities.

“However, as the number of customers transitioning to public cloud solutions is growing rapidly, the value proposition of storage solutions will shift from hardware to software,” TBR says.

Kathleen Kilbourn, TBR data center research analyst, says the networking hardware market hasn’t been as heavily impacted by commoditisation as the server and storage markets, and the proliferation of software-defined networking will have an increasing impact on vendors’ growth strategies.

Interested in this topic?
We can put you in touch with an expert.

Follow Us

Featured

next-story-thumb Scroll down to read: