Story image

Oil oversupply spells good news for data center investment

27 Jan 16

Data center investment will get an extra boost this year – courtesy of the oversupply of oil in the global economy.

That’s the view of Canalys, which is forecasting 8% growth for the large data center segment in 2016. That growth will see the segment hitting around $30 billion in 2016, while worldwide data center infrastructure value is forecast to exceed US$135 billion.

The analyst company says enterprises and service providers are becoming more ambitious with the size of their facilities, and declining oil prices will see data centers – with their massive energy consumption – benefiting from cheaper electricity as wholesale gas prices decline.

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

Oil prices have dropped more than 70% since mid-2014, and with production ramping up across the United States and the Middle East, that’s a situation that is likely to remain in play, Canalys says.

The company says the cheaper oil will accelerate what is an already growing market, with pre-eminent cloud service providers reacting to data sovereignty concerns by expanding their global cloud footprint, a trend Canalys expects to continue.

Ben Stanton, Canalys research analyst, says the role of oil prices in amplifying data center investment is only one part of the story, however.

“Software-defined environments are unlocking more value in hardware than ever before,” 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,” Stanton adds.

Canalys says industry standard servers, network security and virtualisation technologies will become key growth categories, as incumbent data center infrastructure vendors pivot their focus towards high-end large and hyperscale facilities, but face stiff competition from cheaper ODM alternatives.

Stanton adds that infrastructure vendors won’t have it all their own way, with hardware becoming increasingly commoditised as profit margins transition to software and services.

“As average selling prices fall, shipment values will soften,” Stanton says.

“We forecast that worldwide data center infrastructure value will exceed US$135 billion in 2016, which represents a 4.4% growth, but we would expect unit growth to exeed this considerably.”

The new world of edge data centre management
Schneider Electric’s Kim Povlsen debates whether the data centre as we know it today will soon cease to exist.
Can it be trusted? Huawei’s founder speaks out
Ren Zhengfei spoke candidly in a recent media roundtable about security, 5G, his daughter’s detainment, the USA, and the West’s perception of Huawei.
SUSE partners with Intel and SAP to accelerate IT transformation
SUSE announced support for Intel Optane DC persistent memory with SAP HANA.
Inspur uses L11 rack level integration to deploy 10,000 nodes in 8 hours
Inspur recently delivered a shipment of rack scale servers of more than 10,000 nodes to the Baidu Beijing Shunyi data center within 8 hours.
How HCI helps enterprises stay on top of data regulations
Increasing data protection requirements will supposedly drive the demand for Hyper-Converged Infrastructure solutions across the globe.
Vodafone and PNSol champion new ‘invisble network’ broadband project
"As an industry, we've increased the speed of broadband to one gigabit and beyond, which is a remarkable achievement, but we now have to look beyond speed."
Top 3 cloud computing predictions – what’s in store for 2019?
Virtustream's Deepak Patil shares his predictions for how cloud computing will evolve in 2019.
Rubrik welcomes $261m funding for new market expansion
The company intends to use the funds from new investor Bain Capital Ventures will go toward future innovation and expansion.