Story image

Oil oversupply spells good news for data center investment

27 Jan 2016

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.”

VMware to roll out cloud platform on AWS in Singapore
VMware has selected AsiaPac Distribution as its launch partner for VMware Cloud on Amazon Web Services (AWS) in Singapore.
True IDC & Tencent launch AI-enabled cloud platform in Thailand
The platform is designed to offer a complete range of cloud services to the public and private sectors.
Dell EMC’s six server market trends
As the evolution of cloud-based computing continues, it is important to know what’s ahead to stay ahead of the market.
Huawei FusionServer Pro built for 'intelligent transformation'
The next generation X86 servers draw on an intelligent acceleration engine, an intelligent management ending, and intelligent data center solutions for ‘diverse’ scenarios as transformation shifts from digital to intelligent.
HFW deploys digital edge strategy on Equinix
Equinix announced that global law firm HFW has collaborated with Equinix to build out its digital edge in key markets including Dubai, London, Hong Kong, Melbourne and Paris.
SEAX Singapore hosts new Epsilon PoP in Kuala Lumpur
The partnership will allow Epsilon customers and partners to onnect at the new PoP through Epsilon’s Infiny by Epsilon Software-Defined Networking (SDN) platform.
Teradata expands as-a-service offerings for Advantage platform
Data intelligence company Teradata has announced three new cloud and on-premise solutions that are now integrated into its Teradata Vantage platform.
AirTrunk raises $450m: Singapore hyperscale data center on the cards
Australian hyperscale data center specialist AirTrunk has raised SG$450 million in order to finance its expansion across Asia Pacific.