There is no doubt that the global data center market is thriving. An ongoing migration of data from private servers to cloud-based solutions continues to drive growth across the industry worldwide. Current trends show no sign of slowing down, and demand for digital content will only increase over the coming years.
Financial services giant, Credit Suisse, recently explored the future of the data center market further releasing a report entitled 2018 Data Center Market Drivers: Enablers Boosting Enterprise Cloud Growth.
Presenting the findings of the report at CAPRE’s Greater Boston & New England Data Center Summit earlier this month, Senior Analyst for Communications Infrastructure at Credit Suisse, Sami Badri, presented his views on the market trends, technologies and partnerships likely to dominate the data center sector in the New Year.
According to report, the data center colocation and interconnection market is robust and set to grow at an annual rate of 9% over the next five years, from $21 billion in 2016 to $31 billion in 2021.
This growth comes in response to surging cloud demand, promising dramatic upside for the industry. The virtual to physical infrastructure multiplier ratio is also expected to rise dramatically to 3.3X by 2021.
Whilst 2016 was a $21 billion year for the data center market, Badri says: “That market is a multi-tenant market. It does not include hyperscale data centers or enterprise data centers. In 2016, there was a 1.3X multiplier of IaaS software to IaaS physical infrastructure. It’s important to understand this relationship because over time the multiplier effect will essentially be driving companies higher.”
And while Credit Suisse acknowledges that a growth rate of 9% per annum may appear low compared to the 30% growth seen in the software sector, the wealth management firm states that 9% is more stable and predictable, allowing investors and contractors to make disciplined decisions and deploy capital wisely.
Looking ahead to 2018, Credit Suisse expects market revenue growth to be driven by three key forces:
- Cloud On-Ramps
- Scaled SDN Fabrics
- Strategic Partnerships between industry leaders such as Amazon, Verizon and Megaport
Strategic partnerships amongst industry players are only increasing in magnitude. Recent partnership announcements include QTS and AWS, CyrusOne and GDS, and Equinix and Verizon. Digital Realty has also announced strategic partnerships with Mitsubishi and Megaport.
Cloud On-Ramps are spreading rapidly. Amazon Web Services leads the pack with 66 Cloud On-Ramps (one quarter of the total market share). Google Cloud takes second place with 39 Cloud On-Ramps (15% market share) and IBM Softlayer comes in at third with 30 Cloud On-Ramps. This proliferation of Cloud On-Ramps is helping to ease enterprise cloud adoption and facilitate hybrid clouds.
The report reveals that Megaport is currently the industry’s most robust network fabric, with 185 data center Cloud On-Ramps across 47 markets. This is 43% higher than its closest competitor, Console, with 129 Cloud On-Ramps across 43 markets. PacketFabric, Equinix IX and Digital Realty Service Exchange round out the top five.
Software-defined networking fabrics are now ramped and positioned, easing enterprise colocation deployment plans as the total number of ports, virtual cross connections and Internet exchanges continues to grow strongly.
Enterprise cloud workloads, which represent only 35% of total workloads today, are expected to rise to 90% of all workloads by 2021. Badri recalls that in 2005, this figure was just 4%, doubling every four years.
The primary drivers of this acceleration in cloud workloads include:
- Mobile workloads (remote working)
- Cloud enablers (SDNs & marketplaces)
- Cloud provider alignment (partnerships)
- Enterprise expertise (skills)
- Big data, AI, IoT and machine learning
The same drivers will also see the interconnection market accelerate through to 2021, led by the Americas. Mobile will be a particularly important driver of public and private cloud growth.
“Employees logging in remotely – sending out emails, those types of dynamics, all drive significantly more workloads than ever before. That’s why you’re going to see this massive multiplier for the next four years,” said Badri.
The report also highlights the fact that data center Real Estate Investment Trusts (REITs) have been outperforming major indices and most cloud providers since 2014. Find out more about REITs in our latest blog post: Data Center REITs: Who are they and where are they?
Credit Suisse does not expect market absorption to slow in 2018, with positioned enablers like Amazon Web Services, Google Cloud, Microsoft Azure Oracle Cloud, IBM Cloud, Console, Packet Fabric and Megaport likely to continue leading the charge, as they have done throughout 2016 and 2017.
The report concludes by listing some of the key companies to watch in 2018, including Cloudscene, who Credit Suisse states is a simple, accessible platform that reduces connectivity hurdles and uncertainty.
To find out more about this report, please reach out to Cloudscene via firstname.lastname@example.org