All indications are that data center infrastructure is growing. Despite the use of virtualization and related technologies designed to boost resource utilization, the inexorable rise of data loads continues to drive the need for new infrastructure, both in the enterprise proper and in the cloud.
But if this is so, why are key technology sectors failing to capitalize on all this investment?
First, some numbers. According to a recent survey from QuinStreet Enterprise, nearly 88 percent of enterprises say they are investing in their data centers – which is no big surprise really, although I question the judgment of the 12 percent that are not. What’s more interesting is the strong drive to modernize their data centers, reported by 61 percent of respondents, which can take numerous forms, from streamlining bloated infrastructure to deploying advanced technologies like modularity and software-defined networking (SDN).
At the same time, organizations are placing increased reliance on third-party infrastructure, fueling the technology investment in that sector. According to DCD Intelligence, nearly a quarter of all data center space in North America is now outsourced, with continued investment of 15 percent in the coming year. This is a function of both the cost pressures facing the enterprise and the relative ease with which new third-party cloud resources can be brought online compared to traditional in-house data environments. In the past 12 months alone, outsourcing saw about $8.8 billion in infrastructure spending.
And yet many data technology suppliers continue to act like the global recession is still in full force. Intel, for one, while reporting a “solid finish to the year,” nevertheless saw lower-than-expected results in its data center group, which the company chalked up to declining demand and surplus inventories in the fourth quarter – most likely, it says, due to ripple effects of the U.S. government shutdown. Going forward, the company anticipates low double-digit sales of enterprise-class devices, given that the recovery in enterprise markets is taking longer than expected.
So how do we square this circle? Either the enterprise industry is on the rebound or it is still shrugging off the effects of the recession, server virtualization and other developments. Part of the answer lies in the fact that improvements to infrastructure do not require the heavy lifting of days gone by. New virtual, modular designs can lower the hardware footprint even as they expand capacity and performance to unheard of levels. But it is also true that much of the data center investment these days is going toward non-data systems, such as power and cooling. As Frost & Sullivan reports, increased dependence on mission-critical applications is pushing demand for technologies like uninterruptible power supplies and new energy-efficient systems and architectures. It pegs the global UPS market to jump from its current $1.6 billion level to $2.3 billion by 2019.
In that vein, then, the enterprise technology industry is a victim of its own success. Competitive pressure has forced IT to drive data and energy efficiency to unprecedented levels, and the new technologies developed to meet this demand are cannibalizing the existing plant to an ever higher degree.
This process is likely to play out for the remainder of the decade, at least, and will most likely result in diminished performance for many of today’s enterprise suppliers.
The innovation in enterprise systems will undoubtedly continue, but the volume markets of the past are not likely to return any time soon.