Oil gloom, data centre bloom

Oversupply of oil in the global economy is set to accelerate data centre investment, according to Canalys, which forecasted that the large data centre segment will grow eight percent in 2016 as enterprises and service providers become more ambitious with the size of their facilities.

Oil prices have declined more than 70 percent since mid-2014, and will remain low as production ramps up across the US and Middle East. Data centres, with their monolithic energy consumption, will benefit from cheaper electricity as wholesale gas prices decline. Investment will focus on larger facilities, as energy becomes less of a constraint on operating costs.

Cheaper oil will accelerate a market that is already growing. Pre-eminent cloud service providers have already reacted to data sovereignty concerns by investing in the expansion of their global cloud footprint. This will continue and industry standard servers, network security and virtualisation technologies will become key growth categories. Incumbent data centre infrastructure vendors will pivot their focus towards high-end large and hyperscale facilities, but will face stiff competition from cheaper ODM alternatives.

“Oil prices will amplify data centre investment this year, but that is just one part of the story. Software-defined environments are unlocking more value in hardware than ever before. 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,” said Ben Stanton, Research Analyst of Canalys.

“Additionally, sales processes are becoming increasingly applications-led, which lends itself nicely to digital transformation projects involving big data, analytics and IoT. But infrastructure vendors will not have it all their own way. Hardware will become increasingly commoditised as profit margins transition to software and services. As ASPs fall, shipment values will soften. We forecast that worldwide data center infrastructure value will exceed US$135 billion in 2016, which represents 4.4 percent growth, but we would expect unit growth to exceed this considerably,” he added.

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