It's the hyperscalers' world and we're just living in it. By most any measure, the hyperscale service providers are ascendant in the industry across all levels.
New data from Synergy Research Group (SRG) found that hyperscale operators accounted for 33% of all spending on data center hardware and software in the first three quarters of 2019. That's an increase from 26% in the first three quarters of 2017 and from the 15% posted in the same timeframe in 2014.
Over the same time period, the total market has increase in size by more than 34%, primarily due to increased spending by the hyperscale providers.
By contrast, spending by service providers and enterprises has increased by a measly 6%, according to SRG.
The hyperscale spending is being driven by the continued robust growth in social networking and the strong demand for public cloud services. Enterprise spending has been under pressure due to the ongoing shift in workloads from private networks to the public cloud, according to SRG.
Hyperscale operators are the world's largest providers across various service sectors including infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), software-as-a-service, search engines, social networking and e-commerce.
SRG's data showed that total data center infrastructure equipment revenues, including both cloud and non-cloud, hardware and software, were $38 billion in the recent third quarter. Combined, servers, operating systems, storage, networking and virtualization software accounted for 96% of the data center infrastructure market, with the remainder coming from network security and management software.
According to recent research by Dell'Oro Group, the worldwide server and storage systems market declined 2% in 2019 due to macroeconomic factors and declining commodity costs.
Dell EMC is the leader in both the server and storage revenue, according to both SRG and Dell'Oro Group, while Cisco was dominant in the networking sector.
Among the top vendors, SRG said Microsoft and VMware featured heavily in the vendor rankings due to their leadership status in server OS and virtualization applications, respectively.
Below those four, the other leading vendors in the market were HPE, Huawei, Inspur, and Lenovo. Among the major vendors, Inspur and Huawei chalked up the largest growth.
Original design manufacturers (ODM) were also represented in the rankings due to supplying hardware to the hyperscale providers, according to SRG.
“We are seeing very different scenarios play out in terms of data center spending by hyperscale operators and enterprises,” said John Dinsdale, a chief analyst at Synergy Research Group, in a statement. “On the one hand revenues at the hyperscale operators continue to grow strongly, driving increased demand for data centers and data center hardware. There is an ever-increasing number of hyperscale data centers, many of which continue to be expanded. Those huge data centers are crammed full of servers and other hardware, which are on a frequent refresh cycle.
"On the other hand we see a continued decline in the volume of servers being bought by enterprises. The impact of those declines is balanced by steady increases in server average selling prices, as IT operations demand ever-more sophisticated server configurations, but overall spending by enterprises remains almost flat. These trends will continue into the future.”
In October, SRG said hyperscale data centers hit a new high-water mark in the third quarter.
The number of hyperscale data centers increased to 504 at the end of the third quarter, which tripled the total from the beginning of 2013. The total number of data centers increased by 55 over the last four quarters, which marked a bigger increase than was seen in the previous four quarters, according to SRG.
Over the past four quarters, new data centers by likes of Google, Amazon Web Services, and Alibaba Cloud have been opened in 15 different countries with the U.S., Hong Kong, Switzerland and China having the largest number of additions.