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Transformation of Data Centers with Hyperscale Servers

As enterprise IT shifts from being a utility cost-center to an enabler of business outcomes, data center server and storage array revenues will rise at a 1.6 percent CAGR to reach $87.8 billion in revenue from 2014 to 2019, according to Technology Business Research (TBR).

Their latest worldwide market study findings indicate that IT spend continues to increase, but the vendor opportunities are shifting. Demand for stand-alone proprietary servers and storage is declining as customers seek new open source software-defined ways to improve their IT agility and efficiency.

This compelling transformation will make way for new converged systems, hyperscale servers and flash storage to lead the evolution of data center server and storage market growth through 2019.

"As customers seek to harness big data growth, enable mobile computing and respond more fluidly to emerging opportunities, IT has grown more critical than ever to business," said Krista Macomber, data center analyst at TBR.

These emerging workload requirements will disrupt the status quo, spurring demand for software-driven IT as a Service deployed on open and flexible hardware, heightened application acceleration and dramatically reduced IT complexity. These evolving demand patterns will result in rapid revenue share transitions for server and storage vendors during 2015 and 2016.

Moreover, new entrants to the market -- including Huawei and Lenovo -- will gain ground during this time frame. They are driving a price wars in the industry, while leaning on their channel partners and heightened R&D spend to grab market share.

According to TBR estimates, global proprietary server revenues will decline at a 3.7 percent CAGR from 2014 to 2019 as industry-standard software-defined server revenues rise at a 3 percent CAGR.

The bulk of revenue and growth will remain with the industry-standard server segment, as customers turn to increasingly powerful and reliable commodity lower-cost processors to run their mission-critical workloads.

TBR believes that many enterprise customers now recognize they can obtain performance and reliability that is good-enough at a significant cost savings over proprietary technologies. This ongoing shift is particularly evident in the cloud computing market, where open source software and industry-standard hardware is the norm.

Hyperscale server revenues will lead the industry-standard server segment in growth, rising at a 25 percent CAGR through the forecast period, driven by the need for dense, scalable infrastructure to support large-scale cloud computing and high-performance computing deployments.

As more CIOs and IT managers prioritize storing, accessing and analyzing exponentially growing information pools efficiently, TBR predicts global storage revenues will also grow, rising at a 1.1 percent CAGR.

Enterprise customers will deploy flash technologies at a faster pace, supporting storage industry growth. Although growing, these deployments will remain concentrated on mission-critical workloads requiring low latency. Meanwhile, deployments of high-end, stand-alone disk arrays will decline, increasingly replaced by flash solutions and low-cost open source software-defined storage.

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