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Ascent of the Hyperscale, Hybrid IT Operating Model

Digital business transformation requires an investment in new people, process and technology. That being said, typically the most expensive part of achieving a bold digital strategy is overcoming the resistance from passive-aggressive middle managers that try to hold back progress.

Once a CEO and their leadership team have exposed the worst change-blocking cynics -- and removed them from the equation -- then the remaining two steps in the transformation agenda can proceed. Obsolete processes can be streamlined or eliminated and essential IT systems can be updated or replaced.

Investments in modernizing IT infrastructures will be critical to most businesses, driving up global data center server and storage array revenues at a 1.2 percent CAGR from 2015 to 2020 -- reaching $88 billion in revenue, according to the latest market study by Technology Business Research (TBR).

Criteria for Selecting Digital Transformation Partners

"Emerging business requirements, such as increased responsiveness to end customers and the use of data analytics, are driving data center hardware vendors to transform from stand-alone hardware providers to transformation change-agents," said Krista Macomber, analyst at TBR.

Traditional server and storage sales opportunities are shifting dramatically away from legacy technologies, creating turbulent revenue performance and shifting market share. As an example, hybrid cloud deployments will demand a scalable object-based storage solution that's flexible and adaptable to many scenarios.

The rise of the hyperscale, hybrid IT operating model places new pressures on CIOs and their suppliers. The TBR study shows stand-alone proprietary systems are declining in demand, losing market share to cohesive, software-mediated architectures built on increasingly reliable and high-performing industry-standard hardware components.

As a result, TBR estimates a 2.2 percent CAGR for industry-standard server (ISS) revenue from 2015 to 2020, spurred by demand for hyperscale and converged systems, as global proprietary server revenue declined at a 4.7 percent CAGR.

According to the TBR assessment, a select group of leading vendors will sustain proprietary revenue streams by aligning their platforms with modern use cases -- including big data analytics and cloud computing -- thereby delivering superior total cost of ownership (TCO) for mission-critical business functions.

Demand for New Low-Cost, High-Value Solutions

However, depending upon the applications, some of the IT systems market share will go to the more progressive vendors that are also aligning their manufacturing, R&D and go-to-market processes with the industry shift to hyperscale, low-cost, commodity hardware.

"The industry is moving steadily toward flexible, easy-to-manage, good-enough hardware," said Macomber. "Advancements to x86 architectures coupled with customers’ reduced IT resources are shrinking opportunities for siloed deployments of expensive hardware."

This translates to significant business model evolution for leading vendors to fend-off strengthening competition ranging from pure-play flash storage vendors to aggressive new up-and-comers.

TBR analysts believe that the need for IT transformation is highlighted by recessions and commoditization in mature economies, as well as increasing volatility in emerging economies. That means the savvy vendors must articulate an industry-specific business advantage in this budget-conscious global networked economy.

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