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Monday, June 29, 2020

Open IT Hardware: A Hyperscale Public Cloud Advantage

Open IT solutions are gaining momentum. Most savvy CIOs and CTOs already have plans to increase their applications for open-source software projects. While that software is an established component of on-premises enterprise data centers, the untapped opportunity is open IT hardware infrastructure.

Worldwide revenue from the Open Compute Project (OCP) infrastructure market will reach $33.8 billion in 2024, according to the latest global market study by International Data Corporation (IDC).

While year-over-year growth will slow slightly in 2020 due to capital preservation strategies during the COVID-19 pandemic, the market for OCP compute and storage infrastructure is forecast to see a compound annual growth rate (CAGR) of 16.6 percent over the 2020-2024 forecast period.

Open IT Hardware Market Development

The IDC forecast assumes a rapid improvement for this market in 2021-22, fueled by a robust economic recovery worldwide. However, a prolonged crisis and economic uncertainty could delay the market's recovery well past 2021, although investments in and by public cloud service providers may dominate infrastructure investments when they occur during this period.

The Open Compute Project (OCP) was established in 2011 as an open IT community focused on designing hardware technology to efficiently support the growing demands on compute infrastructure at midsize to large data center operators -- also known collectively as the hyperscalers.

Open Compute standards are now supported by market leaders such as Facebook, Microsoft, LinkedIn, Alibaba, Baidu, Tencent, and Rackspace. The OCP encourages infrastructure suppliers, hyperscalers, cloud service providers, systems integrators, and components vendors to collaborate on new innovations, specifications, and initiatives across several key categories.

"By opening and sharing the innovations and designs within the community, IDC believes that OCP will be one of the most important indicators of data center infrastructure innovation and development, especially among hyperscalers and cloud service providers," said Sebastian Lagana, research manager at IDC.

According to the IDC assessment, the compute segment will remain the primary driver of overall OCP infrastructure revenue for the coming five years, accounting for roughly 83 percent of the total market. Despite being a much larger portion of the market, the compute segment will achieve a CAGR comparable to storage through 2024.

Open IT hardware compute and storage segments:

Compute: Spend on computing platforms (i.e., servers including accelerators and interconnects) is estimated to grow at a five-year CAGR of 16.2 percent and reach $28.07 billion. This segment includes externally attached accelerator trays also known as JBOGs (GPUs) and JBOFs (FPGAs).

Storage: Spend on storage (i.e., server-based platforms and externally attached platforms and systems) is estimated to grow at a five-year CAGR of 18.5 percent and reach $5.73 billion. Externally attached platforms are also known as JBOFs (Flash) and JBODs (HDDs) and do not contain a controller. Externally attached systems are built using storage controllers.

"IDC projects massive growth in the amount of data generated, transmitted and stored worldwide. Much of this data will flow in and out of the cloud and get stored in hyperscale cloud data centers, thereby driving demand for infrastructure," said Kuba Stolarski, research director at IDC.

IDC analysts believe that OCP Board Member purchases make up the bulk of the OCP infrastructure market and are poised to grow at a 14.8 percent CAGR through 2024, when they will account for just under 75 percent of the total market.

Conversely, non-member IT infrastructure investment is projected to increase at a five-year CAGR of 23.2 percent and will expand its share of the OCP infrastructure market by just over 600 basis points during that period.

Outlook for Open IT Hardware Market Growth

In terms of end-user type, hyperscalers account for the largest portion of the market at just over 78 percent in 2019 and are projected to expand spending at a 14.2 percent CAGR through 2024, although this will result in erosion of total share.

That said, non-hyperscaler purchases will expand 23.8 percent over the same period, increasing the OCP group's market share by approximately 650 basis points from 2019 to 2024.

Other noteworthy open IT hardware ecosystems include the Open Power Foundation and the RISC-V Foundation. All these open projects are examples of collaboration between forward-looking organizations that have partnered on a common cause to enable the development and implementation of open IT infrastructure standards.