Issue link: https://cp.revolio.com/i/428453
THE DATA CENTER JOURNAL | 11 www.datacenterjournal.com r egardless of broader eco- nomic conditions, technol- ogy plays an increasing role in business. Demand for services continues to rise, and forthcoming trends like the Internet of ings (IoT) hint at even more demand to support computing everywhere. e backbone of these services is data centers, but a growing number of companies are abandoning traditional facilities in favor of the cloud. at doesn't mean data center spending must collapse, however; the cloud still requires data centers, albeit typically larger ones that exploit econo- mies of scale. Although pinning down a solid quantitative assessment of data center spending trends is difficult, several important observations can paint a picture of this market's present dynamics. the ClouD transition A critical trend in the data center market is the shi from company-owned facilities to cloud-based ones. According to the Cisco Global Cloud Index forecast, the fraction of workloads handled by cloud data centers will rise from 53% in 2013 (roughly at parity with "traditional" data centers) to 78% in 2018, represent- ing a 24% compound annual growth rate (CAGR). Cisco estimates the total number of workloads will nearly double over that same period to 211.5 million in 2018, com- pared with 108.3 million in 2013. at's a 14% CAGR. Traditional workloads are set to decline at a –2% CAGR. In other words, according to this forecast, demand for service will rise, and the cloud will tackle a growing portion of it. Sureel Choksi, President and CEO of Vantage Data Centers, sees improve- ment in data center spending since the Great Recession, but in line with the move to the cloud. "I think the investments have completely turned around, but I also think the way data center investments are being made is very different. We are seeing a dramatic increase in outsourced services—from cloud to retail colocation to wholesale data centers." Choksi, who has served in a variety of technology-executive roles as well as in venture-capital and investment-banking positions, also notes the difficulty that this transition can cause in terms of quantifying the market: "In real dollars, I could not say if this is more or less than before because its being spent in a wider variety of ways beyond just build- ing wholly-owned, dedicated data center space." In terms of actual deployments, the move to the cloud appears to be more than just a complement to traditional IT. Research firm IDC predicts that the total number of data centers worldwide will reach a maximum of about 8.6 million in 2017 before starting a slow drop. It expects internal "data center server rooms" to be- gin declining in 2016, followed by "internal server closets" in 2017. Yet total data center floor space is forecast to increase over 20% between 2013 and 2018, reaching 1.94 billion square feet at the horizon. ese numbers suggest that centralization of data center resources is the dominant trend— meaning fewer, larger providers delivering services to customers rather than custom- ers provisioning their own resources on site. Notes an IDC press release, "By 2018... mega datacenters will account for the vast majority (72.6%) of all service provider datacenter construction in terms of space while also accounting for 44.6% of all new high-end datacenter space around the world (up from 19.3% in 2013)." (e firm's use of the term service-provider data center includes both colocation and cloud facilities.) In some ways, this transition may en- able better quantification of the market. Yet evaluating the current state of data center spending—let alone making an accurate prediction—could remain difficult for a number of reasons. sPenDinG foreCasts: haBitual DownGraDes According to Choksi, "Many compa- nies are certainly in a position where they could afford to build their own data center, but the smart ones are not willing to. We are seeing companies looking for more and more efficient ways to garner data center resources without having to make signifi- cant capital investments." In some regards, this sentiment among companies is under- standable: for many, IT is peripheral to the core business and can consume resources that are better invested elsewhere. "Increas- ingly companies will decide that managing data centers requires a lot of work and a great deal of expertise—why not look to companies that do this for a living? Let the experts run your data center, and free up your resources and your people to focus on core elements of their business," he said. But the overall state of the economy hints at a number of underlying prob- lems. Executive sentiment—perhaps at the prompting of politically motivated recovery-hawkers—oen seems to overes- timate even near-term prospects. Con- sider, for instance, historical IT spending estimates from research firm Gartner. Predictions in recent quarters for 2014 (as well as estimates for 2013) fell steadily with time: In 3Q13, Gartner predicted 0.8% growth in 2013 and 3.6% growth in 2014. ose estimates fell almost uniformly over subsequent quarters, ending in 3Q14 with 0% growth for 2013 and 2.6% growth in 2014. But that's not necessarily to fault Gartner—such is the case with the broader economy, where growth estimates are oen downgraded to match reality. So, where does data center spend- ing currently reside? Although Gartner has only in the last couple years broken out "data center systems" in its publicly released data, its overall worldwide IT spending forecasts offer a snapshot. In 3Q08, as the stock-market crash acceler- ated, it predicted worldwide IT spending would reach $3.6 trillion in 2009, up from a forecasted $3.4 trillion in 2008. Estimates in subsequent years sobered as the reality of the recession sank in, but the expected high growth rates never materialized. In 3Q11, Gartner estimated spending for that "Many companies are certainly in a position where they could afford to build their own data center, but the smart ones are not willing to. We are seeing companies looking for more and more efficient ways to garner data center resources without having to make significant capital investments."