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2016 Trends in Datacenter

PREVIEW Technologies
2015 Rhonda Ascierto, Research Director
Andy Lawrence, Research Vice President
Andrew Donoghue, European Research Manager
Daniel Bizo, Senior Analyst

Leading datacenter technology suppliers are attempting to respond to and anticipate


significant changes in demand brought about by cloud and hyperscale datacenter
operators, among other factors. These changes will unfold over the next several years,
but all face growing pressure today to develop cost-effective and energy-efficient
products, as many datacenters of all kinds seek to drive down costs.

2015 451 Research, LLC | W W W . 4 5 1 R E S E A R C H . C O M


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ABOUT THE AUTHOR


RHONDA ASCIERTO
RESEARCH DIRECTOR
Rhonda Ascierto is a Research Director in the Datacenter Technologies and Eco-
Efficient IT practices at 451 Research. Rhonda has been analyzing the crossroads
of IT and business for more than 15 years. She focuses on datacenter innovation
and energy management in datacenters and across the enterprise. She also
covers technologies that enable the efficient use of all resources and help to
minimize the environmental impact of business activity.

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Key Findings

The datacenter is becoming more software-driven, with infrastructure management systems increasingly
integrating with IT management systems. This will make DCIM software more effective and more useful,
including in hybrid datacenter environments but will force companies and suppliers to innovate more and
to focus on integration.

Prefabricated modular (PFM) datacenter designs are rapidly evolving. We expect PFM datacenters will become
the new benchmark to beat for virtually all use cases, giving operators new options and with greater speed,
predictability and agility than traditional approaches.

The Open Compute Project and other hyperscale datacenter architectures represent both an opportunity
and a threat to suppliers.

The impact of cloud computing on the datacenter industry and its ecosystems of suppliers is both deep and
wide. Technology suppliers need to adjust their strategies and products accordingly.

The role of datacenters as passive users of energy is slowly beginning to change, with some progressive
facilities finding more effective ways to interact with, and understand, established and emerging energy
suppliers. Over time, the real-time power feed from the grid will become just one of many power sources,
rather than the default option.

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Executive Summary

INTRODUCTION

FA C I N G C L O U DY H E A D W I N D S , S U P P L I E R S W I L L C H A N G E TA C K
Widespread change across the datacenter sector is disrupting suppliers of equipment, software and services on a number
of levels. While executives and investors are buoyed by the secure knowledge that demand for datacenter capacity and
datacenter services will continue to grow steadily and globally, their optimism is coupled with uncertainty.
Cloud computing has yet to make its full impact, and the extent and the form of that impact on enterprise and commercial
datacenters is still unclear. It will take several years to play out, but demand for on-premises capacity will certainly be offset
by the ability to far more easily migrate workloads and place new workloads with cloud providers such as Amazon. This
possibility is, in turn, beginning to create new competitive and efficiency pressures; operators looking do more of the same
or more for less are now considering radical change.
Our research shows that there will likely be fewer yet larger enterprise datacenters in 2016 and beyond, as many smaller
and regional facilities are consolidated into centralized premium sites. While more capacity is being outsourced to public
cloud datacenters, a growing number of enterprises are also turning to colocation and hosting providers. Within enterprise
and colocation facilities, cost efficiency will be a goal, but not at the expense of availability or reliability. This means high-
redundancy facilities will continue to be built, using traditional power topologies and other incumbent equipment.
Datacenter equipment suppliers will continue to develop more efficient versions of their products.
Yet their R&D labs are almost unrecognizable from a few years ago, as they develop new technology and sales and support
strategies to help cloud and other hyperscale datacenters exploit their economies of scale and drive down costs. This is
a trend that will only continue in coming years. While hyperscales represent a very small number of sites today, they are
the fastest-growing datacenter segment due to demand from cloud providers. They are driving new datacenter designs,
technologies and operational approaches, including those proposed by the Open Compute Project (OCP). A small number
of other types of datacenters, notably colocation, are also beginning to adopt these non-traditional technologies and
designs as a way to differentiate. Over time, more are likely to follow.
There is also significant interest and adoption in prefabricated, standardized datacenters by all sectors of the market, to better
align capital expenditure with capacity requirements. Prefabricated modular (PFM) datacenter designs are still emergent yet
evolving rapidly and meeting demand for additional capacity in various ways. Some large facilities are being built entirely
from prefabbed components. In urban areas and elsewhere, we anticipate that numerous small prefabbed micro-modular
datacenters will emerge. Edge-of-network requirements, driven by new Internet of Things (IoT) applications, will help fuel
their growth.
Regardless of their form, datacenters in the coming years will become increasingly automated and agile across hybrid on- and
off-premises environments. Organizations embarking on hybrid datacenter strategies are beginning to realize the need for
integrated management tools, driving up demand of datacenter infrastructure management (DCIM) and related software.
While DCIM has appeared to be ahead of the market for many years, increasing recognition that well-run datacenters use
integrated, fully functional software platforms means DCIM may at last enjoy widespread adoption. However, at this stage
of its development, it will be a less distinct market blended with IT provisioning, orchestration and service management.
Another area of change is the sourcing and management of energy. This is more of a long-term trend, although progressive
datacenters are already finding more effective ways to interact with, and understand, established and emerging energy
suppliers. This is leading to a greater variety of different power architectures and purchasing relationships. New approaches
to sourcing and management of energy in the datacenter will manifest themselves in a number of ways, with varying
impacts on suppliers of traditional power infrastructure and services, and also ancillary datacenter technology vendors.
This report presents five trends we see shaping datacenter technologies in the coming year.

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451 Researchs 2016 Datacenter Technologies Trends


Source: 451 Research, 2015

Winners Losers
Suppliers that can combine and analyze
DCIM Will Move Further Up the IT Suppliers of DCIM platforms that do not at least
DCIM data with numerous IT and financial
Stack promise to meet future DCSO requirements
management tools
Suppliers with messaging clarity and Suppliers that do not (or cannot)
Prefabricated Datacenters Will
the right balance of design optimization develop product enhancements and
Come of Age
and deployment flexibility invest in effective marketing

Well-resourced suppliers that have global reach


Hyperscales and the Open Compute Suppliers that lack the scale, global presence
and that can create strategic relationships
Project Will Disrupt and resources to rapidly innovate
with hyperscales and rival suppliers

Colos, hosting and cloud companies that Suppliers wedded to the enterprise datacenter
operate efficiently and flexibly; suppliers of market, and whose growth is predicated on
Cloud Will Drive Technical and
most classes of datacenter management physical infrastructure redundancy and over-
Business Change
software; suppliers that develop a strategy provisioning for availability; software suppliers
to work with larger commercial operators that dont participate in the cloud ecosystem
Suppliers capable of combining utility,
Suppliers of legacy energy storage, such as
Datacenters Will Evolve from datacenter construction resources and/
diesel generators, as well as traditional AC
Consumers to Active Energy Players or dynamic energy management software
power gear and traditional power generation
to support energy-smart infrastructures

M E T H O D O LO GY
Reports such as this one represent a holistic perspective on key emerging markets in the enterprise IT space. These markets
evolve quickly, though, so 451 Research offers additional services that provide critical marketplace updates. These updated
reports and perspectives are presented on a daily basis via the companys core intelligence service, 451 Research Market
Insight. Forward-looking M&A analysis and perspectives on strategic acquisitions and the liquidity environment for
technology companies are also updated regularly via Market Insight, which is backed by the industry-leading 451 Research
M&A KnowledgeBase.
Emerging technologies and markets are also covered in additional 451 Research channels, including Business Applications;
Cloud and IT Services Markets; Data Platforms and Analytics; Datacenter Technologies; Enterprise Mobility; European Services;
Information Security; Mobile Telecom; Multi-Tenant Datacenters; Networking; Service Providers; Storage; and Systems and
Software Infrastructure.
Beyond that, 451 Research has a robust set of quantitative insights covered in products such as ChangeWave, Voice of the
Enterprise, Market Monitor, the M&A KnowledgeBase and the Datacenter KnowledgeBase. All of these 451 Research services,
which are accessible via the Web, provide critical and timely analysis specifically focused on the business of enterprise IT
innovation.
For more information about 451 Research, please go to: www.451research.com.

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Table of Contents

TRENDS 1

Trend 1: DCIM Will Move Further Up the IT Stack 1


Figure 1: Global Datacenter Management Software Market Forecast 2
RECOMMENDATIONS 2
WINNERS 2
LOSERS 2

Trend 2: Prefabricated Datacenters Will Come of Age 3


Figure 2: Aggregate PFM Revenue Forecast 2013-18 ($M)4
RECOMMENDATIONS 4
WINNERS5
LOSERS 5

Trend 3: Hyperscales and the Open Compute Project Will Disrupt Suppliers Status Quo 6
RECOMMENDATIONS 7
WINNERS7
LOSERS 7

Trend 4: Cloud Will Drive Technical and Business Change 8


Figure 3: Datacenter Space Is Being Distributed9
Figure 4: Companies Evaluating Disaster Recovery Strategies Anticipated Site or Service Type10
RECOMMENDATIONS 11
WINNERS  11
LOSERS  11

Trend 5: Datacenters Will Evolve from Consumers to Active Energy Players 12


Figure 5: Different Forms of Renewable Energy Supply for Datacenters13
RECOMMENDATIONS 13
WINNERS 14
LOSERS  14

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THE LONG VIEW 15


Figure 6: The Worldwide Datacenter Installed Base 15

FURTHER READING 16

INDEX OF COMPANIES 17

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VI I
Trends

T R E N D 1 : D C I M W I L L M OV E F U R T H E R U P T H E I T STA C K
Implication: DCIM software is being extended up the IT stack Both DCIM and IT management software suppliers are
to associate IT applications and processes with the underlying formulating strategies for early DCSO leadership positions.
physical resources (space, power, cooling). The next generation
Leading DCIM suppliers are partnering with IT service
of DCIM buyer is the business-oriented IT specialist, creating
management (ITSM) and VM management tool suppliers
new product requirements, supplier partnership opportunities
to enable integrations. They include large datacenter
and possibly market entrants.
equipment suppliers Emerson Network Power, Schneider
Electric, Panduit and CommScope (iTRACS), as well as DCIM
Impact to pure-plays such as Nlyte Software, Tier44 and others. They
all offer packaged adapters. Emerson Network Power,
the Market Schneider, Nlyte and others are developing features to
analyze combined DCIM-IT service data. Startups such as
TDB Fusion which has a DCSO software platform, Federos
Deployment of DCIM systems has been slower than most Holistic DCIM integrate DCIM with other applications,
forecasters including 451 Research expected. There enabling managers to build portals and new applications
are many reasons for this, not least that DCIM is in part a that combine processes and data from multiple places to
number of applications and in part a platform. Platforms allow full two-way control.
do not enjoy strong adoption in tough times unless there
As the DCIM and DCSO markets mature (see Figure 1),
are strong applications to drive demand. There is probably
suppliers in adjacent markets are likely to offer their own
no killer app in datacenter management, but there does
products and services. HP, for example, is exploring the
appear to be a growing recognition that these emerging
DCSO opportunity. In 2014, HP launched its Converged
applications and integrations are valuable and justify the
Management Consulting Services (CMCS) to combine IT and
investment, making the case for installing and integrating
facility management, including process and technology.
DCIM stronger.
An initial focus is integrating (and reselling) DCIM software
We are beginning to see growing evidence of datacenter with ITSM systems. Despite their public wariness, we believe
operators exploring how they can achieve a better ROI, some services/IT platform suppliers will consider buying
including improved customer service, agility and efficiency, into the datacenter software management (DCIM/DCSO)
through the adoption of datacenter service optimization market. There is no shortage of DCIM acquisition targets:
(DCSO). This involves integration of DCIM data with IT Dozens of small suppliers are struggling to grow sales as
management and other management systems, and much larger DCIM rivals gain share.
developing new KPIs from the combined data.
For big and diversified suppliers, the DCIM and DCSO
By aligning the supply of datacenter power, cooling and markets present a relatively small opportunity, with
space (DCIM) with demand from IT (IT management tools), combined 2014 revenue of about $600m and a 26% CAGR
they can improve end-to-end datacenter efficiency, agility through 2019 to reach just under $2bn (a downgraded
and competitiveness. They can also calculate the true cost of projection). Yet the role of integrated management software
running applications in their own datacenters and compare as the datacenters central operating system, as well as the
against outsourcing options. This is key for best-execution foundation of best-execution venue decisions, makes DCSO
venue strategies, which are becoming more prevalent as the strategically important.
cost of public cloud services continues to fall.

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Figure 1: Global Datacenter Management Software Market Forecast


Source: 451 Researchs Market Monitor: Datacenter Management Software, September 2015

DCIM and DCSO combined* ($m)


$2,000 $1,900

26%
$1,500 CAGR
2014-2019

$1,000

$599

$500

$0
2014 2015 2016 2017 2018 2019

*See 451 Researchs Datacenter Management Software: DCIM and DSCO study for detailed forecasts
of the DCIM and DCSO markets, including by product subsectors and geographic regions.

R EC O M M E N DAT I O N S
Integrate. Leading DCIM suppliers should create robust, Web-services based integration capabilities with IT management
tools that enable bidirectional control. APIs should be open and flexible, to ensure they are effective to end users on an
ongoing basis (for example, when upgrades are released).
Create DCSO analytics. Integrations alone will not be enough. Analysis of the combined data, including historic trending
and predictive forecasting, will be needed to support business- and IT service-oriented decisions about datacenter capacity.

WINNERS
Suppliers with integrated multi-domain capabilities. Suppliers that can combine and analyze DCIM data with numerous
IT and financial management tools, including a combination of ITSM, VM management and cloud management, will be
most competitive. Over time, automated DCSO features will be an advantage.

LO S E R S
Suppliers of proprietary closed DCIM. DCIM is a strategic investment that is typically for the lifetime of a datacenter.
Suppliers that try to provide all DCIM functions, or that create specialist but proprietary systems, will increasingly fall
behind. Suppliers of DCIM platforms that do not at least promise to meet future DCSO requirements will find limited
opportunity over the long term.

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T R E N D 2 : P R E FA B R I C AT E D DATA C E N T E R S W I L L C O M E O F A G E
Implication: Until recently, PFM datacenters were widely These are weighty advantages that will favor PFM building
perceived as tools for the odd job. But rapidly evolving PFM techniques over traditional construction. However, it is the
designs are giving operators new options and with greater combination of speed and granularity of capacity that will
speed, predictability and agility than traditional approaches. We bring about much bigger benefits: PFM enables better use
expect PFM datacenters will become the new benchmark to beat of capital and the means to stay flexible in order to respond
for virtually all use cases, from SMEs to hyperscale operators. to business needs. By building only whats needed in the
short term (say, over 6-12 months), organizations adopting
PFM datacenters can defer capital outlays and keep their
options open. Should their capacity requirements change
Impact to (volume of capacity or timing of when its required) they

the Market will be able to respond in an on-demand way. With PFM


approaches, they also have the flexibility to specify a
different facility configuration for different parts of the IT
infrastructure critical power density, cooling and resiliency
The strongest motivating force that underlies growing level requirements can vary greatly which promotes
adoption of PFM datacenters is the desire to reduce higher utilization and more energy-efficient operations.
uncertainty: Designing and building an efficient yet
Another major driver for many PFM datacenter facilities
mission-critical datacenter facility is a high-stakes
is performance. Precision manufacturing and designs for
business fettered by complexity, and one that is subject
optimal airflow can deliver significant savings in operational
to cost overruns and delays. PFM datacenters make
energy and water usage. Some cooling systems are
planning, design and build of advanced facilities easier
available exclusively as an integrated part of a PFM facility.
and predictable compared to traditional builds. But there
In mild and cool climates, annualized site power-usage
is more to it than just improved project management.
effectiveness (PUE) of 1.2 or better can be achieved, which
Operators can manage their capacity prudently while
seemed impossible for all but the hyperscale players just
retaining the means to respond to changing business
five or six years ago. Today, virtually any datacenter operator
needs swiftly. As more companies come to fully understand
has access to such levels of energy efficiency with PFM
its benefits, adoption of PFM datacenters keeps growing.
datacenters, without the need to invest in design and to
Since late 2014, the PFM datacenter sector has evolved then build out large facilities to make it economical.
considerably on both the supply and demand sides. A
Interest in PFM facility infrastructure will only grow and the
number of vendors have entered the market, ramped up their
market has a long way to run. 451 Research currently forecasts
sales and marketing activities, or expanded or enhanced their
the market for PFM datacenter infrastructure products to
product portfolio. This has made PFM datacenters accessible
reach $4bn by 2018, up from $1.5bn in 2014. In the past, PFM
in new markets and also more attractive to operators that
datacenter products were perceived as tools for odd jobs:
might have been hesitant in the past.
remote sites, rapid response installations and portable needs.
Although the acquisition cost of PFM datacenter capacity Not anymore. PFM datacenter designs are evolving rapidly
clearly remains a primary concern, the industry dialogue is and operators are gradually becoming better educated
moving past such a static and simplistic view and toward about the new options available to them. Whether buying in
a more nuanced one. It is becoming more widely accepted or developing unique designs for their exclusive use, almost
that the ease of adding capacity is a key advantage of all industry sectors are adopting PFM datacenters including
PFM. Also, prefabrication itself reduces risk. Most of the multi-tenant datacenter providers and hyperscales. We
complexity associated with designing and building a maintain a strongly positive outlook on the PFM datacenter
datacenter facility is assumed by the manufacturer of PFM market for suppliers, as shown in Figure 2.
products and absorbed by the manufacturing process.
This promotes accountability and predictability of cost and
performance for PFM facilities.

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Figure 2: Aggregate PFM Revenue Forecast 2013-18 ($M)


Source: 451 Research, 2015

$3,958
$4,000

$3,320
$3,500
30%
$3,000 $2,726
CAGR

$2,500 $2,175

$2,000
$1,543
$1,500
$1,064

$1,000

$500

$0
2013 2014 2015 2016 2017 2018

Not surprisingly, the growth and interest in PFM datacenters has led to a supplier-side boom in recent years. We expect that
the number of active PFM vendors pursuing international expansion will continue to grow. Technology innovation will also
accelerate as a means to gain competitive advantage, as will marketing budgets.
There are several recent examples. WhiteSpace is a brand new startup in the UK that seeks to differentiate itself through
a cost-guaranteed design in affordable chunks of up to 250kW. CommScope, the large global structured cabling and
communications supplier, and iFortress, a US-based high-security PFM specialist, have stepped up their marketing efforts to
promote their PFM offerings internationally. Baselayer Technologies, the technology spin-off of colocation provider IO, has
been rapidly expanding its PFM portfolio in 2015. Global civil engineering giant CH2M Hill recently won a significant PFM
datacenter project that exploits its airflow-optimized modular design. We expect PFM suppliers will continue to ramp their
development, sales and marketing efforts, and that more new suppliers will enter the market.

R EC O M M E N DAT I O N S
Education remains key. The degree to which PFM datacenters are accepted and their suppliers succeed largely depends
on vendors ability to articulate the holistic value of PFM facilities (e.g., ease of deployment, faster time to production,
lowered risks, and much improved alignment with the business). This is no small task traditional bricks-and-mortar
datacenters have long proven reliable. Suppliers need to help customers adopt a different mindset and understand the
full benefits of the technology.

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Make TCO matter, but not in the old way. Part of the educational process is more nuanced financial modeling of
datacenters throughout their expected life. Mimicking traditional planning based on linear capacity uptake and assuming
a highly homogenous IT infrastructure is not sufficient it is effectively modeling a best-case scenario that will never
materialize. The case for PFM datacenters becomes clear when more realistic what-if scenarios are considered, such as
unexpected growth or decline of capacity needs (as a result of migrating to the cloud, for example), widely varying rack
power densities, and changing preferences in and availability of new facility technologies, among other things. These
are not uncommon scenarios and, given the pace of technological change and the ongoing impact of cloud computing,
are being embraced as givens in modern-thinking organizations. These types of models can favor the flexibility of a PFM
infrastructure and can underscore the potential of unnecessary or, at worst, wasted capex if rigid traditional datacenter
planning and build techniques were to be used.
Enable the delivery of prefab infrastructure end-to-end. Datacenter builders and operators differ in their appetite for
handling datacenter projects on their own. Some, especially large commercial datacenter operators, possess the skill set
and the scale to develop customized datacenters. Others want the PFM vendor to provide a turnkey datacenter, and some
want it prefabbed end to end. PFM vendors that want to maximize their market coverage will need to accommodate both
types of customers. Either way, this will mean developing trusted partnerships and locally configured products, globally.

WINNERS
Suppliers with messaging clarity and the right balance of design optimization and deployment flexibility. Suppliers
that can demonstrate cutting-edge efficiency (PUEs of 1.2 or below in favorable locations) across a range of load and
various climates will be the most successful.

LO S E R S
Suppliers that do not (or cannot) develop product enhancements and invest in effective marketing. Despite its
already considerable history, the PFM datacenter market is still nascent but it is fast evolving. Vendors that do not invest
in continuous enhancement of their offering (more optimization, more standard factory configuration options, etc.) will
fall behind. The market is shaping up but vendors are currently locked in a race to define what PFM is and what the
datacenter of the future should look like. Those that fail to participate at this early stage will risk falling behind.

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T R E N D 3 : H Y P E R S C A L E S A N D T H E O P E N C O M P U T E P R O J EC T W I L L
D I S R U P T S U P P L I E R S STAT U S Q U O
Implication: Hyperscale datacenter operators are demanding are more traditional in other ways, including building for
alternative datacenter designs and technologies to exploit their high levels of physical infrastructure redundancy.
economies of scale and drive cost efficiencies. This is affecting
Some hyperscale datacenters will also be enterprises.
significant change among leading datacenter tech suppliers,
Global financial services companies, in particular, are
which are being forced to move from mostly mass-scale (for
piloting and adopting new electrical topologies and cooling
enterprises) to more customized engineered-to-order projects
technologies in their own datacenters. However, for most
and product development.
enterprises, the cost benefits will not justify the investment
and risks, and they will stick with traditional approaches.

Impact to The very large datacenters of Internet and cloud service


providers, in particular, can have very different requirements
the Market compared to enterprise and other commercial datacenter
operators and they can buy very differently. Internet
and cloud hyperscale facilities are purpose-built and use
variations of traditional power distribution topologies, such
Large Internet and cloud service providers have made
as decentralized UPSs that rely on lithium-ion batteries.
dramatic improvements in the cost efficiency of their
They use increased (or entirely) ambient cooling. Their racks
datacenters, and are aggressively pursuing all types of
may not be traditional sizes and they tend to develop their
enterprise (and consumer) workloads. Three of the largest-
own datacenter management software. More than most,
scale Internet firms Apple, Google and Microsoft
Internet and cloud hyperscales experiment with alternate
continue to invest heavily in building out mega-datacenters
energy sources, such as fuel cells and on-site solar and other
globally, with capital spending at the three companies over
renewable generation.
the past 10 quarters totaling more than $61bn, according to
public filings. This doesnt exclude the large-scale building Hyperscales are forcing change among datacenter
by the likes of Facebook, Digital Realty, Rackspace and equipment suppliers on several levels. R&D pipelines are
others. The pace of capex spending by large-scale Internet almost unrecognizable from a few years ago as the big
firms in general has been increasing over the past several suppliers Schneider Electric, Emerson Network Power,
years, with no end in sight. Eaton, ABB, CommScope, Panduit and others move to
varying degrees from mostly enterprise mass scale to
Until recently, the rise of hyperscale datacenter capacity for
more (hyperscale) customized engineered-to-order product
Internet giants was widely viewed as a threat to datacenter
development, and even collaborative product designs.
equipment suppliers. However, these operators clearly
New business units are being set up to support hyperscale
have huge demand for the best in facility and electrical
projects, which typically have very short lead times. Profit
engineering, and are less able to rely on in-house expertise to
margins for much of the new hyperscale equipment and
innovate and build than in some areas of IT (such as servers or
projects are likely to be relatively low, yet the volume of
network switches). This is translating into not only a significant
business from these mass-scale projects should compensate.
opportunity for suppliers, but also significant challenges.
The Internet giants have adopted multi-vendor sourcing
Broadly speaking, we see two main camps of hyperscale
strategies globally (there can be exceptions in certain
datacenters. There are the Internet and cloud behemoths
regions). Extreme secrecy surrounds most new hyperscale
that are driving the creation of alternative datacenter designs
projects but it is not uncommon for competing datacenter
and operational approaches. They are seeking to simplify
tech suppliers to work cooperatively, exploiting their
(and standardize) and to strip out as many layers of cost as
respective supply chains and resources on a project-by-
possible, including for physical infrastructure redundancy
project basis. This level of cooperation, however, does not
(they favor software-led redundancy approaches instead).
extend to suppliers R&D and business strategies to gain a
The other camp includes multi-tenant datacenters that also
bigger share of the hyperscale wallet.
build, buy and design on a massive scale. While they embrace
certain alternative approaches (such as medium-voltage But their ability to differentiate could ultimately be
power distribution and ambient cooling, for example), they threatened by initiatives such as the OCP. Launched in April

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2011 by Facebook, Rackspace and Intel, the OCP shares customized designs for datacenter infrastructure, including servers,
networking, power supplies, racks, PFM datacenters and, most recently, cloud and datacenter management software.
The end goal is to improve efficiencies by removing extraneous components from within the equipment, disaggregating
equipment to more easily replace components, and lowering overall costs of datacenter builds and operation.
The organization remains IT-heavy on networking and compute innovations, but optimization of traditional datacenter
infrastructure is also an OCP goal. OCP approaches can lead to significant design and operational changes, including:
No mechanical cooling
Servers running hotter than usual
Building and server fans being integrated to behave as one overall airflow system
480V distribution to the rack
Semi-distributed UPS systems based on rack-level batteries
Racks that have deeper-than-usual 21-inch 40U (slots) for servers
Server power supplies consolidated into a 12V backplane
Suppliers of datacenter infrastructure, such as Emerson Network Power and Schneider Electric, have until recently been
slow to actively support OCP in a major way. Schneider became an OCP member in 2015, and both it and Emerson are now
contributors. Other giants such as Microsoft are contributing, with designs to embed a lithium-ion battery directly into the
server-cabinet power supply, as are small startups such as VaporIO, which donated its PFM datacenter design and datacenter
management software run-time environment.
While the future and broader impact of the OCP is not yet clear, a small but growing number of enterprises and colocation
and hosting providers are adopting the technologies. Interest in the OCP is growing (the annual OCP Summit in 2015 drew
more than 3,000 attendees). As acceptance by end users increases, OCP designs and specifications will become more
common within large and hyperscale datacenter projects. Increasingly, suppliers will be competing less on their technology
and more on their ability to execute with speed, scale and cost-effectiveness.

R EC O M M E N DAT I O N S
Be agile, and go deep on services and broad on footprint. Services, global supply chains and partners, and speed will
be key to suppliers looking to grow their presence among the worlds largest datacenter operators.

WINNERS
Large suppliers that have global reach and capabilities and the resources to buy or build new technologies. Those
that can create strategic relationships (partnerships) with the largest datacenter operators as well as rival suppliers will
gain repeat hyperscale business for decades to come during a period of growth.

LO S E R S
Suppliers that lack the scale, global presence and resources to rapidly innovate to meet the changing demands of
hyperscale datacenters will be left to compete in the shrinking, increasingly competitive enterprise market.

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T R E N D 4 : C LO U D W I L L D R I V E T EC H N I C A L A N D B U S I N E S S C H A N G E
Implication: Cloud computing has been driving major and with cloud pricing tracking ever lower, many businesses
changes across the entire IT industry for nearly a decade, and are now assessing if they should maintain their own
its impact has been accelerating with every passing quarter. For datacenters. This has held down investment, both in new
some, the impact of cloud and the growing role of hyperscale builds and retrofits. This trend will continue.
operators is existential and severe; for others for most there
Similarly, many colocation and hosting companies are
is considerable opportunity, helped by buoyant demand.
seeking to ensure that they can run their datacenters cost-
effectively, with agility and securely. If they dont, they

Impact to will become uncompetitive. Currently, colo and hosting


companies are benefiting from a move to private cloud,
the Market but many are aware that this may only be a staging post in
the journey. This concern is encouraging a cautious growth
stance, with a focus on niche, vertical markets and more
emphasis on connectivity. Staged, modular buildouts, driven
The impact of cloud computing on the datacenter industry by clear demand, are now the primary investment strategy.
and its ecosystems of suppliers is both deep and wide.
Cloud is also reducing speculative buildout among
451s Researchs view is that the appetite for enterprise
enterprises, which know that if loads reach anywhere
ownership of datacenters is waning, and more work will go
near peak, they can likely buy time to respond by using
to colocation, hosting and cloud companies, with all these
cloud services (perhaps in combination with colocation).
categories of operators benefiting. Technology suppliers
We believe this is already affecting investment in new
therefore need to adjust their strategies and products
datacenters by enterprises, which no longer find a wait-and-
accordingly. That will mean more IT and datacenters in
see approach risky.
proportionately fewer hands (but there will still be many of
them). There will also be a greater need for management For technology suppliers, the demand patterns in enterprise
tools and services; a stronger overall commitment to high datacenters are likely to continue to be depressed for
standards; and greater opportunity to deploy innovative many, with sales failing to reflect overall industry growth.
designs and technology. This slowdown is attributable to the move to commercial
services, as well as more efficient design and operations, and
While we are cautious about putting a timescale on all these
lower redundancy. Figure 3 below illustrates how capacity is
areas, we can see at least the following happening during
shifting (in terms of datacenter space).
2016 and 2017.
While the enterprise is slowing, 451 Research data shows all
C L O U D C R E AT E S S T R AT E G I C sectors of the commercial datacenter market thriving. This
U N C E R TA I N T Y, A F F E C T I N G I N V E S T M E N T is largely driven by the growth in IT demand and greater
One of the indirect effects of the emergence of cloud has use of colocation, hosting and cloud. For all these reasons,
been its impact on investment in enterprise datacenters. big suppliers of equipment will see more and more of their
With suppliers such as AWS, in particular, suggesting that revenue coming from service providers.
companies should look to putting all their IT in the cloud,

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Figure 3: Datacenter Space Is Being Distributed


Source: 451 Researchs Voice of the Enterprise: Datacenters Study, August 2015

Global Datacenter Space in Square Feet


8% 10%

17% 19%

2015 2017

76% 71%

Enterprise MTDC Cloud

C L O U D I N C R E A S E S T H E N E E D F O R M A N A G E M E N T A N D A U T O M AT I O N T O O L S
Competition from the array of cloud and other service providers increasingly calls for all classes of datacenter operator
enterprise, colo and hosting (whether cloud or not) to be more efficient and agile. At the moment, the cost of the facility
remains fairly hidden, changes are minimal, and investment decisions are very often made with incomplete information.
But that will change: We expect the management of commercial datacenters to become more dynamic. Datacenter-owning
service providers will have more revenue sources; they will do more pricing analysis, real-time service costing and end-to-
end management accounting; and theyll invest in automation that brings bottom-line savings. They will move loads around
to reduce costs, and charge premiums for availability and connectivity; they will cut resource use for those whose demand
is lowered, temporarily or permanently; and they will develop better analytics. This will favor forward-looking, agile service
operators and suppliers of tools and services in this area.
This move toward greater investment is already apparent, but growth for these suppliers is so far only gradual. We expect
to see a greater pickup over time. For more about this, see our separate section on DCIM, DCSO and management software.

R ES I L I E N CY I N T H E C LO U D
From top to bottom, enterprise and commercial datacenters are designed and operated to achieve high availability. This
means generators, redundant power paths, uninterruptible power supplies, and failover and mirroring of computing
and databases. Similar assumptions are made about cooling and networking. But developments in virtualization, cloud
computing, and (in some areas of IT hardware) power and cooling mean that operators are beginning just beginning to
design datacenters with less overhead, less headroom and less redundancy at least locally.

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As some of the physical infrastructure is displaced, we expect more datacenters over time to put more faith in software,
networking and more resilient IT. This can save substantial sums on capex and opex. But the move toward cloud resiliency
will not be all or nothing: It is also clear that, with greater use of prefabrication and modularity in datacenter design, it is
becoming easier and cheaper for operators to build multi-tier datacenters. Many will have low levels of redundancy in one
place, and higher levels in another Facebooks datacenter in Sweden is an example.
Businesses that are highly dependent on their IT at all times, and need a near-zero recovery time in the event of failure, have
long used fault-tolerant IT (mirroring of all IT and data storage), replicated in real time at nearby but geographically separated
locations (synchronous replication). With the transportability, location independence and shared infrastructure approach
that cloud brings, an opportunity is now emerging to do this at much lower cost. With multiple datacenters operating in
tandem, it will be increasingly possible to operate at high availability and rapid recovery times, with lighter infrastructure at
each participating location.
For those who need good integrity but have a slightly lower requirement for real-time continuity, cloud services (and colos
supporting private cloud) can offer asynchronous replication at much lower costs than historically. Using such services, the
data can be copied and recovered, and applications and services restarted remotely, but not necessarily in real time (so there
is a risk of some disruption, and reduced service, but at greatly reduced cost). At its theoretical best, the cloud can provide a
range of redundancy, from N+1 to xN, without adding huge extra costs as redundancy is scaled up.
The extent of this trend (cloud-based resiliency) and the speed at which it will be developed and adopted is difficult to
assess. Some of the technology is immature, and the risks and the cost calculations are all complex and rapidly changing.
Certainly, the IT involved is far from simple: Multiple copies of data may be stored at many logically and geographically
separate locations to be retrieved in the event of failures.
For many, the safe course for the coming years will be to continue to design as much redundancy as possible at the core
power, cooling and network level. But 2015 and 2016 will see more and more moves toward greater use of cloud for backup
and resiliency, even if it is not always for mission-critical low-recovery-time systems (see Figure 4).
Examples of progress in this area include the use of availability zones by Amazon, Google and Microsoft, among others, to
provide redundancy and synchronous/asynchronous replication; support for cloud-based backup and disaster recovery at
a number of service providers; and emerging technology to replicate and manage distributed applications and data from
companies such as OneCloud, CloudVelox, CloudEndure, Continuum, Accelerite, HotLink and Zerto. According to a recent 451
Research Market Monitor report, the cloud-based backup and recovery market is expected to surge at a 22% CAGR through
2019, with revenues exceeding $1bn in 2017.

Figure 4: Companies Evaluating Disaster Recovery Strategies Anticipated Site or Service Type
Source: 451 Researchs Voice of the Enterprise: Datacenters, August 2015

Existing Company-Owned Datacenter 46%


Colocation Provider 44%
Public Cloud Provider 40%
Managed Hosting Provider 34%
New Datacenter Built or Bought by Your Company 23%
Other 4%
Sample size: 185 respondents

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C O L O A N D O N - R A M P S T O C L O U D/C O N N E C T I V I T Y
One of the obvious but sometimes overlooked requirements of cloud computing is good wide area connectivity. Without
good connections to where the data and applications are located, the customers service is vulnerable. And the more
distributed the applications and the data are, the more important the connectivity becomes. Such connections need to
be resilient (i.e., more than one pathway), high-bandwidth (sufficient for all needs) and, in some but not all instances, of
sufficiently low latency.
This has led, in recent years, to a big investment by public cloud providers in direct access technology direct fiber connections
via telecoms providers and/colocation companies from the end users equipment into the cloud service provider. AWS Direct
Connect, Microsoft Azure ExpressRoute and Google Cloud Interconnect are good examples.
For datacenter operators and their equipment providers, this has created a need for more switching and routing technology
on site, as well as good connectivity externally. Equipment vendors such as Cisco and Juniper are now selling significant
amounts of equipment to colocation companies. Some of these companies are using this technology to build their own
cloud access platforms the outstanding example is Equinix with its Cloud Exchange but other initiatives include the
independent OpenIX initiative.
A simultaneous development has been occurring in both commercial and enterprise datacenters: There is a greater amount
of traffic moving around within datacenters, between different applications and services. This increase in so-called east-west
traffic has led to a need for low-end switches and routers and direct fiber cross-connects inside the datacenter. More and
more of this traffic, and more and more of these devices, are in turn being managed from centralized management systems
the so-called control planes in software-defined datacenters.
All of this adds to the need for greater investment in networking equipment, in network management systems spanning
both internal and external routes, and, particularly inside the datacenter, a greater need for software that is managing
physical lines. This will benefit suppliers such as CommScope, Panduit, RiT Technologies, Cormant and others.

R EC O M M E N DAT I O N S
Treat the cloud as the datacenter. Software suppliers and datacenter operators should not consider the cloud to be
external. The datacenter is part of the cloud, and the cloud is partly inside the datacenter. Workloads will move in between.
Visibility, monitoring, control and access need to extend out to key service providers (i.e., the cloud).
Understand that the datacenter industry is an industry. Suppliers of all kinds should understand that the datacenter
sector is commercializing, industrializing and automating. Their datacenter clients will be more profit/loss-driven, and will
have their own clients. That is an opportunity to change the relationship from supplier to partner.

WINNERS
Colos, hosting and cloud companies that operate efficient, agile operations and invest in good internal and external
cloud connectivity, management tools and optimization to support sectors of the market.
Suppliers of most classes of datacenter management software, including DCSO (tools for integrating with IT and running
DCs from a business point of view) and DCIM, control and automation software. Tools for DCSO will become more important
to help operators compete with public cloud providers, but also to support agile, rapidly changing cloud environments.
Suppliers that develop a strategy to work with larger operators, including engineering or customizing products to order.

LO S E R S
Suppliers wedded to the enterprise datacenter market that have not adjusted to selling more to commercial operators.
Suppliers whose growth is predicated on physical infrastructure redundancy and over-provisioning for availability.
Software suppliers that dont participate actively in the cloud ecosystem, partnering and using open protocols, or
that plan for workloads to stay static over a long period.

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T R E N D 5 : DATA C E N T E R S W I L L E VO LV E F R O M C O N S U M E R S TO A C T I V E
E N E R GY P L AY E R S
Implication: Global energy use by datacenters is expected and capital costs by buying more energy-efficient IT, using
to increase from around 95 billion kWh in 2015 to more than software for workload management and using IT power
140 billion kWh in 2020. But the role of facilities as simply management. Workload management, in particular, will
passive users of energy is changing. Progressive datacenters be important to make better use of renewable energy; for
are already finding more effective ways to interact with, and example, IT workloads could be time-shifted to maximize
understand, established and emerging energy suppliers. This the availability of renewable energy (grid or on-site).
is leading to a greater variety of different power architectures These approaches are characterized by work being done
and purchasing relationships. This will inevitably lead to some by European Commission research projects (of which 451
disruption as the real-time power feed from the grid becomes Research is a part) around the concept of the Net Zero
just one of many power sources at a given time, rather than the Energy datacenter.
default option.
Some net energy savings will also come in the form
of transactive energy management. This means
Impact to dynamically managing the supply and demand of
electricity in the datacenter, including transacting with
the Market the energy utility in real time or switching to on-site
power sources at certain times. EBay has been a leader
in the use of on-site datacenter power using fuel cells,
New approaches to sourcing and management of energy but we are aware of a number of large financial services
in the datacenter will manifest themselves in a number of companies that are engaged in demand response
ways, with varying impacts on suppliers. using datacenter backup diesel generators, and others
will follow. The opportunity for more flexible and fluid
The impact on existing suppliers of datacenter technology
interaction between on-site and off-site energy sources
power infrastructure will be low in the short term, but will
will become more apparent as the power grid itself
increase over time. For example, large hyperscale operators
becomes more dynamic, with more use of renewable
are investing directly in renewable energy projects through
energy and smart-grid technologies. Datacenters will also
power purchase agreements (PPAs), in some cases cutting
increasingly be considered in the context of interaction
out established utilities. These and other approaches will
with local energy infrastructure, micro- and mini-grids
have implications not only for utilities, but also for suppliers
(such as San Diegos supercomputer energy campus), and
of traditional power infrastructure and services, and ancillary
other intelligent buildings given growing investment in
datacenter technology vendors. We believe:
so-called smart cities.
Energy efficiency will be a given but variance will
Renewables will become more viable and cost-
increase. PUE ratios, the main measurement of facility
effective. While most datacenters are likely to derive only a
efficiency, are falling across the datacenter industry.
small percentage, if any, of renewable energy from the grid
From 2016, it is likely that very few new datacenters will
or an on-site source in the near-term future, a handful of
be built with a design PUE above 1.2-1.5 (depending
hyperscale datacenter operators are skewing that trend. For
on geography and resiliency). Hyperscale operators
example, in Q1 2015, Apple said it was investing $1.9bn in
continue to operate facilities with some of the lowest
two new European datacenters that will be 100% powered
PUEs; comparisons may be unfair, but enterprise and
by renewables (grid and on-site). There are a variety of
colocation and hosting facilities will increasingly be
ways for datacenters to interact with renewables from on-
expected to follow their lead. Progressive operators,
site generation to PPAs (see Figure 5). Examples include
especially in Europe, will also look to sell waste heat
commercial datacenter provider QTS, which in 2014 built
from facilities (in conjunction with progressive utilities)
a 360,000-square-foot facility in East Windsor, New Jersey,
to improve the cost and carbon efficiencies.
adjacent to 57,000 solar panels generating up to 14.1MW
Energy management will increasingly include IT of power. This could be viewed as a form of micro-grid
specifically workloads/applications. An increasing between the solar power provider and datacenter an
number of facilities will slash their energy bills (currently approach that will increase in the future.
about one-third to one-half of datacenter operating costs)

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Figure 5: Different Forms of Renewable Energy Supply for Datacenters


Source: EU RenewIT Project Deliverable D4.1 2015

4. Renewable from
third parties (RECs)

3. Off-site
generation/colocation

2. On-site
generation from
off-site renewables

1. On-site
generation from
on-site renewables

Suppliers such as ABB, Eaton, Schneider Electric and others view on-site energy generation as an opportunity. There are
specialist suppliers, such as for datacenter fuel cells, including Bloom Energy and Hydrogenics (which the datacenter
equipment supplier CommScope resells), among others. On-site generation is cost-effective mostly for very large or
hyperscale facilities but in many major datacenter regions the power from the grid is still relatively reliable and inexpensive,
slowing adoption. There will likely be clusters of enterprise datacenters sharing a micro-grid, but by and large, the promise
of on-site generation is long-term.

R EC O M M E N DAT I O N S
DCIM suppliers will need to add IT power management and workload management capabilities. Datacenter
operators will increasingly require holistic datacenter management tools that go beyond mere asset management or
environmental monitoring but that also allow transactive interaction with utilities and other partners.
Datacenter power infrastructure suppliers should develop smart city and IoT strategies. Suppliers of power
infrastructure and other datacenter technologies will need to be able to position their products in the context of smart
cities and related areas such as IoT and enterprise energy management.
Colocation, hosting and other datacenter services suppliers will increasingly compete on energy. Commercial
datacenter service providers have seen an increasing requirement to demonstrate energy and carbon-efficiency measures
in certain markets. This will continue to intensify as customers expect transparency on energy use and more flexible billing.

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Proactive datacenter operators could benefit from efficiencies. Only a relatively small number of datacenters will
actively invest in on-site renewables (or colocate with alternative energy providers), but others will begin to alter existing
power infrastructure in response to wider changes in the grid.

WINNERS
IT and energy-savvy engineering firms. Companies capable of combining utility and datacenter construction resources
to build end-to-end, smart infrastructures for datacenters and beyond will find opportunities to win more projects.
IT power management suppliers. As datacenter energy provision becomes more dynamic and variable, operators will
(eventually) expect their IT infrastructure to be capable of adjusting and reacting.
Workload management software suppliers. There will be an increasing requirement for software to monitor and
manage workloads more intelligently and match them to periods of cheapest energy (renewable/non-renewable and
on-site/grid).
On-site power generation and related technology suppliers. Suppliers of equipment and infrastructure fuel cells,
energy storage and direct current (DC) power equipment would benefit from a more widespread use of on-site
generation. These include energy-storage suppliers, such as those with expertise in automotive electric batteries such as
Tesla and Nissan, which are already actively developing technology for the datacenter, as well as suppliers of DC power
distribution and conversion equipment over the long term.

LO S E R S
Suppliers of legacy energy storage. This includes suppliers of diesel generators, natural gas generators and associated
infrastructure such as on-site fuel tanks.
Suppliers of traditional AC power gear. Renewable power is generated as DC, which arguably could eventually disrupt
the need for traditional AC gear (such as UPS and power distribution equipment).
Suppliers of traditional power generation. We expect to see gradually leveling or falling demand for traditional oil and
gas turbines, and suppliers of these products should be ready to respond to this shift eventually.

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The Long View

While the availability of public cloud and other third-party datacenter services will offset the demand for on-premises
datacenter capacity, there will be minimal impact on the broader datacenter install base. Figure 6 below shows that the total
number of datacenters and IT sites worldwide will remain relatively flat from 2015 to 2018, growing at a .42% CAGR.

Figure 6: The Worldwide Datacenter Installed Base


Source: 451 Researchs Voice of the Enterprise: Datacenters Study, 2015

Worldwide Datacenters and IT Sites


2013-2018
4,450,000

4,400,000
4,328,265
4,350,000 4,306,572
4,288,809
4,274,302
4,300,000 4,262,511
4,251,765

4,250,000

4,200,000

4,150,000

4,100,000

4,050,000

4,000,000
2013 2014 2015 2016 2017 2018

Any kind of noticeable growth has been stymied by datacenter consolidation trends among enterprises, as well as growing
IT operational efficiency. Commercial datacenters, however, continue to grow strongly, and are increasingly a target for
datacenter technologies suppliers.
Looking forward to 2015/16, there is good cause for executives and investors to be optimistic. While growth may not be
even across suppliers and datacenter sectors, demand for datacenter capacity and datacenter services will continue to grow
steadily and globally. This trend, driven by the voracious growth of social networks, mobile device use, online video and the
IoT, is further underlined by economic forecasts that, while hardly rosy, are still generally benign.

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Further Reading

Market Monitor: Datacenter Management Software (DCIM and DCSO), September 2015
Datacenter Infrastructure Management and Beyond: A Guide to Datacenter Management Tools, July 2015
Global Prefabricated Modular Datacenter Forecast 2014-2018: Entering the Mainstream, January 2015
Energizing Renewable-Powered Datacenters, April 2015
Q3 2015 - Voice of the Enterprise: Datacenters, Worldwide & Regional Survey Results and Analysis, August 2015

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Index of Companies

ABB 6, 13 Google 6, 10, 11

Accelerite 10 HotLink 10

Apple 6, 12 Hydrogenics 13

Baselayer Technologies 4 iFortress 4

Bloom Energy 13 Intel 7

CH2M Hill 4 Juniper 11

Cisco 11 Microsoft 6, 7, 10, 11

CloudEndure 10 Nlyte Software 1

CloudVelox 10 OneCloud 10

CommScope 1, 4, 6, 11, 13, 17 Panduit 1, 6, 11

Continuum 10 QTS 12

Cormant 11 Rackspace 6, 7

Digital Realty 6 RiT Technologies 11

Eaton 6, 13 Schneider Electric 1, 6, 7, 13

EBay 12 Tier44 1

Emerson Network Power 1, 6, 7 VaporIO 7

Equinix 11 WhiteSpace 4

Facebook 6, 7, 10 Zerto 10

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