A sea change is underway in the hardware business, as organizations essentially “rent” space from cloud servers rather than investing in their own data centers, described in the Fortune article below. But the cloud is not one size fits all; Let’s talk about how we can work with your IT organization on the best services available, at no cost to the company, shifting their department into a predictable, cost-saving, efficiency center vs. a “grey” cost center for businesses.
As tough as the industry-wide transition to cloud computing has been for PC-era software companies, it has been even tougher for data center hardware suppliers.
Just ask IBM, which has recorded revenue declines for its last 15 quarters. Or EMC, which is looking for salvation in Dell’s arms. But the darkest storm clouds are starting to lift, at least for hardware companies who have retooled their equipment for the cloud era. Sometime during the past 12 months, it appears many businesses swapped the question, “Should I move my IT operations to the cloud?” for this one “When is the best time for our cloud transition?”
Under the cloud computing model, applications and other IT resources are delivered via pools of servers, storage devices, and networking gear over which businesses may have very little management control. Slowly but surely, organizations of all sizes are opting to use these services for a larger portion of their IT operations.
That means, of course, that fewer companies are buying servers and other gear for their own data centers. Instead, more are opting to rent from the likes of Amazon Web Services, Microsoft, and Google (the “Big Three” of cloud computing). The latest evidence lies in purchasing patterns reported by market research firm IDC.
Last year, spending on hardware meant for big clouds increased 22% to almost $29 billion. Indeed, almost one-third of the fourth-quarter equipment revenue attributable to tech giants Hewlett-Packard Enterprise, Dell, Cisco, EMC, and IBM was generated by hardware intended for cloud installations. We can expect more of the same this year: IDC projects spending on cloud-related computing hardware will top $38 billion, continuing to grow by double digits for at least the next several years. By 2020, spending on infrastructure for “public” cloud services—those shared among businesses rather than dedicated to serving a single company—will reach $37.5 billion.
One of the biggest beneficiaries of this transition has been Cisco, which sells equipment converging features of servers and networking gear. Revenue for that portion of its product portfolio grew almost 36% during the fourth quarter to $802 million, reports IDC.
Of course, the hardware manufacturers are by no means out of the woods. Many of the biggest cloud service providers—including Facebook and Amazon—are opting to build their build their own gear to keep costs down while personalizing their design needs. Now that momentum is building, it’s up to the likes of HPE, Dell/EMC, and Cisco to prove their value again.