COVID-19 shifts data center market demands as customers leverage the cloud to meet swift transformation needs

In 2020 IT decision makers around the world moved into highly reactive and tactical modes to mitigate COVID-19’s impact on their businesses, and data centers had to be provisioned rapidly for remote activities across all elements of the business stack, including IT. Although businesses’ initial response to the COVID-19 pandemic boosted certain on-premises provisioning, it also delayed large, services-laden transformation engagements. Economic uncertainty and uneven industry sector impact also saw some IT instances pivot to cash conservation. IT infrastructure vendors held strong against the murky IT backdrop, although some business shifted to ODMs more aligned to serving exascale cloud companies at the expense of more traditional or legacy technologies.

TBR believes this trend will continue through 2021. COVID-19 accelerated existing macro trends toward cloud-delivered technologies leveraging automation to strip away person-to-person contact from commerce. AI and machine learning (ML) will pull infrastructure along and push infrastructure deployments further to the edge.

Hyperconverged infrastructure (HCI) is the multifunctional building block for a lot of IT instances. HCI can sit at the ever-growing edge or in departmental or branch office data centers, and it can be used for modular scaling of private cloud deployments whether on premises or in colocation facilities. HCI growth, coupled with further cloud migration, pressures legacy and more traditional IT infrastructure. 

AI growth persists. Definition increases as emerging technologies become applicable to general use. Vendors and customers alike seek AI automation to strip labor’s hollow calories from all elements of business commerce and IT support. All these aspirations hinge on tight data governance rules and human compliance with those rules when putting data into the automation engine. That tight wrapper for consistent, shared information flows can be achieved through blockchain, described by EY Blockchain Head Paul Brody as the ERP equivalent for multienterprise business networks. 

This vision of the digital world also acknowledges the need for a new data engine to analyze the data and derive new insights to advance all elements of human existence. Quantum computing will be that new engine, and its performance will be to classical computing what the jet plane was to propeller airplanes. TBR expects 2021 to be a year with significant discoveries that push quantum computing further down the path to economic advantage. If deep scientific thought and “what if” analysis happen only when the world’s greatest minds can pursue their natural inquisitiveness, then it could be that COVID-19 generates the requisite science necessary for quantum computing to shift from discovery to emerging commercial application.

2021 data center predictions

• Investments in 1H20 to modernize IT to meet COVID-19 requirements will lead to reduced data center hardware spend in 2021
• Quantum computing advancements will persist, leading to an increase in M&A activity to consolidate capabilities
• COVID-19 increases the presence of HCI in modern data centers

Technology Business Research 2021 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud & software, telecom, devices & commercial IoT, data center, and services & digital.

Ericsson and SAP anticipate further expansion in Cairo

Ericsson has also leveraged this environment to support its global strategy, by tapping local talent in the fields of artificial intelligence, software development and digitalization. “It is the existence of the required competent engineers, with various backgrounds and capabilities, that makes it very attractive to operate in the country,” an Egypt-based Ericsson executive noted. Ericsson has been operating a digital services hub in the country to serve the Middle East and Africa region. The Ericsson executive stated, “Since we are covering the Middle East and Africa, Arabic is an advantage for working in Arab countries.

Egyptian professionals have relatively better English communication skills as well to add on top. Plus, Egypt provides reliable telecom infrastructure that can help different engineers to communicate and engage remotely with colleagues and customers.” According to Ericsson, the environment has been very encouraging to do more and serve on the global level as well. The Egyptian government has a strong focus on the ICT sector, is making more spectrum available to operators to improve mobile broadband experience, and has the aspiration to introduce 5G. In Ericsson’s estimation, Egypt is a firm believer in building a connected society and smart cities and is already executing on a solid national artificial intelligence strategy.

Notably, in October Ericsson announced the shipment of the first AI-enabled software developed at its Artificial Intelligence & Analytics Hub in Egypt to be used by Ericsson’s customers globally. According to the press release, “The AI & Analytics Hub has accelerated the execution of Ericsson’s focused strategy in Egypt by using AI and automation technologies to create data-driven, intelligent products and services.”

Looking ahead for SAP, Mansour explained that she hopes to hire more resources in digital marketing, digital sales, presales and services, and, if SAP’s management approves, to establish more partnerships with the headquarters of companies serving the region. For Mansour, a true coup would be to convince the Egyptian talent currently employed in Germany to return to Cairo and help “regain historic leadership of the region.” Potentially accelerating that effort would be SAP’s continued success with SAP Business Suite 4 SAP HANA (S/4HANA) implementations and expanded opportunities with IoT, analytics and other emerging technologies. Ericsson’s Egyptian future, according to its executives, depends on ever-increasing internet connection speeds, recruitment of local talent, and support of a wider array of Ericsson products and services.

Building on the company’s legacy in Egypt, which dates back to 1897, when the first Ericsson telephony equipment was introduced in the country, connecting Alexandria to Cairo, Ericsson believes 5G will be next significant step. Ericsson executives noted that the Egyptian government “took proactive steps in launching 4G in the country … a testimony that the country realizes the importance of technology in building economic development. From a technology point of view, [Ericsson is] ready to switch on 5G on the existing 4G networks, so it is all a matter of getting the 5G license in place. [Ericsson’s] focus area now is to offer the latest solutions and technologies to existing customers for their 4G networks while working together on paving the way to launching 5G.”

Earlier in 2020, TBR spoke with Egyptian officials about the country’s continuing efforts to build a robust alternative for companies looking to outsource their IT services operations. As part of a follow-up, TBR also connected with SAP (NYSE: SAP) and Ericsson (Nasdaq: ERIC) executives to understand why both technology vendors have chosen to expand operations in Cairo. The following reflects those exchanges and TBR’s ongoing analysis of offshore IT services centers.

HPE’s VDI portfolio is not new but is increasingly valuable to its customers as remote work looks like a more permanent situation than initially anticipated

As of April HPE had rolled out a series of VDI solutions that enable customers to adapt to the growing workforce and garnered a significant number of new customers. This week’s announcement at Workplace Next rides the momentum that highlighted use case-specific VDI offerings, allowing customers to customize their experience based on the type of worker and the size of the remote workforce. With these inputs, HPE can optimize newly designed VDI configurations that are dependent on each type of worker and customize pricing, billing and delivery.

Kaddoura explained that customers “need access to their data centers in a very secure way, and in a highly cost-optimized way as well,” and highlighted GreenLake as the cloud that can be implemented in a customer’s data center, colocation facility or edge. Additionally, she noted that what HPE has done is “brought together the best of our Pointnext Services, our software management layer, as well as HPE’s rich portfolio of hardware to create that cloud experience.”

While the announcement of HPE’s GreenLake virtual desktop cloud services was the banner topic woven throughout the event’s discussions, HPE’s rich ecosystem of partners was highlighted as key to optimizing the rollout of these latest features. For example, in addition to offering VDI from Citrix (Nasdaq: CTXS), HPE can now include VMware (NYSE: VMW) Horizon as well as NVIDIA (Nasdaq: NVDA) virtual GPU (vGPU) technology for more cumbersome workloads. The extension of HPE’s partnership with Wipro was also announced, enabling delivery of hybrid cloud and VDI solutions “as a Service” through HPE GreenLake.

Yadavalli expanded on the partnership between Wipro and HPE explaining how the relationship will allow Wipro to leverage HPE GreenLake across its managed services portfolio, offering a pay-per-use model that is subscription based and easily consumable. The aim, said Yadavalli, is to “bring hyperscaler capabilities to customers on-premises or on hosted infrastructure,” which will enable customers to “fast track their workplace transformation efforts by eliminating the need for upfront capital investments and provisioning costs while enjoying the benefits of on-premises control, security and compliance.”

On Nov. 10 HPE sponsored Workplace Next, a series of discussions on the trends and impacts of the reimagined workforce as a result of the COVID-19 pandemic, featuring a cross-industry panel of experts and executives. During the virtual broadcast, business leaders from various industry roles, including human resources, real estate, healthcare and manufacturing, discussed not only the workplace challenges and trends resulting from the pandemic but also highlighted the opportunities a remote work mandate have unveiled. HPE is a prime example of an enterprise that has addressed the challenges of remote work internally while reorienting its portfolio of solutions to enable as seamless a shift as possible for customers. Additionally, with the discussion of the reimagined workplace as the backdrop, HPE notably leveraged the event to announce expansion of HPE GreenLake VDI cloud services, which included several updates to its workforce strategy for the digital economy.

Global 2000 companies and governments will drive the vast majority of spend on private 5G infrastructure

Global 2000-sized companies and governments have the scale, financial resources and technical acumen to handle the complexity of 5G and realize its full benefits. TBR estimates over 90% of private 5G investment will stem from these entities through mid-decade, at which point network slicing, solution maturity and lower price points will enable SMBs to participate more pervasively in the 5G opportunity. TBR expects most SMBs seeking 5G will leverage public infrastructure for their needs as the cost and complexity of private 5G will be too much for many of these smaller companies to handle.

Leading enterprises intend to fundamentally transform their operations by converging IT and operational technology with 5G, edge computing, AI and machine learning, and IoT.

Manufacturers and governments are expected to be among the largest investors in private 5G networks through mid-decade.

Software upgradability of private LTE systems to 5G will enable some enterprises to accelerate their migration to 5G

A large portion of the global private LTE install base is software upgradable to 5G, which will hasten some enterprises’ move to 5G, but the timing of these upgrades will be contingent on 5G device readiness.

TBR expects leading enterprises will upgrade their private LTE systems starting in 2021 as compatible devices and 3rd Generation Partnership Project (3GPP) features from Releases 16 and 17 become available. This upgrade cycle is a key factor in why the private 5G market size will be able to scale in the early years of the forecast period.

TBR’s Private Cellular Networks Market Forecast, which is global in scope, details private cellular network spending trends among enterprises and governments, particularly as it pertains to 5G. The report includes current-year market sizing and a five-year forecast of the private cellular networks opportunity by vertical, by provider type and by region.

HPE bundles its existing portfolio in a GreenLake wrapper

When CEO Antonio Neri initially announced in June 2019 that HPE (NYSE: HPE) will offer everything “as a Service” by 2022, many were skeptical that the plan would resonate with the market as a whole. It was clear that pockets of customers would buy into this offer, particularly in the SMB space, where pricing can have a greater impact. But for major customers, the conversation often boiled down to something as trivial as where to put the expense on the balance sheet for stakeholders. However, considering the changing market dynamics over the last six months due to the pandemic, this aggressive marketing campaign could not have come at a better time. Because HPE has been pushing GreenLake hard since 2019, the vendor is now serendipitously ahead of peers on its “as a Service” offerings.

HPE’s “as a Service” push is directly related to increases in IT sprawl. “Sprawl” is a concept the IT industry has grappled with for decades. Prior to distributed IT environments, the term was used to describe the increase in the variety of workloads in each environment. Now, it is used when describing a single-pane-of-glass management console to ease the burden placed on IT personnel when managing a diverse environment of IT infrastructure. Sprawl is now the upshot of the increasingly diverse application of technology to business, or digital transformation. Diverse applications lead to diverse IT requirements, from the edge to the core to the cloud, making cloud an integral piece of the story and establishing the importance of bundled solutions that provide business outcomes, which is precisely what GreenLake can provide.

GreenLake does come at a premium, as software and services are baked into hardware deals consumed through this model in many cases, but pricing it as a monthly subscription makes these solutions more available and affordable to firms with less capital support. HPE GreenLake clearly resonates with customers, as key competitors Dell Technologies (NYSE: DELL) and Lenovo both formalized their own consumption-based pricing offerings after GreenLake began to gain traction, although Dell Technologies did have informal offerings emerge around the same time as GreenLake initially. With COVID-19, the edge becomes increasingly more important as organizations deploy new workloads in their factories, office spaces and retail locations to ensure public safety while returning to work.

HPE’s workplace portfolio of solutions is attractive for several reasons. HPE’s existing infrastructure portfolio is augmented by HPE Aruba’s connectivity engine and associated services through HPE Pointnext Services, which combines expertise across workplace networking and IoT. The combined offering is then layered with GreenLake and sold as a use-case-based package to end customers, the primary benefits being the efficiencies gained in conjunction with the fact that the solutions are positioned and sold as business outcomes. Essentially, HPE takes care of the grunt work normally weighing down the end user but offers increased manageability and increased control at a reduced effort through GreenLake, leveraging the existing expertise within its organization to reimagine how the world of knowledge-based employees works and what is necessary to make it operate seamlessly in a hybrid model.

IT vendors are poised to solve the challenges that have arisen in the wake of the COVID-19 outbreak, and Hewlett Packard Enterprise (HPE) is a prime example of a vendor that, in response to the pandemic, is addressing previously unforeseen challenges by formalizing offerings pertaining to the workplace. Hybrid working was a pre-existing trend that COVID-19 has accelerated. However, for those individuals working in a knowledge-based field or with school-aged children, how they work and learn has fundamentally and permanently shifted. Further, people with non-knowledge-based jobs, many of whom lost work due to COVID-19, will find in-person work again, and these jobs will also see a fundamental shift in how they are performed to ensure safety and productivity. HPE’s announcements today at Workplace Next highlight how the company’s portfolio can be leveraged to ease customers’ COVID-19 mandated digital transformations.