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2022 Predictions: Data Center

Join Principal Analyst & Practice Manager Angela Lambert Thursday, Feb. 17, 2022, at 1 p.m. EST/10 a.m. PST for an in-depth, exclusive review of the Top 3 Predictions for Data Center in 2022, part of TBR’s Predictions special series examining market trends and business changes in key markets, such as cloud, IT services, digital transformation and telecom. 

Data center infrastructure vendors are racing to further entrench themselves into customers’ ecosystems, from managed services to hybrid cloud enablement, to diversify their revenue beyond hardware and create more reliable revenue streams. During this webinar, we will discuss three key areas where vendors are innovating and reinventing to carve out space in evolving markets.

Don’t miss:

  • How hardware subscription offerings will be refined to boost traction
  • How infrastructure vendors will embrace ecosystems
  • How vendors will attempt to gain share in edge compute

Mark your calendars for Thursday, Feb. 17, at 1 p.m. EST,
and REGISTER to reserve your space.

Related content:

  1. Top 3 Predictions for Data Center in 2022

Click here to access more TBR webinars.

WEBINAR FAQS

Hyperscalers begin to shift capex from central cloud build-outs to edge cloud build-outs

Hyperscalers’ focus is on creating value from distributed computing

Hyperscalers are at the cusp of scaling out their edge computing deployments as they focus on creating value from distributed computing, which is a key foundational aspect of their digital ecosystem initiatives. They must pivot from centralized data center build-outs to building out the edge to achieve the latency and quality of service that new network use cases will require.

TBR believes the world’s largest hyperscalers are all likely to extend their cloud footprints closer to endpoints through this decade and expects hyperscaler capex will shift significantly from central cloud to edge cloud over the next five years. The Big Nine hyperscalers will drive significant innovation in the edge space, contributing design references, technology standards, and best practices to facilitate ecosystem development.

Hyperscalers have been experimenting with ways to make it more economically feasible to deploy distributed edge network resources at scale. The commercial model will likely see hyperscalers partner with ecosystem stakeholders, such as tower companies and data center real estate investment trusts, to offset the financial burden of deploying, owning and operating edge compute environments. For example, a hyperscaler could partner with tower companies to site micro data centers at the base of cell sites and plug directly into the access and backhaul network.

Models such as this would help defray the cost and complexity of building and managing many sites. TBR also believes telco sites, such as central offices and aggregation hubs, are logical locations for edge compute resources. These facilities are usually strategically located, are owned and controlled by the operator, have access to power and cooling, have fiber readily available, offer secure access, and are ruggedized to withstand the elements.

Total CSP Edge Compute Spend 2020-2025E

Telcos are divesting their tower assets, which limits their opportunities and market leverage in the edge compute space; supply issues delay rollouts

Telcos relinquishing control over network sites opens door for hyperscalers

Hyperscalers are likely to continue their encroachment of network ownership as they build out their distributed computing platforms. Network access sites, particularly cell sites such as towers, are of unique strategic importance as hyperscalers aim to extend their platforms closer to data origination sources. The ultimate shift toward open virtual RAN and the radio intelligent controller will also spur significant innovation at the access layer of the network, which will prove to be an area of keen interest to hyperscalers that are looking at how to capitalize on new opportunities presented by edge computing, 5G and AI.

TBR believes it is highly likely that hyperscalers will become key customers of shared infrastructure owners, particularly towercos, during this decade as their reach extends beyond their central clouds.

Supply chain constraints will delay peak telecom edge compute spend growth rate to at least 2023

Delays in chipset availability — partly due to the COVID-19 pandemic and partly due to geopolitical factors and technological complexity — will slow the pace at which the vendor ecosystem can meet customer demand for edge compute infrastructure through at least 1H22. Supply chains should be able to meet demand by 2H22, setting the stage for projected 66.7% year-to-year growth in the market in 2023.

Shipping constraints are another headwind to meeting demand. Even if products can be manufactured, there are chronic problems with exporting and importing those products and bringing them to customer sites. This too will push out build timelines.

TBR’s Telecom Edge Compute Market Forecast, which is global in scope, details edge compute spending trends among communication service providers, which include telecom operators, cable operators and hyperscalers. This research includes current-year market sizing and a five-year forecast by multiple edge compute market segments and geographies. TBR’s Telecom Edge Compute Market Landscape, also global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market, including telecom operators, cable operators, hyperscalers and vendors that supply the telecom market.

TBR projects CSP spend on edge compute infrastructure will grow at a 46.1% CAGR from 2020 to 2025 and reach $100B

Key Insights

The Big Nine hyperscalers will collectively outspend the combined outlays of telcos and cablecos on edge compute infrastructure before the middle of this decade.  

All Big Nine hyperscalers are investing in the edge in some way. Amazon, Microsoft and Google have global ambitions for edge, though and the hyperscalers intend to partner with and/or compete against telcos and cablecos in the edge space.

Delays in chipset availability — due to the COVID-19 pandemic, geopolitical factors and technological complexity — will slow the pace at which the vendor ecosystem can meet demand for edge compute infrastructure through at least 1H22.

TBR projects CSP spend on edge compute infrastructure will grow at a 46.1% CAGR from 2020 to 2025 and reach $100B

TBR’s Telecom Edge Compute Market Forecast, which is global in scope, details edge compute spending trends among communication service providers, which include telecom operators, cable operators and hyperscalers. This research includes current-year market sizing and a five-year forecast by multiple edge compute market segments and geographies. TBR’s Telecom Edge Compute Market Landscape, also global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market, including telecom operators, cable operators, hyperscalers and vendors that supply the telecom market.

Nascent trends in edge compute market should worry telcos as webscales disrupt incumbents’ business models

Key insights

Webscales will leverage their own infrastructure, platforms and ecosystems to disrupt vendors and relegate incumbent operators to providing site access and backhaul services.

Though webscales are posturing like they want to partner with telcos on new opportunities, edge compute partnerships between webscales and telcos to date are more exploitative than cooperative in nature.

The end state of this competitive dynamic will see telcos capturing even less value as they increasingly offload towers and other sites to towercos and data center REITs, and as webscales gain ownership of greater portions of the network.

TBR’s Telecom Edge Compute Market Landscape, which is global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market, including telecom operators, cable operators, webscales and vendors that supply the telecom market. The research includes key findings, market size, regional summary, technology trends, use cases, operator and vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

COVID-19 fallout unlocks unique opportunities for the telecom industry to build out edge infrastructure

vRAN will become a major driver of edge compute scale-outs

Communication service providers (CSPs) that are driving forward with virtualized radio access network (vRAN), most notably Rakuten and Dish, will build many thousands of edge sites over the next few years to support their vRAN topologies. These edge sites will need to be located within 10 miles of the remote radio unit to meet the strict time synchronization requirements of vRAN. Additionally, these edge sites, which will house the virtualized baseband unit, can be multipurposed, supporting more workloads than just RAN traffic, which could unlock new monetization options for these CSPs.

Total CSP Edge Compute Spend 2019-2024E

CSP spend on edge compute infrastructure will grow at a TBR-projected 54.5% CAGR from 2019 to 2024 to reach $90B by 2025

TBR estimates CSPs will own or lease over 1.2 million local edge sites (i.e., mini data centers) globally by 2025, up from nearly 9,000 sites globally at the end of 2019. The primary driver of edge build-outs during the forecast period is telcos’ and cablecos’ network transformations, which entail migrating to a cloudified and virtualized network, and webscales’ edge initiatives to support their cloud businesses and digital ecosystem endeavors.

In this new architecture, network functions will be virtualized and housed in NFV infrastructure, which is essentially a data center. Network sites, such as central offices, have been the primary edge compute locations to date, with cell site builds expected to ramp up significantly in 2021 and become the primary locations for the CSP edge by 2025. Converted retail store locations and customer premises locations are other site types where CSPs will locate their edge infrastructure. For more information pertaining to the market size and for further breakouts of the data, see TBR’s Telecom Edge Compute Market Forecast.

TBR’s Telecom Edge Compute Market Landscape, which is global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market including telecom operators, cable operators, webscales and vendors that supply the telecom market. The research includes key findings, market size, regional summary, technology trends, use cases, operator and vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

COVID-19 fallout unlocks unique opportunities for the telecom industry to build out edge infrastructure

CSP spendon edge compute infrastructure will grow at a TBR-projected 54.5% CAGR from 2019 to 2024 to $90B by 2025

COVID-19 fallout unlocks attractive real estate opportunities for edge site locations

Strategically located office and retail real estate is being purchased or leased by shared infrastructure owners (SIOs) and webscales for pennies on the dollar compared to pre-pandemic valuations. These companies intend to convert most of these locations into edge computing sites.

This practice is expected to be widely adopted as COVID-19 fundamentally reshapes the economic landscape and accelerates digitalization. In many cases, these freed-up real estate sites are in ideal locations, close to power and population centers and, in some cases, fiber.

Amazon has been one of the most aggressive in buying real estate, but other companies are expected to ramp up their investments as new opportunities surface when businesses, particularly brick-and-mortar retailers, downsize, go bankrupt, or shift their office building stances in favor of a more permanent or hybrid remote work policy.

TBR’s Telecom Edge Compute Market Landscape, which is global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market including telecom operators, cable operators, webscales and vendors that supply the telecom market. The research includes key findings, market size, regional summary, technology trends, use cases, operator and vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

Niche enterprise edge vendors disrupt the enterprise edge compute market

New and reformatted use cases have emerged at the edge that help companies meet safety requirements and allow employees to return to the physical workplace. Longer-term solutions that will help dictate how we live in the new normal will rely more heavily on edge technology, further increasing desire for the already high-demand enterprise edge compute infrastructure and related applications. Additional use cases will emerge at the edge as companies worldwide adjust their operations to ensure they are meeting safety guidelines, which will require increased visibility of their customers and employees. To meet the varied demands of new use cases and extend existing ones, enterprise and niche edge players are building out a strategy rooted in innovation and automation and are increasingly looking to build and sustain strategic partnerships to accelerate time-to-market.

Join Nicole Catchpole and Stephanie Long for a discussion on how COVID-19 has created new opportunities at the already thriving enterprise edge. The analysts will also discuss niche players and emerging startups that have relevant offerings that address companies’ needs during the pandemic.

Don’t miss:

  • Emerging enterprise edge use cases, including those related to COVID-19, and customer examples
  • Niche and startup players with differentiated edge compute offerings
  • The increasing relevance of strategic partnerships

Telecom operators felt the effects from COVID-19 in 1Q20; the impact on telecom vendors will be more pronounced in 2Q20

Telecom market impact

COVID-19 impacted the telecom industry during 1Q20 on different levels, with telecom operators feeling the initial effects during the quarter. TBR believes telecom vendors were initially shielded from the early effects, but we anticipate a deeper negative impact on both operators and vendors in 2Q20 as the pandemic plays out.

Though company results and the broader ICT market are expected to be challenged further in the short term (over the next year) due to the crisis, TBR believes the near term (two to three years) and long term (three to five years) will be net positive on the ICT industry as the post-COVID era drives enterprises and governments around the world to double down on digitalization and invest in a broad range of technologies to evolve their businesses and increase safety in the new world.

Telecom edge compute

The COVID-19 virus will significantly impact the ICT infrastructure supply chain, and, more broadly, the global economy. This dynamic and evolving situation prompted TBR to revise its telecom edge compute market size in the recently published Telecom Edge Compute Market Landscape.

Though the virus will delay the ultimate build-out of the edge, the cumulative market size during the forecast period is expected to be larger and grow faster than originally anticipated once the dust settles from the virus.

TBR expects the virus to delay edge spend in 2020 and a portion of 2021. By mid-2021 TBR expects the supply chain to be fully operational again, at which time the industry will attempt to catch up to align with pent-up demand.

TBR expects governments and businesses around the world will reassess their disaster response and risk profiles to mitigate future risks to their societies and operations. This will drive investment in surveillance, drones, industrial automation, blockchain, AR/VR and other use cases that require edge resources to operate. As such, TBR increased the cumulative market size for edge infrastructure as it is expected that many governments, not just the U.S. and China, will justify these investments for national security and business resiliency purposes. It is expected that communication service providers (CSPs) will be key beneficiaries of this addressable market to support government and business initiatives in these areas.

Private cellular networks

Despite short-term issues, COVID-19 will ultimately be a net positive driver of the private cellular networks market over the near to long term.