Posts

Cost of ‘intelligent connectivity’ must decline significantly for intelligent world to unfold

TBR perspective

Realizing the intelligent world presented by the mobile industry at Mobile World Congress Barcelona 2019 (MWC19) will require a fundamental change in how networks are architected, including a radical reduction in the cost of providing connectivity. It will also require business transformation for companies tied to the old world, namely communications service providers (CSPs) and their incumbent vendors.

It was readily apparent at the event that technology is advancing at a much faster pace than the establishment of business cases that economically justify deployment of the technology. The reality for the mobile industry is that the cost of building, owning and operating networks is too high and networks are too inflexible to support the business realities of the digital era, whereby connectivity is relegated to a commodity service and the value lies in the platforms and applications that run over the network. The industry has known this for years, but changes have been minimal, until maybe now.

The entrance of Rakuten to the mobile industry could be a game changer and provides a glimpse into what a digital service provider will look like. In what could arguably be the most important takeaway from the entire event, Rakuten’s approach to building and operating a network could signify a paradigm shift in the industry. Not only will Rakuten’s network be agile, flexible and dynamic to provide digital services, it will also enable a dramatic reduction in the cost of connectivity.

The theme of MWC19 was “intelligent connectivity” and centered on how 5G, IoT, AI and big data are coming together to enable the intelligent world. Against this backdrop, Rakuten stole the show with the evangelization of its end-to-end virtualized and cloud-native network, which is being deployed across Japan this year. Rakuten’s network provides a glimpse into what the intelligent network of the future will look like.

AI chips: Explosive growth of deep learning is leading to rapid evolution of diverse, dedicated processors

Artificial intelligence (AI) utilization has been accelerating rapidly for more than 10 years, as decreases in memory, storage and computation cost have made an increasing number of applications cost-effective. The technique of deep learning has emerged as the most useful. Large public websites such as Facebook (Nasdaq: FB) and Amazon (Nasdaq: AMZN), with enormous stores of data on user behavior and a clear benefit from influencing user behavior, were among the earliest adopters and continue to expand such techniques. Publicly visible applications include speech recognition, natural language processing and image recognition. Other high-value applications include network threat detection, credit fraud detection and pharmaceutical research.

Deep learning techniques are based on neural networks, inspired by animal brain structure. Neural networks perform successive computations on large amounts of data. Each iteration operates on the results of the prior computation, which is why the process is called “deep.” Deep learning relies on large amounts computation. In fact, deep learning techniques are well known; the recent growth is driven by decreasing costs of data acquisition, data transmission, data storage and computation. The new processors all aim to lower the cost of computation.

The new chips are less costly than CPUs for running deep learning workloads

Each computation is limited and tends to require relatively low precision, necessitating fewer bits than found in typical CPU operations. Deep learning computations are mostly tensor operations — predominantly matrix multiplication — and parallel tensor processing is the heart of many specialized AI chips. Traditional CPUs are relatively inefficient in carrying out this kind of processing. They cannot process many operations at the same time, and they deliver precision and capacity for complex computations that are not needed.

Nvidia (Nasdaq: NVDA) GPUs led the wave of new processors. In 2012, Google announced that its Google Brain deep learning project to recognize images of cats was powered by Nvidia GPUs, resulting in a hundredfold improvement in performance over conventional CPUs. With this kind of endorsement and with the widespread acceptance of the importance of deep learning, many companies, large and small, are following the money and investing in new types of processors. It is not certain that the GPU will be a long-term winner; successful applications of FPGAs and TPUs are plentiful.

Super 7 webscale total capex spend will reach $123B in 2022

Infographic showing webscale "Super 7" capex forecast for 2017 through 2022

 

Data center builds and expansions as well as AI investment drive growth

According to Technology Business Research, Inc.’s (TBR) 3Q18 Webscale ICT Market Landscape, webscale ICT capex for the “Super 7” will grow at a 26.2% CAGR from 2017 to 2022 to more than $69 billion as these top webscales aim to future-proof business-critical infrastructure and map network capacity to data traffic growth, which is expected to increase exponentially through the forecast period.

Webscales are investing tens of billions of dollars in new data centers, either to support their core businesses or to increase the scale of their cloud services businesses. Capex spend is spiking in 2018 as many of the Super 7 build new facilities on land they acquired in 2017. Amazon’s 30.4% year-to-year ICT capex growth rate in 2018 is noticeably lower than that of its peers, which is largely due to its leading presence in the cloud services market. Challengers Microsoft, Alphabet and Alibaba will grow 2018 ICT capex 73.6%, 100.3%, and 101.6%, respectively, year-to-year in a bid to catch up to market leader Amazon Web Services.

The OEM landscape is being upended as webscales embrace ODMs and open-source technology. A growing number of ODMs aim to take share from incumbent hardware vendors such as Cisco and Dell EMC. Webscales often possess the talent necessary to design their own equipment, then outsource production to an ODM. In these instances, the software is disaggregated from the hardware and the code is written by webscale software engineers. This threat gives webscales negotiating power over incumbents. Some vendors, such as Cisco, mitigating the threat from ODMs with acquisitions, strong customer relationships and litigation.

For more information, contact Senior Analyst Michael Soper at [email protected].

Data center builds and expansions, along with AI investments, will drive webscale ‘Super 7’ ICT capex to $69B by 2022

HAMPTON, N.H. (Sept. 6, 2018) According to Technology Business Research, Inc.’s (TBR) 3Q18 Webscale ICT Market Landscape, webscale ICT capex for the “Super 7” will grow at a 26.2% CAGR to over $69 billion in 2022 as these top webscales aim to future-proof business-critical infrastructure and map network capacity to data traffic growth, which is expected to increase exponentially through the forecast period. Webscales are investing tens of billions of dollars in new data centers, either to support their core businesses or to increase the scale of their cloud services businesses.

“Capex spend is spiking in 2018 as the Super 7 build new facilities on land acquired in 2017. Amazon’s 30.4% ICT capex growth rate in 2018 is noticeably lower than its peers, which is largely due to its leading presence in the cloud services market,” said Michael Soper, a senior analyst at TBR. “Challengers Microsoft, Alphabet and Alibaba will grow 2018 ICT capex 73.6%, 100.3%, and 101.6%, respectively, year-to-year in a bid to catch up to market leader Amazon Web Services.”

The OEM landscape is being upended as webscales embrace ODMs and open-source technology. A growing number of ODMs aim to take share from incumbent hardware vendors such as Cisco and Dell EMC. Webscales often possess the talent necessary to design their own equipment, then outsource production to an ODM. In these instances, the software is disaggregated from the hardware and the code is written by webscale software engineers. This threat gives webscales negotiating power over incumbents. Cisco is mitigating the threat from ODMs with acquisitions, strong customer relationships and litigation.

TBR’s Webscale ICT Market Landscape tracks the ICT-related initiatives of the seven largest webscale companies in the world, known as the Super 7, which includes Alibaba, Alphabet, Amazon, Baidu, Facebook, Microsoft and Tencent. The report provides a market assessment, deep dives into company strategies and analyzes capex trends, particularly as they pertain to ICT. Vendors are also covered from the perspective of relative opportunities with webscale companies as customers.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.758.1803 or [email protected].

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.

Webscale ICT market to experience a 19.5% CAGR from 2017 to 2022

AWS (Amazon Web Services) is the leading IaaS provider by revenue, but Microsoft Azure and Google Cloud are growing revenue faster than the incumbent due to years of data center investment across geographies. Microsoft is closing the gap quickly and will challenge AWS in the short term, while Google, which was later to the market, is more of a long-term threat. Beyond data centers, webscale companies are making undersea cable investments to support cloud and video traffic growth. Alphabet, Amazon, Facebook and Microsoft will continue to build these networks to carry traffic across oceans and typically partner with each other as they do so. — Senior Analyst Michael Soper, TBR’s 1Q18 Webscale ICT Market Landscape