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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.

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  1. Top 3 Predictions for Data Center in 2022

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Top 3 Predictions for Data Center in 2022

Vendors respond to customers’ accelerated IT transformations​

Hardware vendors will race to further entrench themselves in customers’ ecosystems

While storage, hyperconverged infrastructure (HCI) and servers are the main products being sold by data center vendors, they are hardly noticeable in the go-to-market messaging that is being pushed out to customers. These vendors are more focused than ever on selling the outcome over the hardware itself,  whether that outcome is building a hybrid cloud environment to serve remote workers or deploying an edge solution on a factory floor. Data center vendors are looking to capture more of their customers’ environment, from managed services to hybrid cloud enablement, to diversify their revenue beyond hardware and create more reliable revenue streams.​

Building ecosystems is at the forefront of data center vendors’ go-to-market strategies to add value and create stickier offerings. This ranges from building management consoles and expanding software capabilities to refining “as a Service” offerings rolled out over the past 18 months. For leading vendors, this is done with an eye toward helping customers reap the same benefits they seek in public cloud alternatives — agility and simplicity — while also providing flexibility and cost control. ​

The road to a more diversified revenue stream is not without hurdles. Customers have already developed preferences for management tools and development platforms from cloud providers and ISVs. Markets like edge compute are complex with customization and industry nuance. Selling subscription models requires sales and delivery transformation for not only vendors but also partners, and a sales strategy that delivers on values that resonate with customers. In 2022 TBR expects to see further proliferation of the journey vendors embarked on in 2021, building out solution portfolios one use case at a time by identifying areas ripe for transformation that also benefit from on-premises hardware.

2022 data center predictions

  • Infrastructure vendors’ “as a Service” offerings will gain traction as the offerings are refined for specific use cases
  • Hardware vendors embrace the ecosystem
  • Vendors will carve out niche specialties under the broad banner of edge compute

Send me a free copy of TBR’s Top 3 Predictions for Data Center in 2022

Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.

CompuCom and the 4 dimensions of employee experience

The future of hybrid when your home printer runs out of ink

We recently met with CompuCom, an 8,000-person technology vendor providing hardware, software and services across the digital workplace, and discussed the company’s evolving role as the nature of how and where people work changes, especially for professionals inextricably linked to and dependent upon IT. To frame the discussion — and CompuCom’s place in the IT services ecosystem, which TBR’s Professional Services team tracks closely — one of the CompuCom executives asked, “What does hybrid work really mean going forward?” The question was particularly applied to professionals using home and personal technology for enterprise-level work. While everyone seems to be asking these questions and refining their answers based on pandemic-forced experiences, CompuCom has taken a broader view, suggesting employee experience (EX) is at the heart of the issue, rather than technology.

As described by CompuCom, employee experience fits within four dimensions: technology choice, self-sufficiency, well supported, and workplace flexibility. The first dimension is centered on technology that meets employees’ needs and “securely integrates personal technology” into the workplace ecosystem. Self-sufficiency is employees’ desire to be able to get their work done with minimal friction. And well supported and workplace flexibility most clearly align with hybrid work environments, with employees needing trusted technologies they can securely use anywhere, anytime. TBR has reported on other IT services vendors and consultancies shifting focus to the employee experience, particularly during the early months of the pandemic. This framework may not be new, but CompuCom has smartly articulated what many other vendors have been trying to provide, often with more offerings and less focus.

As small and midsize enterprises look to migrate to the cloud, the desire to take advantage of emerging technologies without investing heavily in IT staff may provide an opening for CompuCom to deliver its full end-to-end solutions, including hardware from trusted brands like Dell Technologies, without the higher-end services and support price tag. Delivering multivendor device support and addressing technology choice as a component of the employee experience will further resonate with SMB clients. Managing CompuCom’s ecosystem relationships while delivering value may depend on the second revelation from the company: experience-level agreements (XLAs).  

The future of IT services when XLAs replace SLAs

Building on this framework, CompuCom has begun measuring its value to clients by the employee experience delivered, rather than standard service-level agreements (SLAs). The company has even developed persona-based, experience-level indicators (XLIs), recognizing that at any one client, CompuCom will be serving multiple persons. TBR will continue tracking CompuCom’s efforts to transition XLIs into XLAs as a widely accepted standard for replacing SLAs among its clients and the larger IT services ecosystem. 

A second point about CompuCom’s approach struck TBR as noteworthy, especially as post-pandemic trends have pointed toward IT services vendors and consultancies rapidly expanding their offerings into areas such as engineering and legal services: CompuCom intends to stay in its own lane, deliver what it delivers well and grow through bringing technology to the workplace. That sounds unradical and almost boring. As one CompuCom executive said, “We’re focused on the workplace experience.” Having a clear focus and doing what you do well, in TBR’s experience analyzing IT services vendors and consultancies, have been key characteristics of solidly performing and growing companies.

According to TBR’s Digital Transformation: Voice of the Customer Research, in the early days of the pandemic enterprise buyers shifted priorities and budget spends from improving the customer experience (CX) to improving the employee experience by ensuring staff safety and productivity measures were in place. While the pendulum swung back a bit toward CX spend in early 2021, the shift toward everything hybrid will compel all parties, including employees, to seek and offer innovative ways to collaborate within the ecosystem, thus creating channels for robust EX and driving opportunities for companies such as CompuCom. 

In the coming months, TBR intends to revisit CompuCom’s portfolio and performance in the context of the larger IT services and technology vendor landscape, particularly in relation to the U.S. market and digital transformation. 

While challenges persist for security vendors due to COVID-19, opportunities abound as customers adapt to the new world

Acquisition sprees continue despite economic woes

As noted in TBR’s 1H20 Security Benchmark, consolidation continues in the enterprise security market as customers continue to seek to work with fewer vendors to secure their IT portfolios. This encourages larger firms to make tuck-in acquisitions to meet customer demands. COVID-19 rapidly increased the need for enterprise security in remote and edge environments to enable employees to securely work remotely.

Logistical challenges with hardware shipping threaten multiline vendors’ ability to deliver solutions

Many multiline vendors in the enterprise security market also sell data center infrastructure and attach security sales to hardware sales to provide customers with solutions. The logistical and supply chain challenges that data center hardware vendors encountered due to COVID-19 hampered their ability to fulfill orders, resulting in a hardware sales backlog in 1H20. However, this backlog will be cleared out in 2H20, which will enable these vendors to realize the revenue. This should, in turn, enable multiline enterprise security vendors to realize the revenue of attached security solutions in 2H20 as well.

New use cases created at the edge amid pandemic

COVID-19 has fundamentally changed how society works, rapidly increasing the demand for new use cases for IT infrastructure as companies swiftly seek new ways to continue to do business. A key example is the emergence of new edge use cases to help slow and monitor the spread of COVID-19, including leveraging surveillance equipment to monitor social distancing and mask wearing as well as assist to assist with contact tracing if a person tests positive. These new uses will result in the need for more technology at the edge and heightened security to protect individuals’ privacy.

TBR’s Security Benchmark provides clients a deep dive into the enterprise security market, highlighting the financial performance of public and private, multiline, and pure play vendors within the industry.

Hardware commoditization pushes vendors into new ventures

Insights from TBR’s 2020 Data Center Predictions

Join Stephanie Long and Geoff Woollacott for a detailed analysis of where the data center market is headed in 2020. With many emerging technologies coming to market, data center vendors are investing in various emerging technologies to augment their existing portfolio and maintain relevance as legacy portfolios become commoditized.

Don’t miss:

  • How cloud versus on-premises dynamics will impact data center vendors
  • The rise of quantum services vendors
  • The emerging dynamics of ODMs and OEMs in the data center landscape

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

TBR 2020 Data Center Predictions: Hardware commoditization pushes vendors into new ventures

Hardware commoditization is pressuring traditional data center vendors to invest in related emerging technologies

The data center hardware market has been on a downward trend due to commoditization for years. As a result, vendors have had to get creative to maintain their financial performance. Some vendors that have not adjusted have been forced out of highly contested markets or had assets or whole organizations acquired. However, many vendors have adjusted by investing in new ventures to maintain hardware relevance. Non-volatile memory express (NVMe) and hyperconverged infrastructure are two examples of technologies that have upward potential in the declining hardware market.

Other vendors have chosen to explore entirely new areas, such as quantum computing, to maintain relevance. IBM is notorious for laying the tracks to new markets, and quantum is no exception. TBR believes IBM’s quantum computing investments might increase the longevity of the mainframe, as we see a future in which mainframes and quantum computers can work together to answer tough computational questions. IBM is also investing in high-performance computing, another technology that could fill this space for mainframes.

Change is the only thing in the data center market that is guaranteed. TBR believes 2020 will be marked by a lot of change, and vendors will either adapt or be left behind. Consumption-based pricing and quantum computing are just two examples of the types of change that are coming to the data center space, but there are many others still to come. Vendors that embrace change will be around for the long haul, and fast-followers are more and more likely to be left behind if they sacrifice research and development for quick returns for their capital investors. Vendors should encourage innovation around new ideas to maintain relevance while commoditization maintains its unrelenting grip on the data center hardware space.

2020 Predictions:

  • Cloud vs. on premises: A distinction without a difference
  • The rise of quantum services vendors
  • ODMs will progressively squeeze OEMs as cloud-centric data center environments become increasingly popular

Register for TBR’s 2020 Data Center Predictions webinar, Hardware Commoditization Pushes Vendors Into New Ventures, Jan. 15, 2020.

Technology Business Research 2020 Predictions is a special series examining market trends and business changes in key markets. Covered segments include telecom, cloud, devices & commercial IoT, data center, and services.

Growing traditional revenues in IT services remains a challenge

TBR’s quarterly IT Services Vendor Benchmark published last week, with the following comment from lead Senior Analyst Elitsa Bakalova: “Vendors are scaling transformational portfolios; however, lingering growth challenges in traditional service areas challenge revenue performance. Trailing 12-month IT services revenue growth, at 1.9% year-to-year in U.S. dollars, was down 140 basis points sequentially in 2Q19 and 670 basis points against the year-ago compare. While vendors are not making major downward revisions in revenue growth targets for 2019, revenue growth for the benchmarked vendors has been decelerating due to growth challenges in commoditized traditional service areas; increasing competitive pressures, especially around advisory, implementation and management of next-generation solutions, such as transformational engagements around digital and cloud; and potential macroeconomic uncertainty.”

Additional commentary

“This week TBR publishes its 3Q19 IBM Initial Response, focused on IBM’s corporate and Systems Hardware performance. As the first formal report since the announcement of IBM’s z15 in September, this report will dive into some of the implications of this new launch across the broader portfolio while continuing to provide analysis on IBM’s quantum computing investments and developments. Implications of the Red Hat buy will be highlighted in this report as well, but deeper analysis on this topic can be found in TBR’s IBM Cloud Initial Response. Be on the lookout for TBR’s 3Q19 IBM full report, which publishes on Nov. 6, for a more in-depth look at these topics.” — Stephanie Long, Analyst

“IBM is using its advisory, digital design and technology expertise to win and execute holistic transformational projects and drive management consulting revenue growth in 2019. Value-led and IBM-asset-powered solutions; collaborative innovation, such as in the IBM Garage facilities; and specialized consulting expertise and talent, such as in Global Business Services’ Digital Strategy & iX, Cognitive Process Transformation and Cloud Application Innovation segments, enable IBM Services to position as a digital reinvention partner for clients’ cognitive enterprise journeys.” — Bakalova

“As Julie Sweet takes over the helm, Accenture will continue to capitalize on its momentum, targeting Diamond clients by deploying industrialized, AI-enabled solutions. In FY20 we expect investment in ‘the new’ to help the company expand wallet share within existing businesses as well as position for new logo opportunities, inching total sales from ‘the new’ closer to 100%.” — Boz Hristov, Senior Analyst

Additionally, join TBR’s Professional Services team Oct. 16 for a webinar and Q&A on India-centric vendors, including how they compare to leading IT services vendors and which IT services vendors have the most to lose due to sustained success among those that are India-centric.

Interested in learning more about IT services, cloud, data center and IoT?  Contact TBR today!

Dell Technologies knew what it was doing all along

Dell Technologies’ strategies

Deliver ‘essential infrastructure’

Dell Technologies’ key strategy is to deliver on what it promises: comprehensive and competitive essential infrastructure, specifically, hardware and systems software for PCs, data centers and cloud vendors. Dell Technologies fills in this spectrum with a mantra of “from edge to the core to the cloud,” where edge includes PCs, gateways and near-the-edge data center hardware. By “core,” Dell refers to on-premises data centers. Dell has been investing in R&D and in breaking down internal silos to compete in its core business, with a successful recent track record. For the last two years, part of this strategy included consumption-based pricing to compete with cloud offerings. Dell Technologies’ main competitors, Hewlett Packard Enterprise (HPE) and Lenovo, have similar strategies, including flexible pricing.

‘Better together’ with VMware

The company differs from its competitors in its ownership of VMware, a provider of popular software products that provide an abstraction layer between workloads and hardware, allowing flexibility and efficiency. VMware products run on all vendors’ hardware — a necessity for VMware’s continued presence in the market. Dell Technologies seeks to leverage its relationship with VMware to make it easier for customers to benefit from VMware solutions when they buy them on Dell hardware. This “better together” approach is delicate; “better together” implies “worse apart.” One company spokesperson described Dell Technologies’ approach as offering a combined solution to those who prefer Dell hardware or are indifferent and continuing to offer separate solutions for customers who prefer competitors’ hardware.

With or without Dell hardware, VMware’s solutions are very profitable, and contribute approximately one-third of Dell Technologies’ operating profit. Maintaining VMware’s strong position in both core and cloud markets is critical to Dell’s continued success. For this reason, Dell and VMware must ensure that Dell hardware and VMware cannot be too much better together. VMware also plays a role in Dell’s cloud strategy by playing key roles in the company’s multicloud offering, Dell Technologies Cloud, providing a way to work with multiple clouds, both public and on premises. By providing the ability to move workloads between public and on-premises clouds, Dell makes it easier to bring workloads back on premises, where Dell’s margins are stronger and where, the company claims, customer operating costs are often lower.

Dell Technologies World 2019 was, to a large extent, a celebration of the success of a long-term plan. Dell has emerged from a sequence of going private, shedding many businesses, acquiring a huge federation of related business, and then going public as a healthy, growing company. Despite some continuing challenges, Dell Technologies has largely achieved the goals of an ambitious plan to become the dominant provider of “essential infrastructure,” which includes computer hardware, systems software and supporting services “from the edge to the core to the cloud,” including PCs, cloud hardware and data centers.

AWS shakes up the private cloud infrastructure market with Outposts

Outposts enable AWS to meet clients’ demand for private cloud

Amazon Web Services (AWS) unveiled at re:Invent in Las Vegas its new Outposts on-premises cloud infrastructure, which will enable AWS to become the sole cloud infrastructure provider for its clients. The underlying Outposts infrastructure closely resembles AWS’ public cloud data center infrastructure. Since the infrastructure will be similar, it is conceivable AWS will be able to tie customers’ public and private clouds together seamlessly, fulfilling customers’ desire to deal with one less vendor for their IT needs. AWS will deliver, install and maintain Outposts for customers.

The sheer volume of AWS public cloud customers creates a large base to sell Outposts to and takes aim directly at private cloud data center providers. Outposts will also directly compete with Microsoft Azure, and will generate accretive hardware revenue for AWS.

An advantage AWS has over infrastructure vendors is economies of scale, which will enable AWS to sell massive infrastructure volumes for low margins — much like an original design manufacturer — and become a price leader against OEMs such as Dell EMC and Hewlett Packard Enterprise (HPE). AWS also plans to arm its channel partners with the necessary capabilities to sell these infrastructure solutions, further enabling large sales volume. Moreover, AWS is better equipped than other infrastructure vendors such as Dell EMC and HPE to attach the necessary services to provide connectivity between public and private cloud environments due to its expertise in the public cloud space — and will gain the higher-margin sales to boot. IBM has strong services capabilities but lacks the commoditized infrastructure and customer volume to match AWS’ strategy. TBR notes that pricing details of Outposts have not yet been determined.

VMware gets a piece of the AWS Outpost pie with the VMware Cloud variant

VMware and AWS collaborated to provide VMware Cloud on a variant of AWS Outposts, which will be offered by VMware as a managed service. As this creates a conflict of interest for Dell Technologies, TBR believes Dell Technologies has its sights set on the higher-margin sales generated from VMware Cloud and will forego the loss of lower-margin hardware sales to gain it.

Although AWS’ announcement may seem like bad news for the private cloud infrastructure OEMs, the good news for them is that AWS’ Outposts will not hit the market until 2H19, giving the infrastructure players some time to develop solutions that can compete with AWS as it moves into the data center hardware market.