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Key findings from TBR’s 2H18 Hyperconverged Platforms Customer Research

  • TBR forecasts the HCI market will reach $15 billion by 2023, representing a significant growth opportunity for data center vendors.
  • Survey incidence data indicate that the majority of potential customers have not yet begun their hyperconverged infrastructure (HCI) journey.
  • Emerging solutions, such as Lenovo’s TruScale Infrastructure Services and AWS Outposts have the potential to shake up the HCI market.

Opportunity for successful HCI vendors is great, as the market will rapidly expand through 2023

The HCI market evolves to meet customers’ changing demands. As customers embrace digital transformation, the opportunity in HCI increases, and vendors invest and adapt to become agents of change for customers. TBR estimates the HCI market will increase from $4.6 billion in 2018 to $15 billion by 2023 as customers leverage HCI for a wide array of needs, both traditional and emerging.

A majority of potential customers have not yet purchased HCI, creating opportunities for all HCI vendors to gain customers. Incidence data from TBR’s research show that only 27% of companies surveyed purchased HCI. This demonstrates the massive opportunity that remains for vendors to gain net-new customers in the space. Converged infrastructure (CI) leaders Dell EMC and Cisco have a distinct advantage over other HCI peers, as their CI legacies have afforded them incumbent status with existing CI customers. Despite the incumbent advantage, there is opportunity for any vendor to capitalize on emerging buyer preferences. For example, software is an increasingly central piece of the HCI story, and with 79% of respondents indicating that they would consider consumption-based HCI purchases, strategic marketing and investments can enable any HCI vendor to rise through the ranks.

While Lenovo is not a leading vendor at this time, 30% of respondents indicated they considered Lenovo for their HCI purchase. Lenovo’s restructured portfolio, its recent unveiling of TruScale Infrastructure Services, and the rapid positive changes in its overall data center business are likely to bolster gains for the vendor in HCI as well. Although Dell EMC’s and Cisco’s leadership in the HCI space has been established, the opportunity in HCI remains vast, even for fast followers in the space. Digital transformation only stands to reinforce this trend as HCI becomes more widely adopted.

Customers leverage HCI for private and hybrid cloud installments as security remains a top concern with public cloud adoption

It is clear the private and hybrid cloud value proposition is a benefit HCI buyers are looking to achieve, with 80% of respondents indicating they leverage HCI for private or hybrid cloud installments. A majority of customers (60%) leverage their HCI for database management, and many of these customers indicated their database management use was for mission-critical purposes. This underscores the need to protect critical and sensitive data. TBR’s research showed that buyers are making additional investments in security in conjunction with HCI, particularly network security.

Graph depicting 2H18 security software purchased with hyperconverged

Going forward, the emergence of AWS Outposts in the market will challenge current HCI deployment trends as Amazon Web Services (AWS) messages its Outposts offering as being able to seamlessly integrate with AWS public cloud, addressing a key driver behind HCI adoption for private cloud installments. AWS Outposts are expected to hit the market in 2H19, so it will take some time before the impact of Outposts is known. However, that AWS is making its Outposts offering available as a managed service will improve ease of use, and will likely increase demand, especially among existing AWS customers as the underlying hardware of Outposts will resemble that of AWS’ public cloud environment.

IT budgets are shifting in HCI’s favor

Infographic discussing TBR's hyperconverged infrastructure research for 2H18

Key findings from TBR’s hyperconverged infrastructure (HCI) customer survey

87% of respondents indicated that they were likely to make their next HCI purchase from their current HCI vendor.

80% of respondents are leveraging HCI for a cloud installment.

68% of respondents cited their desire to purchase hyperconverged directly from teh vendor rather than through channel partners or systems integrators — an increase from 59% in 1H18.

66% of respondents indicated software quality and reliability and 63% indicated hardware quality and reliability were important factors in their HCI purchasing decision.

 

For more information, contact Data Center Analyst Stephanie Long at [email protected].

Snapshot: TBR’s 1H18 Hyperconverged Platforms Customer Reserach

Enterprises are seeking the agility and flexibility afforded by cloud environments and are increasingly considering opex-based consumption models for their on-premises private cloud environments. Insights from TBR’s recently published 1H18 Hyperconverged Platforms Customer Research report further detail these trends and the impact they will likely have on the data center infrastructure market and digital transformation.

For more information on Hyperconverged Platforms Customer Research, contact Engagement Manger and Senior Analyst Angela Lambert ([email protected]).

HCI vendors capitalize on digital transformation with private cloud adoption

HAMPTON, N.H. — In many ways, digital transformation equates to rising cloud adoption. Enterprises need the increased agility and flexibility that a cloud environment provides but also want the cost structure associated with cloud. However, new regulations on data sovereignty continue to emerge and security concerns are mounting as data becomes an increasingly valuable asset, creating challenges for enterprises seeking cloud environments. Hardware vendors that initially lost business to cloud providers revel in this shift, as clear markets for both public and private cloud enable infrastructure and services vendors to co-exist.

Despite the need for greater control and security of data, enterprises still demand the agility and flexibility afforded by cloud environments and are increasingly demanding opex-based consumption models. Insights from TBR’s recently published 1H18 Hyperconverged Platforms Customer Research report further detail these trends and the impact they will likely have on the data center infrastructure and cloud markets.

Many customers purchasing HCI are doing so for cloud environments

More than 90% of hyperconverged infrastructure (HCI) customers surveyed in TBR’s 1H18 Hyperconverged Platforms Customer Research are leveraging or will leverage HCI for cloud installments: 54% are leveraging HCI for hybrid cloud, 30% are leveraging HCI for private cloud, and 8% are not currently leveraging HCI for cloud but intend to do so in the future. HCI is well-suited for the cloud as it is highly software-enabled, making spinning it into a private cloud relatively seamless compared to traditional infrastructure environments. Further, HCI sales tend to be more supported with services than legacy infrastructure sales, enabling customers to experience a more collaborative sale. Findings from 1H18 Hyperconverged Platforms Customer Research indicate 59% of respondents purchased their HCI solution direct from the vendor, while 62% of respondents received or requested additional hardware services, such as firmware and break-fix, with their HCI purchase.

HCI is a lucrative opportunity for vendors as it combines hardware, software and services into a single sale, increasing margins for hardware vendors and enabling vendors to leverage strategic marketing to sell across their entire portfolio stack rather than one-off piecemeal hardware sales. Further, many HCI vendors successfully bundle additional non-HCI sales on top of HCI purchases, as a customer already strongly considering a given vendor’s HCI architecture is likely to consider other solutions in the portfolio. Respondents in the 1H18 Hyperconverged Platforms Customer Research indicated they frequently make additional hardware purchases with HCI sales. However, these additional hardware sales were not necessarily associated with the HCI appliance, with customers purchasing additional hardware for their data centers in many cases. This suggests a broad portfolio is paramount to enterprise success as IT shops look to reduce the number of suppliers they manage while seeking hardware components to maintain existing infrastructure requirements of legacy workloads and building out new environments for native cloud workloads. This will prove advantageous for multiline vendors in the space such as Lenovo, Dell EMC and Hewlett Packard Enterprise (HPE) but will challenge niche vendors such as NetApp and Pivot3.

The rise in consumption-based pricing makes HCI more desirable for cloud installments

Of 1H18 Hyperconverged Platforms Customer Research respondents, 81% are considering consumption-based pricing models for future HCI purchases. The reasons for considering consumption-based pricing vary, with less than one-third of respondents doing so for the shift to an opex model alone, indicating that purchasing decisions are more complex than simply to shift expense structures. However, customers are still intrigued by these new pricing options.

The more interest increases for consumption-based HCI purchases, the greater challenges public cloud vendors will face from infrastructure vendors. Dell EMC and HPE both have a strong presence in the consumption-based pricing space, and there are other infrastructure vendors playing in this space less vocally. Competing will be a challenge for public cloud providers as infrastructure vendors message increased security and control without cost increases to battle public cloud options.

There will always be a place for both public and private cloud in the data center market

Although competition will continue to heat up between public cloud and private cloud vendors as evolving market dynamics alter messaging, the need for both installments in the digitizing world will remain. However, as economics become more favorable on the private cloud side, partly due to HCI and consumption-based pricing, customers may consider private cloud options for workloads they previously would have considered a public cloud environment.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 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.

Is the IT hardware market ready for Hardware as a Service?

Hardware as a Service — or maybe you call it PCaaS, DaaS or XaaS — is basically referring to bundling some type of hardware (e.g., phones, PCs, servers) with life cycle services and charging a recurring fee over a multiyear contract. The customer never really owns the hardware, and the vendor takes it back at the end of the agreement.

Sure, it’s not a new concept. But the solution hasn’t exactly taken off like a rocket ship, either. So, is it going to? Maybe. Its initial speed may be more like a Vespa than a SpaceX Falcon, but there are a few things working in its favor.

Why do buyers want it?

  • Retiring hardware is a huge pain. I have talked to IT leaders who have literally acquired warehouse space solely to store old hardware they have no idea what to do with.
  • Making it easier to stay up to date with tech. Management can no longer deny the negative impact on morale brought by an unattractive, slow and/or unreliable device.
  • Automation & Internet of Things (IoT) usher in new capabilities. Who doesn’t want to make managing hardware easier? Hardware as a Service is basically IoT for your IT department. Device management features like tracking device location and health are key functions of many IoT deployments and is a core selling point of Hardware as a Service offerings.

Why do vendors want to sell it?

  • Business models are changing. That darn cloud computing had to come along and change expense models, not to mention make it easier to switch between vendors. From Spotify and Netflix to Amazon Web Services and Salesforce, “as a Service” is second nature to IT buyers in both their personal and professional lives.
  • Creating stickiness. Hardware is more often perceived as “dumb” with the software providing the real value. If you’re a hardware maker (or a VAR), you need to make the buyer see your relationship as one that’s valuable and service-oriented versus transactional.
  • Vendors desire simplicity. Most vendors will tell you they have been building similar enterprise service agreements on a one-off basis for years. These new programs will hopefully create swim lanes to make it faster and easier for partners to build solutions.

Buyers are used to monthly SaaS pricing models, but that’s not really what creates the main appeal for Hardware as a Service. Buyers really want the value-added services and fewer managerial headaches.

So, how’s it going?

As someone who manages several research streams, I get to peek at results from a lot of different studies. Here are a few snippets of things I’ve heard and seen in the last month or so.

  • Personal devices: It certainly seems like there’s the most buzz around PCs, with Dell, HP Inc. and Lenovo all promoting DaaS offerings. I have also heard from enterprises doing initial DaaS pilots with as many as 5,000 PCs, but we seem to still be in very early stages of adoption. Both PC vendors and their channel partners are beginning to report “legit” pipeline opportunities tied to DaaS.
  • Servers: Either outright purchasing or leasing servers is still the overwhelming choice of purchase method for about 90% of IT buyers recently surveyed by TBR. Perceptions that an “as a Service” model will be more expensive in the long run is the main customer concern to date that vendors will need to address via emphasizing the value-added life cycle services.
  • Hyperconverged infrastructure (HCI): A bundle of hardware and a services bundle? This is the bundle of bundles! Not too many HCI vendors are openly promoting an “as a Service” pricing model at this point, but 80% of current HCI buyers in TBR’s most recent Hyperconverged Platforms Customer Research indicated they are interested in a consumption-based purchasing model, particularly to enhance their scalability. About 84% of those surveyed are using HCI for a private or hybrid cloud buildout, so maybe a more cloud-like pricing model make sense. Make no mistake, interest is not synonymous with intent, but it’s safe to say these buyers are at least paying attention to their purchasing options.

My general verdict is that things are still moving at Vespa speed. PCs have a head start over data center hardware based on the concerted go-to-market efforts of the big three OEMs and a consumption model that more closely aligns with the consumer services we’re used to. The second half of this year will be an interesting proving ground to see if the reported pipeline growth is converted to actual customers. Depending on how that goes, maybe we’ll see the data center guys making more serious moves in this space.

What do you think? Add a comment or drop me an email at [email protected].

 

Key findings from TBR’s upcoming HCI customer research

Hyperconverged infrastructure (HCI) is a growing market ripe with opportunity for vendors. TBR forecasts the market will reach $11.7 billion by 2022. Although TBR research indicates that incumbent vendors with a strong presence in the converged infrastructure (CI) market, such as Dell EMC and Cisco, have an advantage in the space, findings also indicate that a growing number of smaller vendors are rising in popularity. Add to that the approximately one-quarter of existing customers who indicated that brand is not a key factor in their decision making, and it becomes clear that the opportunity to take share from existing vendors is high. Further, with nearly three-quarters of respondents indicating they have not yet taken the plunge into the HCI space, there is massive opportunity, through strategic marketing and support, for vendors to encourage new adopters to be their customers.

HCI has a significant place in the cloud market

Eighty-four percent of respondents indicated they are leveraging HCI for either hybrid or private cloud installations. TBR believes this suggests that cloud is not necessarily an inhibitor to HCI adoption, as some vendors may perceive. Further, we believe this signals that consumption-based pricing options, which 81% of respondents indicated they would be interested in considering in the future, will encourage more HCI adoption. Consumption-based pricing enables customers to select HCI for a capex solution as well as for public cloud if they choose, and they can simply compare performance and other features between the two to make purchasing decisions. Vendors can capitalize on this flexibility with strategic marketing.

IT leaders play a crucial role in the HCI decision-making process

HCI remains a strategic purchase, as evidenced by the fact that 74% of respondents indicated IT directors and managers were one of the decision makers. TBR believes that as customers become more familiar with HCI and their HCI vendor, they will be more likely to make repeat purchases and will be less likely to demand direct-from-vendor sales.

To learn more about TBR’s Hyperconverged Platforms Customer Research, contact Stanley Stevens ([email protected]) or your account executive.