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Top priorities for IT infrastructure investments: What’s more important than business transformation?

TBR’s recently launched Infrastructure Strategy Customer Research report surveys 300 IT decision makers responsible for IT infrastructure globally and by industry vertical, such as technology, public sector and healthcare & life sciences, and by organization size, including small, medium and enterprise.

 

Join Principal Analyst and Engagement Manager Angela Lambert for insights, data and analysis on exactly what IT buyers are concerned with in the post-COVID-19 transition, with billions of dollars of IT investment on the line. Angela will discuss the challenges and priorities guiding investment plans, key areas of infrastructure expansion, plans for data center consolidation, and expectations for edge computing and multicloud adoption.

 

In this FREE webinar you’ll learn:

  • The top priorities influencing IT infrastructure investments today, and the top challenges slowing business transformation
  • Key insights for OEM, ODEM, cloud, service provider, software and security professionals
  • Differences in needs across small, midsize and enterprise businesses
  • How data center consolidation will impact infrastructure investment, edge adoption and shifts to public cloud resources

 

Mark your calendars for Thursday, June 30, 2022, at 1 p.m. EDT,
and REGISTER to reserve your space.


Related content:

  1. Free Copy: Top Predictions for Data Center in 2022

 

Click here to register for more TBR Webinars

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OEM earnings roundup: Unpacking a quarter of ‘record growth’

OEMs boasted revenue and profit gains in the first calendar quarter of 2021

“Record growth” was a frequently repeated phrase over the last week as Dell Technologies, Lenovo, Hewlett Packard Enterprise (HPE) and HP Inc. reported their earnings for the first calendar quarter of 2021. For these major OEMs in the PC and data center hardware space, record gains in revenue and profitability have been hard to come by in recent years due to several factors including slowed PC refresh cycles, stiff competition from cloud offerings, component shortages, and uncertainty about the  pandemic’s impact on businesses and consumers.

For all these reasons, it was a pleasant surprise to witness a series of positive earnings announcements. But as one company after the next reported breaking multiple growth records in revenue and/or profit, it led me to wonder the degree to which business growth was based on increased economic stability rather than major changes in the OEM’s go-to-market approach.

Comparing first quarter revenue figures from the last two years provides a good snapshot of how the hardware market has changed since the world was immersed in the COVID-19 pandemic. For Dell Technologies, HP Inc. and HPE, the earnings reported in the first quarter represent revenue from February to April. Looking back to 2020, this represents the time frame when many countries imposed lockdowns. Lenovo’s earnings time frame is slightly different — reporting on revenue from January through March — but remains a good comparison, particularly as Lenovo may have felt the pandemic impacts earlier than peers as a China-based company, especially given that Lenovo has a manufacturing facility in Wuhan.

All vendors but Dell Technologies saw a first quarter corporate revenue decline of at least $1 billion in 1Q20 compared to 1Q19. In 1Q21 all vendors exceeded their revenue levels from the start of the pandemic, and three of the four grew revenue by $1.9 billion to $3.9 billion compared to 1Q19. This is impressive revenue growth for these vendors operating in mature and, in some cases, declining market segments. But are all business units growing equally? The fact that HPE was the only vendor of the four to not grow revenue in 1Q21 compared to 1Q19 and is also the only vendor in the compare lacking a PC business suggests growth is not consistent across hardware segments.

PCs are the driving force in the revenue rebound

Demand for both consumer and commercial PCs has been strong throughout the pandemic as many people spent an increasing amount of screen time at home for work, school and socialization. Dell Technologies, Lenovo and HP Inc. have not only reported 1Q21 revenue gains of billions of dollars compared to 1Q20, but the OEMs’ revenue is also up significantly compared to 1Q19. In addition to pandemic-related demand for PCs, silicon supply shortages have also helped to stem the race to the bottom for PC prices. With limited chip supply available, Intel and peers have focused on producing higher-end chips for premium devices. OEMs are also less competitive on pricing while demand outweighs supply. Improving selling prices and shifting toward premium PCs benefit not only revenue but also profitability.

Data center is still not immune to the impact of cloud migration

OEMs’ data center business units tell a different story. While the three vendors all reported increased year-to-year revenue in 1Q21, both Dell Technologies’ and HPE’s data center revenues are down compared to 1Q19. This suggests that year-to-year revenue gains represent customers showing less pandemic-related spending hesitancy and resuming delayed data center projects, while declines compared to 1Q19 align to the overall trend of enterprise data center consolidation in favor of public cloud. Although with the smallest data center revenue base, Lenovo was the only vendor in the comparison that increased revenue from 1Q19 to 1Q21, possibly buoyed by its Cloud Service Provider customer segment, which has higher demand for data center infrastructure compared to the enterprise segment. Overall, the revenue trends suggest that a favorable year-to-year compare may be masking impacts of public cloud adoption, which have accelerated through the pandemic.

Looking ahead to the remainder of 2021, TBR expects the trend of favorable year-to-year compares to continue for hardware vendors as businesses gain confidence in resuming IT spend. Profitability will likely also remain strong as supply constraints on chips will lead to price premiums and a focus on selling high-end devices. The data center space will likely continue to benefit from pent-up demand, but will be offset to some degree by the ongoing trend of public cloud and SaaS adoption, leaving PCs to drive the largest OEM revenue increases in 2021.

TBR predicts total enterprise spend on edge infrastructure will grow at a 41% CAGR through 2024 to almost $120B

Webscale drives projected forecast for enterprise edge

On Feb. 26, TBR senior analysts Nicki Catchpole and Stephanie Long were joined by hundreds of professionals across multiple vendors and verticals for TBR’s first webinar on the enterprise edge. The session, The emerging and evolving landscape of enterprise edge computing, focused on the components of the enterprise edge market — as defined by TBR — and projected market growth, in addition to touching on use cases in retail and agriculture that demonstrate the real-life applicability of edge computing across verticals.

In TBR’s definition, the enterprise edge market encompasses enterprises in all verticals, including communication service providers (CSPs). We explores CSP spend on edge infrastructure in depth in our Telecom Edge Compute Market Forecast (2019-2024).

Although edge technology is not new, it is still considered to be emerging, and growth rates are projected to increase significantly through 2024. The spending increase will occur to support connected devices, emerging workloads such as IoT, and faster time to insight on existing use cases and predictive analytics, with the ultimate goal of facilitating the adoption of digital transformation. The most notable driver of edge spend through 2024 will be the complex dynamics within the webscale space in support of digital transformation projects that were historically captured by OEMs.

Use cases in the agriculture and retail verticals demonstrate the value of edge computing across disparate industries

There are hundreds of individually documented and proven use cases for edge computing across many different verticals. A common theme is that edge computing across verticals makes it easier to process data at the source to refine and send it to an edge or cloud network for further analysis, AI applications and storage. During the webinar, TBR analysts covered use cases that touch consumers and vendors alike, focusing on examples in smart farming as well as retail.

Agribots enhance farm management while edge computing introduces benefits for brick-and-mortar retailers

Smart farming technologies mark a notable shift in how farms can be managed by introducing automation and predictive intelligence at scale. Even within this one industry, the examples are vast and varied. Agribots in the form of machinery, like autonomous tractors, interact with the surrounding environment, collecting data and communicating back to the cloud for longer-term analysis. Crop management and production life cycles are optimized through the automation and analytics enabled by edge at scale.

The examples in retail are as equally as diverse, ranging from in-store robots that can create a customized shopping experience to the implementation of AR/VR in fitting rooms. Benefits include improved customer experience as well as workforce and operational optimization.

Questions from attendees prompted a deeper dive

One attendee asked for more detail about what components TBR included in its market sizing estimates. There are many components of edge computing, with varying opinions around what should and should not be included. TBR’s enterprise edge market sizing includes hardware — server and storage networking — as well as close-to-the-box software and services.

Another attendee asked about the “vendor soup” among hyperscalers and whether there are online marketplaces such as Azure that facilitate the decision-making process or if it is largely left to systems integrators. TBR has seen offers from hyperscalers trying to sell more solutioning and recommending combinations of solutions to their customers. This type of approach, but with a more vertical focus in the marketplace, may promote market expansion to include solution advisory services. Implementation of edge computing is a multifaceted and dynamic process, and hyperscalers are well positioned to help customers through the process of selecting and integrating multiple different services.

Click here to listen to this webinar, The emerging and evolving landscape of enterprise edge computing, in its entirety

Insights from TBR’s inaugural Enterprise Edge Compute Market Landscape

The edge computing market spans a spectrum of use cases that meet various customer needs, including sensitivity for latency and analytics. According to TBR’s 1Q20 Enterprise Edge Compute Market Landscape, while the edge is not new, its use for low-latency-dependent applications and close-to-the-data computing has increased and will continue to do so to support connected devices, emerging workloads such as IoT, and faster time-to-insight. For example, in-store robots can interact with customers to create a customized shopping experience on the floor and use data around purchases to help restock inventory.

TBR predicts a rapid increase in enterprise edge spend through 2024. The dynamics within the webscale space  include a desire by managed service providers to run their offerings on bare metal hardware and ODMs with the ability to provide this bare metal hardware at lower price points than OEM peers. These dynamics will be a key driver behind the upswing in enterprise edge revenue through 2024 as webscales capture opportunities typically fulfilled by OEMs.

For additional information, read our special report Edge computing is a cross-industry revolution that will reshape every industry and contact an account executive about TBR’s Enterprise Edge Compute Market Landscape.

Edge computing is a cross-industry revolution that will reshape every industry

The edge computing market spans a spectrum of use cases that meet various customer needs, including sensitivity for latency and analytics. According to TBR’s 1Q20 Enterprise Edge Compute Market Landscape, while the edge is not new, its use for low-latency-dependent applications and close-to-the-data computing has increased and will continue to do so to support connected devices, emerging workloads such as IoT, and faster time-to-insight. For example, in-store robots can interact with customers to create a customized shopping experience on the floor and use data around purchases to help restock inventory.

TBR predicts a rapid increase in enterprise edge spend through 2024. The dynamics within the webscale space   include a desire by managed service providers to run their offerings on bare metal hardware and ODMs with the ability to provide this bare metal hardware at lower price points than OEM peers. These dynamics will be a key driver behind the upswing in enterprise edge revenue through 2024 as webscales capture opportunities typically fulfilled by OEMs.

Nearly all webscales and some telcos utilize ODM hardware, and most enterprises are expected to use OEM gear for their edge environments

ODMs have perhaps the largest opportunity at the enterprise edge. White-box hardware is of rising interest to major service providers, and the low-margin, high-volume play that ODMs embrace is an excellent fit for the enterprise edge market.

ICT hardware continuum graphic

TBR’s Enterprise Edge Compute Market Landscape, which is global in scope, details edge compute trends among vendors and their customers. Vendor coverage includes Amazon Web Services, Atos, Cisco, Dell Technologies, Digital Realty, Equinix, Hewlett Packard Enterprise, Huawei, IBM, Lenovo and Microsoft. This research includes current-year market sizing and a five-year forecast. Interested in hearing more of TBR’s analysis on the emerging and rapidly evolving opportunity in the enterprise edge market? Check out the replay of our recent webinar, The emerging and evolving landscape of enterprise edge computing.

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.

Lenovo unveils TruScale Infrastructure Services, consumption-based data center pricing

In February Lenovo’s Data Center Group (DCG) unveiled TruScale Infrastructure Services. A Hardware as a Service (HaaS) solution with subscription-based pricing, TruScale makes DCG’s entire ThinkSystem and ThinkAgile portfolio available to customers “as a Service” through both Lenovo sales associates and channel partners. For a monthly fee, customers will gain access to data center infrastructure, which can be installed at the customer’s location of choice. Cost will be based on power consumption, as power consumption is a relatively accurate way to measure usage without compromising infrastructure security. The hardware remains Lenovo-owned, -maintained and -supported, and with no minimum usage requirement, customers gain the financial flexibility available through public cloud offerings without the risks associated with taking data off premises. Further, the monthly pricing structure includes installation, deployment, management, maintenance, remote monitoring, system health checks and removal of the hardware once the subscription expires. Pricing details of the solution have not yet been disclosed and are likely to be determined case-by-case. The solution is currently available only in English and priced in USD and Euros.

DCG’s late-to-market status will be advantageous in the consumption-based pricing realm

DCG is a fast-follower in consumption-based pricing, as Hewlett Packard Enterprise (HPE) and Dell Technologies have offered consumption-based pricing for over a year. While these offerings have greater market longevity, as they are typically multiyear agreements, customer adoption remains relatively nascent for consumption-based pricing models. These deals are more complex than traditional hardware sales, and therefore require a mindset shift in some ways to promote adoption, just as cloud did initially. DCG’s entrance into the market times well with customer interest, and the vendor’s later arrival to the space will not prove to be a major inhibitor to growth.

The total inclusion of DCG’s channel partners, in addition to its direct sales force, in providing TruScale, is an asset and distinction for the group. Because Lenovo’s services portfolio is not as mature as that of vendors such as Dell EMC, providing channel partners with this opportunity will prove to be a win-win as it enables channel partners to sell attached services while affording Lenovo a more passive revenue stream. Involving the channel has been an initial challenge for some vendors offering consumption-based pricing as the partners need to be incentivized to pursue it over a traditional hardware sale, in which they would get a lump sum payout versus a subscription-like payout. TBR believes that because Lenovo has arrived to market later than peers with its consumption-based pricing offerings, it was able to work out channel partner challenges before going live with the solution.