With the rising popularity of the cloud and the hyperscalers that seem to be taking over everything before them, it may come as a surprise to learn that the data center market is generally alive and well. Both local data centers and hyperscalers are thriving. Enterprises continue to operate data centers and most have no intention of changing this anytime soon.
Here are some of the top trends in data center networking:
Data center spending boom
Dell’Oro Group reports that data center capital expenditure (CAPEX) increased year-on-year in Q1 2022, the fastest since early 2019. This suggests that any COVID-related spending crisis appears to be over.
New cloud implementations and higher data center infrastructure costs pushed up CAPEX despite ongoing supply chain constraints. Data center managers add network devices, servers, storage and more to increase bandwidth and allow networks to take care of streaming and serve high-performance applications.
“The growth was attributed to higher average selling prices for data center equipment as vendors passed on supply chain costs to end users, as well as the introduction of new server architectures and accelerated computing,” said Baron Fung, research director at Dell’Oro Group.
“We anticipate further upside potential in data center CAPEX later this year.”
Hyperscaler build out
Meanwhile, hyperscalers like Google Cloud Platform (GCP), Microsoft Azure, and Amazon Web Services (AWS) continue to expand their operations. They are building stronger network connections between their facilities and connections from those facilities to key markets. They are investing in 5G, fiber and other high-bandwidth technologies. And they strive to provide better service to a wider range of customers.
“The top 4 cloud service providers are expanding their services and are expected to launch services in more than 30 new regions in 2022,” said Fung.
Enterprise data centers address supply chain disruptions
The data center equipment supply chain has been sluggish for more than a year. This drives prices up and delivery dates further into the future. The average selling price (ASP) for devices is up 6% as supply chain constraints continue to restrict unit shipments.
Despite higher costs, data center managers are spending more. In many cases, however, this is due to the need to upgrade aging network and server infrastructure, some of which should have been upgraded in 2020 but have been delayed due to the pandemic.
What are you investing in? Dell’Oro Group figures show that network switch sales have grown to near record levels. Vendors like Arista, H3C, Juniper, and Star-net Ruijie are among those capturing the largest chunks of the enterprise switch market. And data centers choose the biggest and best. Switches in the 25 Gbps, 100 Gbps, 200 Gbps, and 400 Gbps ranges accounted for nearly 70% of Q1 2022 shipments and 80% of revenue.
High-end 400Gbps switch shipments are particularly popular. They surpassed 800,000 ports in the quarter and their adoption curve is accelerating. The reason is simple. Data center connectivity requirements have never been higher. With a greater number of private clouds, 5G, ever-increasing Ethernet speeds, wireless networks in demand, and a workforce that is now more mobile than ever, there is a rush for networks to become faster, more resilient, and more secure. Expect the high spending on data center connectivity to continue for some time to come.
Data center as a service
Data Center as a Service is another growing trend. Faced with staff shortages, higher equipment prices and the need to invest heavily in their networks to keep up with technological advances, some data centers are now willing to hire outside vendors to maintain data center infrastructure. Known as Data Centers as a Services, these providers maintain the servers and provide network services as needed. Leading vendors include vendors such as Schneider Electric, Vertiv, Eaton, and Riello.
Less public cloud, more private
Bill Kleyman, Switch’s executive vice president of digital solutions, has observed a trend in which data center managers tend to favor private cloud arrangements over public clouds.
IInstead of migrating workload after workload to the public cloud, a whole range of workloads are now migrating back to private clouds. Of course, this affects the network requirements. Data centers are no longer solely focused on establishing the strongest possible network connection to their cloud providers. Instead, they must pay much more attention to internal connectivity to make the private cloud work for an increasingly dispersed user community.
“In our State of the Data Center 2021 report, we found that more than half of respondents (58%) reported noticing a trend for organizations to move away from the public cloud and toward colocation or private data centers” , Kleyman said.