Hyperscale data centers: scaling up the ODM server and storage market

The cloud infrastructure is expected to grow at a rapid CAGR of 50% year on year. Organizations with huge cloud requirements such as Amazon, Google, and Facebook are adopting hyperscale data center infrastructure to cut costs.

A hyperscale data center provides a single massively scalable computer architecture. The deployment can be made from off-the-shelf servers that are cheaper than proprietary hardware and software. The cloud providers are expanding their data centers at the rate of 20% to newer locations through the hyperscale model to manage increasing workload. The growth of network functions virtualization (NFV) and software-defined networking (SDN) is also influencing the design and development of data centers.

According to the International Data Corporation’s (IDC’s) Worldwide Quarterly Cloud IT Infrastructure Tracker, the total spending on IT infrastructure products for deployment in cloud environments will increase by 18.9% to reach $38.2 billion in 2016. The shift towards hyperscale data centers increased the market share of ODM (Original Device Manufacturer) server providers. Instead of choosing mainstream OEM (Original Equipment Manufacturer) servers, organizations prefer ODM-supplied servers or “white box servers” due to their low cost, innovative and efficient design, and ability to customize system capabilities.

By selling servers to enterprises, ODMs are estimated to corner an 18% market share by the end of 2018. They have already started to impact the market share of external controller based storage vendors such as EMC, Netapp, and IBM due to the increased adoption of open stack storage solutions. On the server front, ODMs’ direct sales to hyperscale data center operators helped its 1Q15 revenue increase by 23.1% to $1.8 billion, according to an IDC (International Data Center) report.

ODMs currently account for a 28.8% share in the Cloud IT infrastructure market. Facebook’s OCP (Open Compute Project), an initiative where a group of companies share efficient server and data center designs online, helped it save $2 billion since its launch in 2011. The success of the OCP initiative is encouraging tech leaders such as HP and Cisco (CSCO) to join the open-source initiative. ODMs are also expanding their customer base and building hardware on OCP designs that are available for smaller companies.