There is an emerging trend in the cloud era, that of a decline in data centers. Companies are finding more appeal in renting servers, consolidating their IT resources, and moving to the cloud. The IDC reported that the use of data centers peaked in 2015. There were 8.55 million of them that year, but the number started declining thereafter. The organization expects the number of worldwide data centers to decrease to 8.4 million in 2017, and to 7.2 million by 2021.

Although total square footage increased to 1.8 billion square feet, thanks to pushes by Microsoft, Amazon, and Google, even this is expected to go on the decline. Cloud data centers are on the rise, and Cisco’s Cloud Index recently predicted three quarters of data center workloads would be running in the cloud by 2018. The cloud is a major factor in the current trends in data center use.

Effects of Cloud Adoption on the Data Center

Synergy Research Group recently reported static spending on enterprise data center equipment. However, spending on service provider data centers is increasing. Using vender-run infrastructure is often a preference for enterprise customers, rather than buying their own server and storage resources. Ten years ago, about 90 percent of enterprises had their own data center space, which is now about 77 percent today. By 2020, only about 50 percent of enterprises are expected to run their own data centers.

Vendor data centers are providing companies with many benefits. They don’t have to manage their own equipment and maintain it. All that is covered in one monthly price if an enterprise customer works with a vendor. “Pay-for-use” pricing models are emerging as well. That means they pay for only the storage and bandwidth needed according to demand – it can be added or subtracted at any time, as needed. Power usage varies as well, so corporate customers may not have to pay a constant rate if they aren’t contributing to the vendor’s data center power bill.

Companies are also having a hard time predicting what their demand and even IT equipment needs will be in a few years, which may cause some to transform IT operations. Flexible payment plans are allowing them to access crucial resources without committing to contracts and equipment purchases that could cost them down the line. Thus, another reason that data centers are not being utilized as much.

Service Provider Data Centers Are Growing

There is still growth in this area, but the IDC says even here it is moderating. The greatest declines are for in-house data centers. This in-house equipment is often not compatible with the cloud, and companies are being forced to re-architect their IT infrastructure. The cloud isn’t always the least expensive option. The greatest advantages of the cloud over on premise systems is flexibility, speed, and a lower operating expense.

When one looks at revenue, however, the data center system market is barely growing. That includes minimal growth in profits for hardware and software, according to Gartner, a leading research firm. Overall, spending and activity is decreasing in the data center segment. Server power is being rented from some of the larger organizations in the market, including Google, Amazon, and Microsoft.

In terms of in-house use, and overall spending, data centers appear to be on the decline. That doesn’t mean enterprises are using less data or not requiring up-to-date IT resources to survive. Massive data centers owned by a few leading corporations are dominating the space, and are expected to account for a majority of service provider data center construction by 2018, IDC has said. In fact, it predicts such facilities will account for 76.2 percent of all projects by then. The trends, therefore, depend on how one looks at them; large data centers are alive and well, and expected to stay strong.


by: Rick Delgado