bringing the cloud home: how data center hardware vendors are seizing private cloud opportunities

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T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

TBR’s Computing Business QuarterlySM

Research Highlights and Outlook Technology Business Research (TBR) Quarterly Webinar Series

Jan. 30, 2014

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2 TBR Quarterly Webinar Series | 1.30.14 | www.tbri.com | ©2014 Technology Business Research, Inc.

Christian Perry, Senior Analyst, Data Centers

Twitter: @ITwriter

Email: [email protected]

Computing Business Quarterly Research Highlights and 2014 Outlook: Webinar Presenters

Coverage and focus areas:

• Data center ecosystems

• Servers: x86, proprietary (UNIX/mainframe), microservers

• Storage: SAN, NAS, flash, object

• Converged infrastructure/integrated systems

• Private/hybrid cloud

• High-performance computing/hyperscale

Krista Macomber, Analyst

Twitter: @klmacomber Email: [email protected]

mailto:[email protected]


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• Data Center Landscape Overview

o Private-public cloud connection, buyer

concerns and behaviors

• Data Center Benchmark

o Customer comfort with public cloud will

drive opportunities in the private cloud

space.

o Private cloud deployments will

increasingly lead to storage hardware

pull-through opportunities.

o Evolving vendor landscapes create an

increasingly competitive data center

hardware market.

CBQ 3Q13 Research Highlights and Outlook: Agenda

TBR Data Center

Benchmark

Vendors:

Brocade

Bull

Cisco

Dell

EMC

Fujitsu

HDS

HP

Huawei

IBM

Juniper

NEC

NetApp

Oracle

Quantum

Unisys

Data center customers are changing their consumption habits as hardware technologies evolve

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Data Center Trends

Data center hardware vendors embrace the benefits of public cloud to drive private cloud solutions sales

Data center hardware vendors are accommodating private cloud

buildouts to build long-standing and profitable customer relationships

centered on IT agility and efficiency.

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Data Center Trends

Public Cloud Competition

Integration

Deployment

Private cloud vendors, including Dell, HP and IBM/Lenovo, must jump multiple obstacles to reach market success. Conveying the value of

private cloud solutions will be the biggest challenge for data center hardware vendors.

Data center hardware vendors will leverage close customer relationships to overcome barriers to adoption of private cloud solutions

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Data Center Trends

Hardware vendors are working to bridge the gap between public and private cloud solutions by providing scalable, pay-as-you-go pricing methods and tie-ins to cloud services.

Elastic pricing models and hybrid appliances will help hardware vendors bridge the public and private cloud divide

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CBQ 3Q13 Research Highlights and 2014 Outlook: The Data Center Landscape

• Data center revenue for the vendors tracked in TBR’s Data Center Benchmark, including servers, storage and networking, declined 2.8% year-to-year.

• Data center gross margin of 42.1% declined 140 basis points year-to-year, with all product segments posting year-to-year declines due to cloud-driven hardware commoditization.

Data center hardware and gross margins continue to decline as vendors compete on price, software and services

Revenue (in $ thousands) Gross Profit (in $ thousands)

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TBR believes Cisco, Lenovo and Huawei established themselves as significant competitors and will continue to gain share.

CBQ 3Q13 Research Highlights and 2014 Outlook: x86 Server

x86 Server Vendor Trends for 2014

As cloud models and x86 chip capabilities improve, hardware will grow increasingly commoditized. Dell, HP and Lenovo (IBM) will compete around services, support and software management capabilities to win deals.

The trend toward differentiating software and services delivered on low-cost hardware is evidenced by 3Q13 performance. In 3Q13 the efforts of Tier 2 OEMs to expand share cut into Tier 1 vendor efforts to compete on price to win server deals.

Tier 1 OEMs Dell, HP and Lenovo (IBM) will compete on price and workload-specific efficiencies to drive sales of x86 servers

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CBQ 3Q13 Research Highlights and 2014 Outlook: x86 Server

Note: Revenue base includes only the vendors in the above graph.

Average x86 server revenue growth improved sequentially in 3Q13, as customers continued to migrate workloads that traditionally required proprietary systems onto x86 servers

The continued migration of workloads away from proprietary systems drove average x86 revenue growth in 3Q13

Cisco

HP

HuaweiIBM

Oracle

Unisys

Dell

Fujitsu

Bull

NEC

15%

20%

25%

30%

35%

40%

-60% -10% 40% 90% 140% 190%

x86

Ser

ver

Gro

ss M

argi

n

x86 Server Revenue Year-to-Year Change

3Q13 x86 SERVER REVENUE GROWTH VS. x86 SERVER GROSS MARGIN TBR

NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE.SOURCE: TBR ESTIMATES AND COMPANY DATA

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Fujitsu is investing to differentiate its Sparc64 chip to gain Unix market share, but designing a competitive chip will prove more challenging for Fujitsu than for rival vendors with larger cash reserves such as IBM.

CBQ 3Q13 Research Highlights and 2014 Outlook: Proprietary Server

Unisys’ shift in its ClearPath mainframe strategy away from proprietary CMOS chips is a long-term play TBR believes will result in market share gains through improved solution flexibility.

Proprietary Server Vendor Trends for 2014

IBM is working to keep its Power server line relevant amid increased x86 server capabilities. However, the shift to Linux will help IBM correlate its value proposition to business cases.

Mainframe and UNIX server vendors work closely with customers on specific workload requirements to solidify their value propositions

TBR


CBQ 3Q13 Research Highlights and 2014 Outlook: Proprietary Server

In 3Q13 the global UNIX market continued to decline, and TBR expects the UNIX market will fall at a faster rate than the mainframe market through 2014

Leading proprietary server vendors IBM, Oracle and Fujitsu invest in new technologies despite continued revenue declines

IBM

NEC

FujitsuBull

Oracle

30%

40%

50%

60%

-30% -25% -20%

Pro

pri

etar

y Se

rver

Gro

ss M

argi

n

Proprietary Server Revenue Year-to-Year Change

3Q13 PROPRIETARY SERVER REVENUE GROWTH VS. PROPRIETARY SERVER GROSS MARGIN TBR


HP(-64.3%, 34.6%)

Unisys(-84.0%, 12.3%)


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Both large and small storage vendors are investing to address customer pain points associated with data proliferation through increased scalability and management simplicity.

CBQ 3Q13 Research Highlights and 2014 Outlook: Storage

Storage Vendor Trends for 2014

As today’s new applications drive rapid growth in size, speed and types of data, storage vendors have the opportunity to leverage private cloud solutions to help customers efficiently manage and secure data.

TBR believes effectively articulating cost savings enabled by flash is necessary for vendors to win deals in a marketplace that is highly competitive and focused around price and performance efficiency.

Storage vendors are using private cloud solutions to address customer requirements for efficient data management and workload optimization

TBR


CBQ 3Q13 Research Highlights and 2014 Outlook: Storage

Storage vendors’ hardware revenue is pressured by rising midmarket competition as vendors seek new revenue streams to offset limited enterprise budgets

Continued enterprise spending challenges and increasing midmarket competition accelerated storage hardware revenue declines in 3Q13

EMC

FujitsuHDS

HP

Huawei

IBMNEC

NetApp

Oracle

DellBull

Quantum

25%

35%

45%

55%

65%

-25% -15% -5% 5% 15% 25%

Sto

rage

Gro

ss M

argi

n

Storage Revenue Year-to-Year Change

3Q13 STORAGE REVENUE GROWTH VS. STORAGE GROSS MARGIN TBR



TBR


TBR does not expect SDN will contribute significantly to revenue growth for vendors until late 2014, at the earliest. However, efforts are under way to expand portfolios with SDN offerings.

CBQ 3Q13 Research Highlights and 2014 Outlook: Data Center Networking

Data Center Networking Trends for 2014

Security and software-defined networking are two of the primary drivers in the data center networking space, as customers seek to overcome challenges in their environments.

SDN lies at the heart of vendors’ cloud flexibility and efficiency value propositions. SDN solutions will drive pull-through sales of hardware.

Networking vendors expand their cloud capabilities with software-defined management and security to protect customer loyalty

TBR


CBQ 3Q13 Research Highlights and 2014 Outlook: Data Center Networking

Networking hardware revenue leaders Cisco, HP and Brocade will respond to shifting hardware demand by developing end-to-end networking capabilities and investing in disruptive technologies

Average year-to-year networking hardware revenue growth decelerated in 3Q13 due to commoditization and SDN technologies

Cisco

HP

Huawei

Oracle

Dell

BrocadeJuniper

25%

50%

75%

-20% -10% 0% 10% 20%

Net

wo

rkin

g G

ross

Mar

gin

Networking Revenue Year-to-Year Change

3Q13 NETWORKING REVENUE GROWTH VS. NETWORKING GROSS MARGIN TBR



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The whitebox trend moves to storage and networking.

Quarterly Topics

The flash storage market is evolving quickly and creating fertile grounds for competition.

CBQ 3Q13 Research Highlights and Outlook: Next Quarter Syndicated Topics

Data center ecosystems are morphing into workload-defined shapes that dictate customer purchase and deployment decisions

2014 will be ARM’s breakout year, but will server

customers make the transition?

TBR


Christian Perry Senior Analyst — Data Centers Email: [email protected] Twitter: @ITwriter

Krista Macomber Analyst Email: [email protected] Twitter: @klmacomber

James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166

Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel

CBQ 3Q13 Research Highlights and Outlook: Q & A




https://twitter.com/TBRinc

http://www.slideshare.net/TBR_Market_Insight

http://www.youtube.com/user/TBRIChannel

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Computing Practice Syndicated Research Coverage

Device Benchmark Vendors (Benchmark XLS data is also available)

Data Center Benchmark Vendors (Benchmark XLS data is also available)

Computing Vendor Coverage

• Acer* • Amazon • Apple • Asus* • BlackBerry • Dell • Fujitsu • HP • HTC • Huawei • Lenovo

• LG • Motorola* • Nokia* • Panasonic* • Samsung* • Sony • Toshiba • ZTE

• Brocade • Bull • Cisco • Dell • EMC • Fujitsu • HDS • HP

• Huawei • IBM • Juniper • NEC • NetApp • Oracle • Quantum • Unisys

• Acer* • Apple • Asus* • Dell • EMC • Fujitsu • Google • HP • IBM • Intel • Lenovo • Microsoft • NetApp • Samsung* • Sony • Toshiba

Corporate IT Buying Behavior & Customer Satisfaction Studies

• Desktops • Notebooks • Services & Support

• x86-Based Servers • Apple Enterprise PCs* • Cisco UCS*

TBR Computing Practice Syndicated Coverage

*Semiannual publication

TBR


Thank you, and see you next quarter!

www.tbri.com

@TBRinc

TBR

T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

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, telecom and enterprise network vendors, and operators.

Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.

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