Businesses are still ploughing money into on-premise data centres despite the rush to embrace the cloud. On-prem server spending is likely to remain unchanged over the next four years, market analysts say, though the massive investments being made by the cloud hyperscalers mean that they are taking the lion’s share of the market.
The new data from Synergy Research Group shows that the hyperscalers, led by Amazon’s AWS, Microsoft Azure and Google Cloud, now account for 37% of all worldwide data centre capacity.
How the data centre market is changing
Synergy says the number of large data centres operated by the hyperscalers is now approaching 900, with half of that capacity built by the companies themselves, and half in leased facilities.
With non-hyperscale colocation capacity, in shared data centres operated by companies such as Equinix and NTT, accounting for another 23% of capacity, that leaves on-premise data centres with just 40% of the total. This is in stark contrast to five years ago, when almost 60% of data centre capacity was in on-premise facilities, Synergy says.
Over the next five years, the analyst company expects hyperscale operators will account for over half of all capacity, while on-premise will drop to under 30%. But the total capacity of all data centres will continue to rise steadily, driven primarily by hyperscale capacity almost doubling over the next five years.
This means that, while the on-premise share of the total will drop by over two percentage points per year, the actual capacity of on-premise data centres will decrease only marginally. Colocation's share of total capacity will also remain relatively constant.
After the initial rush to the cloud a decade ago, businesses have started to look more closely at which workloads are best suited to running on a consumption model, employing multi or hybrid cloud strategies combining public cloud, private cloud and on-premise infrastructure.
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How many businesses are actually moving away from public cloud servers is unclear, but in October, David Heinemeier Hansson, CEO of project management software company Basecamp, said his businesses would leave the cloud, and the repatriation was completed last month. "The back-of-the-napkin math is that we'll save at least $1.5m per year by owning our own hardware rather than renting it from Amazon," Heinemeier Hansson said.
"And crucially, we've been able to do this without changing the size of the operations team at all. Running our applications in the cloud just never provided the promised productivity gains to do with any smaller of a team anyway."
Hyperscalers keep spending on data centres
But while some businesses are repatriating their data, the seemingly insatiable demand for cloud services means the hyperscalers will keep spending.
Amazon, in particular, has been splashing the cash, and in June, said it was investing a further $7.8bn in Ohio, where it already has facilities, to expand its data centre operations. Earlier this year it was reported it would put $13bn into Australian server farms, creating 11,000 new jobs in Sydney and Melbourne.
John Dinsdale, chief analyst and research director at Synergy Research Group, said that "as enterprises radically reshaped their IT investments and crimped spending on their own data centres, the leading cloud providers rapidly built out huge global networks of hyperscale data centres".
"Hyperscale operator growth was further fuelled by rapid development of more consumer-oriented digital services such as social networking, e-commerce and online gaming," Dinsdale said in emailed comments.
"Furthermore, while enterprises did maintain or slowly grow spending on data centre equipment, a growing proportion of that gear has been pushed offsite into colocation facilities. On-premise data centres will not disappear any time soon, but their scale is being increasingly dwarfed by hyperscale and colocation companies."
