With the surging popularity of the cloud, and the hyperscalers appearing to conquer all before them, it might be surprising to learn that the data center market in general is alive and well. Both the local data centers as well as hyperscalers are thriving. Enterprises continue to operate data centers and most have no intention of changing that in the immediate future.
Here are some of the top trends in data center networking:
Data Center Spending Boom
Dell’Oro Group reports that data center capital expenditures (CAPEX) grew at the fastest rate year-over-year in 1Q 2022 than they have since early 2019. This indicates that any COVID-related spending malaise appears to be over.
New cloud deployments and higher data center infrastructure costs drove CAPEX higher despite persistent supply chain constraints. Data center managers are adding networking gear, servers, storage, and more as they seek to increase bandwidth and enable networks to take care of streaming and serve high performance applications.
“Growth was attributed to higher data center equipment average selling prices as vendors passed supply chain costs to end-users, and from the adoption of new server architectures and accelerated computing,” said Baron Fung, Research Director at Dell’Oro Group.
“We anticipate further upside in data center CAPEX later this year.”
Hyperscaler Build Out
Meanwhile, the hyperscalers such as Google Cloud Platform (GCP), Microsoft Azure, and Amazon Web Services (AWS) continue to expand their operations. They are establishing stronger network connections between their facilities as well as connections from those facilities to key markets. They are investing in 5G, fiber, and other high bandwidth technologies. And they are intent on delivering better service to a wider range of customers.
“The Top 4 cloud service providers are expanding their services and are scheduled to launch services in more than 30 new regions in 2022,” said Fung.
Enterprise Data Centers Address Supply Chain Disruption
The supply chain for data center equipment has been sluggish for more than a year. This is driving prices up and delivery dates further into the future. The Average Selling Price (ASP) for equipment has jumped by 6% as supply chain constraints continue to limit unit shipments.
Despite higher costs, data center managers are spending more. But in many cases, this is driven by the need to refresh aging networking and server infrastructure, some of which should have been upgraded in 2020 but was delayed due to the pandemic.
What are they investing in? Dell’Oro Group numbers show networking switch sales growing at almost record levels. Vendors such as Arista, H3C, Juniper, and Star-net Ruijie are among those capturing the biggest chunks of the enterprise switch market. And data centers are opting for the biggest and the best. Switches in the 25 Gbps, 100 Gbps, 200 Gbps, and 400 Gbps range comprised nearly 70% of shipments in 1Q 2022 and 80% of revenues.
Higher-end 400 Gbps switch shipments are especially popular. They exceeded 800,000 ports for the quarter and their adoption curve is accelerating. The reason is simple. Data center networking needs have never been higher. With a greater number of private clouds, 5G, ever faster ethernet speeds, wireless networking in surging demand, and workforces now more mobile than ever, networks must become faster, more robust, and more secure in a hurry. Expect high spending on networking in data centers 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 to invest in their networks to keep pace with technological advances, some data centers are now willing to let outside providers take care of data center infrastructure maintenance. Known as Data Center as a Services, these providers maintain the servers, and supply networking services as needed. Among the leading providers are vendors such as Schneider Electric, Vertiv, Eaton, and Riello.
Less Public Cloud, More Private
Bill Kleyman, Executive Vice President of Digital Solutions at Switch, has observed a trend of data center managers tending to favor private cloud arrangement over the public cloud.
Instead of workload after workload heading to the public cloud, a good number of workloads are now heading back to private clouds. This, of course, impacts networking demands. Data centers are no longer focusing solely on establishing as strong a networking connection as possible to their cloud providers. Instead, they must put a lot more attention on internal networking to make the private cloud function for an increasingly dispersed user community.
“In our 2021 State of the Data Center Report, we found that more than half of respondents (58%) reported noticing a trend for organizations to move away from the public cloud and look to colocation or private data centers,” said Kleyman.