The data center business is changing rapidly. The days of companies investing capital in their own in-house data centers are dwindling as cloud technology and services continue to diversify, expand, and become more affordable.
What trends are powering the most significant growth of global cloud application hosting? Our 2019 Market Report: State of Data Center, Cloud, and Applications provides analysis and unique insights on data center trends in light of the ever-expanding transition to cloud technology.
Data Center Trends
According to research by Intricately’s Global Sensor Network, three trends are having a significant impact on the global data center industry today:
- Trend #1: The Data Center Business Model Is Transforming
- Trend #2: Cloud Growth Is Not Slowing Down
- Trend #3: Hybrid Cloud Adoption Is Limited
Let’s take a look at each of these trends individually.
Trend #1: The Data Center Business Model Is Transforming
The continuing growth of the data center industry is largely fueled by a subset of an existing customer base: public cloud and platform providers. Rather than continuing to pursue traditional businesses, data center providers are moving toward serving large cloud service providers like Amazon Web Services (AWS), Google, and Microsoft.
More companies are abandoning in-house physical servers in favor of cloud hosting. According to Gartner, 80% of enterprises will eliminate their traditional data centers by 2025. As of February 2019, 10% of organizations already have. Creating traditional on-site data centers is prohibitive due to building and equipment costs, staffing, and continuing maintenance.
Trend #2: Cloud Growth Is Not Slowing Down
The explosion of cloud services and products continues to make it easier for businesses of all sizes to create high-performance solutions and deploy their digital infrastructure to the cloud.
Larger cloud players continue to grow, while smaller competitors specialize in niches like application performance management (APM) and content delivery (CDN) to maintain market position.
Global trends influencing the cloud market include:
- Rising customer expectations
- Niche CDN solutions
Rising Customer Expectations
The widespread use of mobile devices has triggered an unprecedented demand for constant access to content. Consumers have become used to high-bandwidth “over-the-top” (OTT) content such as on-demand video/music and live event streaming from their smartphones and tablets. They have come to expect fast, reliable, and easy-to-use applications.
Cloud technologies have made it possible for businesses to set up infrastructure quickly to conduct business on a global scale. Modern applications need to run from many locations, requiring cloud providers to offer high-performing hosting solutions internationally.
Most data center providers cannot hope to compete with big players like AWS, so they specialize in niche solutions. Artificial intelligence, security, and the developer experience help smaller data center companies set themselves apart and stay in business.
Trend #3: Hybrid Cloud Adoption Is Limited
There are clear preferences on hosting environments, depending on the size of the business involved. Enterprise companies have the most flexibility to use hybrid solutions, whereas startups heavily favor SaaS.
As a point of reference, business sizes are defined as follows:
- Enterprise = 1,000+ employees
- Mid-Market = 100 - 1,000 employees
- SMB = 10 - 100 employees
- Startup = less than 10 employees
As companies grow larger, their use of hybrid solutions increases in relation to their ability to have access to a data center presence, engineering team, and ample resources. Because of these factors, adoption of hybrid cloud environment is generally limited to Fortune Global 500 businesses -- and even those are struggling to fully integrate the technology.
Interested to understand what the distribution and growth of applications look like across cloud, hybrid, and data center environments? Learn more in the 2019 Market Report: State of Data Center, Cloud, and Applications. This report analyzes historical data from 2013 through July 2019 on data center environments and providers worldwide collected by Intricately’s Global Sensor Network.
Want to learn more about Cloud and CDN markets? Download our previous market reports here:
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