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Digital transformation has already taken a toll on traditional data centre hardware suppliers

As digital transformation is adopted by more organisations, suppliers of traditional data centre suppliers have seen their hardware revenues begin to decline.

Adoption of virtualisation, hyper convergence and public cloud technologies have increased as businesses have begun to embrace cloud computing, allowing them to achieve more without investing heavily into new hardware. Data centre hardware suppliers though are facing slow sales as a result of enterprises adopting this new technology.

Technology Business Research (TBR) has released a new Data Center Benchmark report that sheds light on the fact that the companies who provide data centre hardware have seen a 4.3 per cent year-on-year drop in revenue during the second quarter of 2016. This drop in revenue was also accompanied by a 5.4 per cent fall in gross profit which has led analysts to urge traditional data centre suppliers to rethink their business models entirely.

Krista Macomber, senior data centre analyst at TBR, offered further insight regarding the ways that these new technologies have disrupted the business model of data centre suppliers, saying: “At a quickening pace, customers are embracing software-defined functionality and service-based delivery for business-critical workloads and data centre consolidation initiatives. For mainstream hardware suppliers, this shift necessitates business model evolutions that are equally as radical to remain relevant.”

TBR's report also revealed that industry-standard servers (ISS) have been in higher demand during Q2 with their revenue up 39.8 per cent year-on-year. This technology is quickly being adopted by businesses that need an IT infrastructure that is more cost-effective as well as more flexible. It is no longer worthwhile for organisations to use proprietary servers as they attempt to digitally transform their businesses.

Data centre research analyst at TBR, Stephanie Long, noted that Dell-EMC, HP and Brocade are all being forced to ensure that their products align with the way that enterprise is currently headed. Long also predicted that the data centre market will continue to be more competitive than it once was, saying: “Shrinking opportunities to differentiate on hardware and consolidation of the supplier landscape will result in a highly competitive market for the foreseeable future.”

In the past, companies needed to operate their own servers to function but as cloud computing companies have emerged to fill that role for them, more organisations are trusting their data in the hands of others with better servers and more resources. 

Image Credit: Scanrail1 / Shutterstock


After getting his start at ITProPortal and then working with the TechRadar Pro team for the last several years, Anthony is now the security and networking editor at Tom’s Guide where he covers everything from data breaches to how to cover your whole home or business with Wi-Fi. When not writing, you can find him tinkering with PCs and game consoles, managing cables and upgrading his smart home.