Virtualization and the rapid rise in server processing power are enabling data centers to do more with less. These advances are affecting all aspects of data center operation and hardware. So one would be correct in assuming that with virtualization and improved server technologies comes a significant impact on the market for IT racks and enclosures, the most basic component of infrastructure and design in a data center—but in what direction? IMS Research just completed a study on the IT racks and enclosures market that examined the impact of these, and other, trends on the market. The study found that virtualization and increases in server processing power do have a negative effect on the racks market. These effects, however, were overpowered by the ever increasing demand for computing power, the nature of frequent data center refurbishments, and emerging markets building out data and networking infrastructures. The end effect is a market forecast to grow $1 billion over the next five years, from an estimated market size of $1.7 billion in 2011 to $2.6 billion in 2016.
How Virtualization and Consolidation Could Reduce Data Centers Rack Count
Let’s start with virtualization, which, for the purposes of this article, is defined as software that partitions a physical server into several smaller, virtualized servers. It enables multiple applications to run on one server and adjust for dynamic changes in usage. The theory is that by creating enough virtual servers on one physical device, you maximize the machine’s processing power and utilization. The result is a reduction in the number of servers.
Secondly, we look to the rapid rise in server processing power and how this is driving server consolidation. Progress in server design means that one server now has the computing capacity of multiple servers from years ago. Blade servers, for example, offer a tremendous amount of computing power in one-third the amount of rack space as a traditional server once filled. According to Moore’s Law, the number of transistors in a microchip will double every two years, meaning that server processing capacity effectively doubles every 24 months. And this means that fewer servers are needed to do the same amount of computing.
Both virtualization and improved server processing power leads to a decreased number of servers in a data center for a given computing load, which implies that fewer racks and enclosures are needed to store the ever dwindling hardware, right? Surprisingly, not as few as one would expect. IMS Research’s study on the market for IT racks and enclosures found that global shipments grew roughly 7% in 2011. And in the US, where virtualization is more common than most regions, the market experienced an even higher growth rate in 2011. If virtualization and server consolidation are having such a negative effect on shipments, why is the market still growing?
Why Virtualization and Consolidation are Not Decreasing the Rack Count
IMS Research found three major reasons why growth in the racks market continues in spite of virtualization and server consolidation. First, shipments continue to grow because digitization and computing demands are well outpacing the strides made in the consolidation of servers. When a hard-working IT manager reduces six servers to three to handle the same amount of computing capacity, the company still asks for multiple new servers to handle all the new applications it now requires. In most cases, computing demand is simply increasing faster than IT managers can consolidate.
Second, these new and improved server designs and processing capabilities mean that technology refreshes occur more frequently in the data center; in some scenarios they may even refresh every two years given the nature of Moore’s Law. Refreshes are usually carried out through the replacement of old equipment with newer, faster, higher-capacity servers. When this occurs, data center managers may decide to also do a cabinet refresh to avoid downtimes that would occur if they moved old servers out of a cabinet and new servers in. The cost of racks pales in comparison to that of all new server technology, so a data center manager is unlikely to risk downtime to save on the cost of the racks. This constant refurbishment cycle can have a positive spillover affect on rack equipment.
Moreover, new server designs enable more servers to fit into a rack. So when refurbishments occur, more servers per rack means a greater power density at each rack and therefore more heat being generated. Up to this point, we’ve been talking about increased shipments of racks, but the need to manage heat and airflow are causing an increase in rack and enclosure revenues as well. IMS Research forecasts an average market revenue growth of 9% annually through 2016, driven partially by the movement toward higher-priced products. Many enclosure manufacturers have come up with new and innovative ways to manage airflow at the rack level, ultimately saving the steepest expense facility managers face: cooling costs. A one-time purchase of a well-designed enclosure is well-worth the years of savings in electricity bills.
The third reason growth in rack shipments continues is because of emerging markets that are now building out their networking and data center infrastructure. Shipments of enclosures to very large geographic regions like Brazil, Russia, China and the Middle East are increasing at double-digit growth rates each year. Just looking at China, annual shipments in 2016 are forecast to be nearly double estimates in 2011. Unlike some of the more mature data center markets like the U.S. and Europe, these regions are building infrastructure at an exceptional rate to handle their large populations’ demands for connectivity and data storage.
Virtualization and improved server processing capabilities are changing the landscape of the racks and enclosures market. When comparing like-for-like computing needs, there is a definite reduction in the number of racks required. But three other factors are at work in the market, having a stronger positive influence: rapidly growing computing needs, technology refreshes and the associated refurbishments, and infrastructure build-outs in emerging regions. IMS Research believes that growth in the IT racks and enclosures market caused by these three latter factors will eclipse the negative pull that server virtualization and consolidation have on shipments of racks.
About the Author
Elizabeth Cruz is an analyst in IMS Research’s Data Center Infrastructure group, which covers a wide variety of data center hardware and services. Since joining IMS Research (recently acquired by IHS—NYSE: IHS) in 2010, Elizabeth has authored detailed research reports on uninterruptible power supplies (UPSs), home appliance design trends, UPS service and IT racks and enclosures, and she is now commencing research on the market for containerized data centers. She is available for questions and comments at firstname.lastname@example.org.
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