The Enterprise Computing technology subsector, after peaking in 2015 (+5.6% over-year growth), will flatten out, stabilizing at +0.5% in 2016 with a +0.3% CAGR for 2015-18. The exceptional servers’ growth that caused the peak in 2015 is not expected to continue and by 2018 the market will expand by just USD +0.7bn. Key market dynamics shaping this sector remain cloud computing and hyper-scale servers.

Referring to segment dynamics, the servers segment is expected to drive growth while the storage market will slow down the subsector. Servers will exhibit a USD +2.6bn increment in revenues by 2018 (+1.5% CAGR). Hyper-scale data centers continue to be a key growth driver for this segment, although pausing in 1Q 2016. External storage will exhibit negative revenue growth, with USD -1.9bn revenue decline (-2.4% CAGR) to 2018. The switch towards cloud, integrated systems, and the adoption of all-flash arrays are key dynamics shaping the storage segment.

THE REGIONAL PERSPECTIVE

Emerging Asia Pacific (in particular, China) will be the region with the largest revenue increment of USD +2.4bn and highest CAGR (+4.8%). Most of this growth will be boosted by the servers segment (USD +2.2bn). On the other hand, the mature markets of Europe and the Americas will exhibit the largest declines (USD -1.3bn combined), almost entirely originated in the storage segment.

Enterprises under pressure to boost efficiency are increasingly engaging in alternative strategies to lower the ownership costs of enterprise storage.

Large service providers are building their own hyper-scale data centers to be able to expand on cloud and data analytics, while keeping their costs low. This strategy is feasible for providers that have the necessary in-house capabilities to ensure an acceptable level of build, manage, and support activities. However, many enterprises do not have similar capabilities and are therefore turning to alternatives like cloud computing or integrated solutions. Many smaller tier 2 data centers, lacking these in-house capabilities, are in fact more reliant on service-oriented products provided by OEMs.

The overall development of Enterprise Computing is posing significant challenges to companies´ supply chains as well as to logistics providers. The expected increase in servers´ shipments opens growth opportunities in that segment but, at the same time increased competitive pressure in the market poses higher cost efficiency requirements. Moreover, there is an increasing need for differentiated supply chains to serve low-cost ODM sourced hyper-scale data centers, opposed to the service-oriented OEM vendors. Lastly, an efficient technical distribution and flexible service parts logistics will be increasingly important in this rapidly changing market.

WHAT COMES NEXT

DHL will be publishing more Technology Subsector Market Monitors about PCs & Notebooks, Mobile Devices, Imaging and Printing, Semiconductors, Networks, Consumer Electronics, and Enterprise Computing.

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DHL TECHNOLOGY MARKET INTELLIGENCE SUBSECTOR DEFINITION

The Enterprise Computing Technology Subsector is among the key subsectors regularly monitored by DHL. This subsector includes two segments: Servers and External Storage. CAGR is used as an abbreviation for Compound Annual Growth Rate and refers to the period 2015-2018. Incremental growth refers to the period 2015-18 and is expressed in USD bn. Data Source: Gartner 1Q 2016.

Published: July 2016

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