The business of selling data center hardware designed to Open Compute Project specifications is booming – and not simply because of the insatiable demand from the handful of hyperscale cloud platforms that are this type of gear’s biggest consumers.
Omdia, the research firm the OCP Foundation has turned to for taking the pulse of the market for its hardware outside the companies that sit on its board, estimates that the market grew 40 percent last year, reaching $3.6 billion in revenue, or 2.25 percent of the total market for servers, storage, network, rack, power, peripherals, and so on. (Servers represent the bulk of the revenue.)
Again, that’s the estimated size of the “non-board OCP” market. It doesn’t include all the iron Facebook, Microsoft, and (to a much smaller degree) Rackspace have wheeled onto the concrete floors of their computing facilities.
Omdia expects the market to grow another 46 percent this year, to $5.3 billion, and to more than double by 2023, when it’s expected to reach $11.8 billion, growing 36 percent annually on average for the next three years.
Until this year, Facebook, Microsoft, and Rackspace were the only companies that operate their own data centers and don’t sell gear with seats on the board. The foundation announced this week during its virtual summit that Google has joined the board, becoming a fourth one.
Even though there are non-board hyperscalers – such as Amazon, Baidu, and until this week Google – this is not a scenario where a few big buyers are responsible for ballooning total market numbers. (Omdia considers a company “hyperscale” if the company has 3 million square feet of data center space or more.)
“The non-board category is exactly where there’s many small purchases from different companies that are accounting for the total market value,” Vladimir Galabov, principal analyst, data center compute, at Omdia, told DCK. (Disclaimer: Omdia and DCK are sister brands under the Informa Tech umbrella.)
The three non-board hyperscalers mentioned above started deploying OCP hardware in their data centers only recently, he said. The verticals responsible for most of the non-board OCP market are tier-two cloud service providers, telcos, and private and public sector enterprise IT shops.
Tier-two cloud companies were responsible for about 45 percent of the market in 2018. Last year they drove about 30 percent of revenue, and Omdia expects them to drive slightly under 30 percent in 2020.
The category expected to grow its share of revenue the most between now and 2023 is telecommunications. Telcos are investing in edge computing infrastructure, much of it going into their central offices to support virtualization of network functions.
Telco investment in 5G infrastructure is also driving some investment in edge computing for applications 5G is expected to enable, Cliff Grossner, senior director, research, and technical fellow at Omdia, told us, but a big portion of the telco spend has nothing to do with 5G. For example in the US, 5G is not a big factor for telco investment in OCP hardware, he said.
As you can see from the Omdia chart, non-board hyperscalers’ role within the overall market has shrunk substantially since 2016 and 2017, and it’s not expected to grow much into the foreseeable future. The big non-board OCP buyer categories going forward are enterprises, telcos, and tier-two cloud providers.
COVID-19 Headwinds and Tailwinds Likely to Balance Each Other Out
The Omdia analysts said they did not expect the COVID-19 pandemic to have a meaningful impact on their forecast because of the wide variety of user verticals represented in the total numbers.
Tier-two cloud providers and telcos have seen an increase in demand as a result of the pandemic-driven lockdowns, Galabov said. He expects them to invest in equipment to satisfy that demand, not cut back on orders.
But pullbacks are very likely in the enterprise category, especially by government agencies, which have had to spend huge resources to address the crisis while seeing tax revenues decline sharply. As far as the public sector is concerned, it’s safe to assume that “any refresh of equipment that can be delayed will be delayed,” he said.
There are also many private-sector industries that are facing a lot of uncertainty, and “it’s not very clear that they’ll be doing any investment whatsoever – in any type of equipment,” Galabov said.
But he expects the headwinds experienced by some and the tailwinds experienced by others to balance each other out overall.
Telcos’ Drive to Disaggregate and Innovate Fuels OCP Momentum
Servers have and continue to be responsible for most of the overall OCP hardware volume acquired each year, but the variety of technologies developed within the OCP framework is growing. That’s especially true in the telco category and partly the reason Omdia expects the category to continue playing such a big role in the ecosystem going forward, Grossner said.
There’s a lot of activity within OCP around cell-site network gateways, routers, and servers designed specifically for telcos’ needs at the edge. “It’s a market that’s looking for brand new solutions, and that’s the time when new vendors and innovators can jump in,” he said.
Telcos are drawn to OCP partly because of the innovation in the ecosystem and partly because the disaggregation that’s been a big design goal across its many projects helps them avoid vendor lock-in, Galabov explained. The next thing telcos want to disaggregate is core routing, Grossner said.
Telecommunications equipment is a space that’s notorious for big and expensive proprietary solutions, where all the components in a single box (both hardware and software) are designed to work together. Open specifications required by OCP allow different vendors to design different components that are interchangeable and can all enable a single solution. They’ve also allowed for new vendors to enter the space.
More Enterprise Types Interested
Last year was the year the enterprise portion of the non-board OCP market jumped substantially – from below 30 percent to above 40 percent – and that’s due to more government agencies, gaming, e-commerce, and energy companies buying the gear, as well as a modest increase in deployments by automotive and industrial users.
Many of the companies told Omdia they were deploying OCP to enable high-performance computing infrastructure. Automotive and industrial users have deployed OCP proof-of-concept installations to support edge computing for connected-car and Internet of Things initiatives, respectively.
Access Remains an Issue
While the non-hyperscale market for OCP equipment is growing, the equipment continues to be relatively difficult to source for smaller-scale buyers. Most of the big players on the vendor side of the ecosystem have traditionally focused on hyperscalers and haven’t built the supply chain and support infrastructure smaller companies look for in their hardware suppliers.
Access has improved over time, but it’s still an issue. “That barrier is still there today, but to a lesser degree,” Grossner said. “It’s not a totally solved problem.”
Some vendors have started offering server orders as small as one or two servers and in some locations there are already solid networks of OCP resellers and integrators, Galabov said. “I tried to order myself a couple of servers, and I was able to do that.” (He is based in London.)
Omdia has also identified “circular economy” as a new, potentially major growth driver for non-hyperscale OCP adoption. ITRenew, which specializes in decommissioning and reselling used equipment from hyperscale data centers, has been reconfiguring some of it into broad market-friendly solutions, certified for traditional software platforms, such as VMware. The company has seen a lot of interest in these solutions, especially by tier-two cloud providers, its president, Ali Fenn, told DCK.