UK Data Centre Highlights
- Excluding applications and maintenance the UK spent £15.7B last year
- Internal staff accounted for 51.2% (£8.0B)
- Infrastructure software spending was 17.7% (£2.9B), Network 13.6% (£2.1B), Server 11.9% (£1.9B), Storage £870m (5.5%)
- Cisco led with a 14.2% share (£1.1B) of external spending, followed by IBM (8.5%), HP (7.3%) and Dell (5.7%)
- Despite the ‘mega trends’ external data centre spending remained at £8B in 2011, 2012 and 2013
- Manufacturing spent most (24.5%) followed by Retail/Wholesale (17.0%), Government (13.7%) and Finance (11.0%)
- Despite many case studies Health and Education were only 7.1% of spending
- The improvement of the economy and vendor changes make this very dynamic in 2014
The UK market is very open and full of suppliers, thanks to a sharing culture and a common natural language with the US – the world’s largest IT marketplace at present. Marketing material typically comes for free with US companies almost always establishing themselves there first as they expand internationally. Nevertheless there are some major differences between the UK market and those in the US, Germany France and others. There are no indigenous suppliers following ICL’s sale to Fujitsu many years ago – at least in the hardware markets which are the subject of this research paper. We show market shares and sizes for the data centre market in the Figure.
System and data centre suppliers are always talking up the need for customers to transform their data centres in order to meet the otherwise insurmountable challenges of Big Data, Mobility, Cloud, etc. However the cost has been very consistent – external IT spending in our data centre category has remained at £8 Billion in 2011, 2012 and 2013. Getting more bang for buck has been the name of the game and vendors have become more competitive as the fight over the funds available. As the UK economy starts to grow in 2014 so there are more opportunities for vendors to expand. You’ll want to learn more about the size and shape of this very important market.
What’s in the Data Centre?
For the purposes of this article we’ve included infrastructure software, enterprise networks, servers and storage as external spending areas and calculated the amount customers are spending on internal staff. We haven’t included telecom service or application software spending, outsourcing and implementation service , or SaaS, PaaS or IaaS for that matter. We’ve excluded hardware or software maintenance, which would add another £450 and £500 million respectively to the total. We have include all spending of the offerings included to business markets only, but have not excluded small business usage.
In terms of external data centre IT spending accounted for 9.7% (£7.7 Billion) of the total of £79.9 Billion ITC market in 2013. The market leaders were the big systems vendors of course, header up by Cisco (14.2%) due mainly to its massive 47.0% share of the enterprise network market. It has grown as a server vendor achieving a healthy 4.4% with its UCS products. It is spreading its strategy by adding storage by acquiring Whiptail and entering as a public Cloud supplier recently.
IBM in second had an 8.5% share of all markets. it participates in all, although its Blade Network products gave it only a small share of the network market where it continues to partner with Cisco and others.
HP has a smaller market share in the UK than in many other countries, being beaten by IBM in all sectors apart from network. Although it was in second place to Cisco in the worldwide network market, it was also beaten by Huawei, Brocade and Alcatel Lucent in the UK last year.
Dell has a stronger position in the UK than in Europe overall. As a data centre supplier it was in fourth position with a 5.7% share in 2013. It came second in server and fifth in storage systems last year. Although a strong leader in storage EMC’s absence from the other markets gave it only a 3.4% share of the overall data centre market (we’ve treated VMware as a separate company in this analysis).
Few changes in market sizes
There was a slight downturn in Infrastructure software spending and up tick in storage systems in Q4 2013. There are also significant seasonal shifts in spending on server and (to a lesser extent) storage markets – see Figure. Nevertheless the total spending on external IT has remained very constant at £8 billion in each of the last 3 years. There’s been little cross-play between contributing categories apart from infrastructure software companies claiming users can save money on hardware by purchasing their products. In our interviews with UK data centres this year we’ve come across a large number who have invested in new hardware for the first time in a number of years and many who see the cost of software increasing as a proportion of their total spending. Hardware spending is significantly less than it might be due to the extensive adoption of advanced virtualisation in the UK. Vendors have failed to persuade customers to invest more in storage systems through their Big Data campaigns, although the wider use of disk drives and Direct Attached Storage is somewhat hidden from this view. We’re not seeing a demand for extra capacity exceed that driven my Moore’s Law in any of the hardware areas.
Manufacturing the largest vertical
Breaking the 2013 internal and external data centre spending down by industry sector (see Figure) gives us some interesting results. In particular:
Manufacturing led, accounting for 24.5% followed by Retail/Wholesale with 17.0%, Government 13.7% and Finance 11.0%.
Education and Health Care together represented only 7.1% of total spending, despite often being quoted by vendors as references and in case studies.
Large companies (those with more than 1k employees) accounted for 50% of spending, medium (100-1k) 17% and small 33%.
Last year saw stagnation in Manufacturing and Finance, a reduction in spending in – especially Central – Government and a significant increase in Health and (to a lesser extent) Education.
Some Conclusions – Boats, Tides and Data Centres
The rising economic tide is not lifting all boats equally – rather data centre spending is increasing first in commercial sectors and large companies. We expect some major changes in the landscape from vendor activity as well – the offloading of IBM’s system x to Lenovo, Cisco’s increasing interest in storage and moving away from its traditional up-stream partnerships, HP’s resurgence, the growth of Huawei, as well as the battle between VMware, Microsoft and Red Hat for data centre virtualisation will all play their part in making this an increasingly dynamic market.
Try see it my way… there are many different ways to slice and dice the market, so let us know how you’d like to see it for your business planning.
The long term competitiveness of storage and cloud services provided by the UK for the worldwide market depends on the cost of energy. On grid energy is much too expensive in the UK. So datacentres will be located where off-grid power is abundant.
If the UK Government could intervene to ensure the provision and control of such cheap off-grid energy supplies whether in the UK or abroad, then the UK could be a major player in the Cloud benefiting the economy for decades.
The government intervention is also required to re-nationalise the Internet from USA control as Germany and France are likely to do too.
The storage of data is one of the basic operations of a computer, but this simple concept has brought about a host of charlatons to confuse, complicate and eventually relieve the customer of his wallets contents.
This will become harder to do when clients use public Cloud Services more and more.
Apart from small rich companies, badly-advised blue chip companies and government bodies who seem to have £billions to waste on hopeless I.T. projects, the rest of us will use special cloud servers running linux and mainly opensource software.
Datacentre owners will not be able to pay excessive license fees from MS for example, when you have 10,000 servers this is becomes evident, even to top government I.T.employees, many of whom are ex-senior MS executives.
The point is well made in the article above that the gravy train that was storage will come to a stop and more VFM found. This is indicated by the money spent remaining flat over the years. I would anticipate it will stay flat or tumble as cheap overseas cloud providers steal the majority of the UK Data Centre business.
Rich
Many thanks – as provocative as ever.
From my point of view it’s not just the cost of electricity, it’s also where the network pops up and carbon taxes which contribute to where data centres get planted, otherwise Iceland would win hands down. The UK government is beginning to get its act together on carbon taxes at least.
I agree with you on the US dominance of the Internet and the need for something better locally and regionally – but who’s going to do it?
On the software issues, much of it is never used (Centrix says only 5% of Powerpoint is ever accessed again after being installed) and there are very high prices for maintenance even when a customer doesn’t need to use the latest upgrade. The move to enablement and subscription is being used to hook customers in, but is much more costly for them than buying perpetual licenses used to be.
I agree with you on the importance of Cloud and Linux, but we also need some European and UK hyperscale user/suppliers in the mix; otherwise we’re just going to trade the dominance of HP and IBM for that of Amazon and Google.
Best Wishes
Martin