Austin, Texas (January 29, 2018) – The data center industry is thriving – so it would seem. Cloud and colocation service providers top the headlines, citing significant double-digit growth and billion-dollar mergers and acquisitions. But not every piece of the data center puzzle is on cloud nine. Suppliers of centralized data center infrastructure, such as UPS, cooling, and power distribution, remain grounded, as data center consolidation, virtualization, and new design trends have absorbed much of the potential growth of our increasingly digital world. As Cloud and colocation service providers are forecast to continue to grow, while data center consolidation continues, should more turbulent times be expected for data center infrastructure suppliers? Possibly, but developing trends of hybrid cloud, artificial intelligence (AI), machine learning (ML), and edge data center deployments provide hope for a brighter future for these infrastructure suppliers.
One lens to assess the current, and future state, of critical, centralized data center infrastructure is through the UPS installed base.* Due to UPS’ being utilized in nearly all mission-critical data center applications (and the ability to infer applications from power ratings), the UPS installed base has an interesting story to tell.
At the end of 2017, the global three-phase UPS installed base was estimated at 1.13 million units. The power rating range of 10.1 – 100 kVA accounted for nearly 75% of the installed base, while systems above 100 kVA accounted for the remainder. In aggregate, the total UPS installed base has been slowly declining in recent years, but possibly more interesting is how the UPS installed base is shifting.
UPS Installed base analysis
The UPS installed base for the power rating range 10.1 – 100 kVA (associated with server rooms/network closets and small data center applications) is declining at the fastest rate, at low single digits levels. This is a symptom of data center consolidation. Small and medium businesses that operate data centers in this range are increasingly outsourcing to colocation and cloud service providers. New companies that would invest in compute in this power rating range are also increasingly being born and growing in the cloud.
The UPS installed base for the power rating range 101 – 500 kVA (associated with small and medium data centers) has a slightly different story due to regional differences.
- In the Americas, the installed base in this range is declining at a rate just above 2.0% annually, again due to data center consolidation. However, this decline may not be as much as expected, due to smaller or regional colocation or cloud service providers building data centers with UPS sized in this power rating range, offsetting a further decline.
- In Asia, the UPS installed base in this power rating range is growing at a rate close to 7.0%, due to design trends. In Asia, large data centers are more commonly built vertically, sized to smaller UPS systems, and built in a modular fashion.
- EMEA’s UPS installed base in this power rating range is relatively flat. This is due to a slower trend of data center consolidation (relative to North America) and the close proximity of countries to each other. This is leading to many enterprises still owning data centers, and those that are outsourcing are more likely to utilize smaller, regional colocation and cloud service providers within country borders for security reasons.
The UPS installed base for the power ratings above 500 kVA (associated with large and hyperscale data center applications) has become the most interesting. This segment has grown along with the trend in consolidation and movement to cloud and colo service providers. Currently, the installed base in this power rating range is growing above 5.0% globally, with double-digit growth in specific regions. With trends such as hybrid cloud taking hold and newer trends like AI/ML and edge deployments developing rapidly, how will this impact the UPS installed base and greater data center landscape?
Future trends and their impact on UPS installed base
One theme of 2017 was the hybrid cloud. These deployments grew in 2017, and large cloud providers made new software and hardware available to enable easier hybrid cloud adoption. Hybrid cloud adoption is being driven by enterprise’s ability to utilize cost friendly compute for specific applications in the cloud, while maintaining other mission-critical applications, predominately security or latency sensitive applications, on-premises.
In 2018, there is a greater focus on AI and ML. The number of IoT devices and the amount of data they create has been rapidly increasing every year, enabling vast data sets to be analyzed to transform enterprise’s business models. Cloud service providers are in the best position to offer services tailored to business needs for AI and ML, due to the otherwise high costs associated with the required infrastructure and compute. However, collecting and processing that data will require significant edge data center deployments. Some of that compute may sit in colocation facilities, but thousands of new data center deployments will still be required for latency sensitive applications where colocations may not have capacity. Applications that will require edge deployments will include low-latency financial trading, driverless cars, and AR/VR. These trends and applications are swinging the pendulum back from a centralized compute model towards a more distributed one, which may spell future success for data center infrastructure suppliers.
The rate of decline for the UPS installed base is forecast to slow in the near term, before returning to growth in 2021. The return to growth for the UPS installed base will be driven by power ratings above 100 kVA, with the fastest growth from systems above 500 kVA. The UPS installed base in the power rating range of 10.1 – 100 kVA will continue to decline, but at a slowing rate, as more edge and hybrid cloud deployments take hold. For data center infrastructure suppliers who have weathered the storm, created by the data center consolidation from colocation and cloud service providers, may have a reason to smile as sunnier days are forecast ahead.
*IHS Markit tracks the three-phase UPS installed base as a part of its UPS service and support report. The UPS installed base is analyzed by three regions, Americas, EMEA, and Asia, and further broken down by three power ratings per region, 10.1 – 100 kVA, 101 – 500 kVA, and above 500 kVA. This analysis utilizes primary research from OEMs and third-party service providers as well as incorporating research and forecasts from the IHS Markit UPS hardware market tracker.
A full assessment of the UPS service & support market is available from IHS Markit in the UPS Intelligence Service. The UPS service & support research provides in depth analysis across three major regions: Americas, EMEA, Asia, and 27 country level or minor region segmentations. The research is further segmented by 15 service types, six power ratings, and 13 end user segmentations. These statistics are estimated for 2016 and forecast through 2021. Supplier market shares and an analysis of the competitive environment are also provided.
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Senior Research Analyst, Cloud and Data Centers
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