Moore’s law economics has reached a point where compute no longer constrains IT automation.
Due to the miniaturisation of electronics, distributed computing is taking place at the microprocessor board level, as evidenced by the rise of graphics processing units (GPUs) and the resulting hyper-converged infrastructures.
As such, refresh cycles no longer consist of replacing old, standardised Intel servers with new variants.
Now IT departments look at the cost economics of the traditional standardised servers against the increasing number of compute form factor variants coming to market as purpose-built edge compute instances.
As compute form factors proliferate, there has been a shift in the type of skills IT departments require. Manual task-work becomes automated.
Technical skills have to incorporate more software functionality to operate the various management control planes that can monitor, manage and dynamically provision an enterprise IT instance.
Physical IT becomes less relevant based on abstraction, which allows for enterprise IT to reduce the number of primary suppliers. The margin protection for infrastructure vendors will come from the power and simplicity of the abstraction layer, be it PaaS or management, orchestration and provisioning.
The plot thickens when emerging technologies are placed on top of this evolving landscape.
Cutting-edge capabilities and the growing need to secure environments are further adding to the complexity of IT infrastructure, as is necessary to achieve desired outcomes.
Meanwhile, consumers want to reap the benefits of these emerging capabilities without dabbling in the complexities.
Infrastructure vendors will undergo many transformations — in how they partner, in how they go to market, and in how they innovate — to maintain relevance in a rapidly evolving 2019.
In an increasingly open-source world, the power of partnerships grows stronger within hardware-centric vendor strategies.
- Trend: Hardware vendors are pursuing deeper and more co-opetive partnerships to bolster emerging strategies around key technologies such as cloud.
- Driver: Increasing customer demand for open-source technologies and the ongoing pressures of commoditisation on infrastructure vendors’ bottom lines are encouraging co-opetive partnerships between infrastructure vendors as they work together to maintain relevance.
- Result: Co-opetive relationships will enable infrastructure vendors to push back against pressures from cloud-centric and software-centric counterparts. ODMs are also placing increased pressure on OEMs, reinforcing the need for these partnerships to ensure long-term viability.
Throughout 2018, the infrastructure industry has seen an increase in co-opetive relationships. There are, in general, two types of co-opetive relationships we are seeing emerge.
Lenovo and NetApp’s blending of infrastructure portfolios for a common goal demonstrates one type of co-opetive relationship.
The two relatively smaller companies are working together through an OEM agreement to take on market behemoths, such as Dell EMC, which has economies of scale and supply chain efficiencies on its side.
By working together, Lenovo and NetApp can benefit from expanding their customer bases.
Further, the joint venture formed by Lenovo and NetApp in China for storage products reinforces the advantages a larger company can amass and is a strategic way for companies struggling due to their smaller size to compete in the commoditising hardware market, which is forcing margins to slip and economies of scale to be an essential way to turn a meaningful profit.
However, supply chain efficiencies alone will not save these smaller vendors, as services are becoming an increasingly integral part of the infrastructure sale.
Dell Technologies’ approach to VMware is another example of co-opetition in the infrastructure market. VMware, although a part of Dell Technologies, is vendor agnostic when it comes to hardware.
Although Dell Technologies is embracing its “better together” mantra to encourage customers to pursue deals with Dell EMC and VMware, customers can leverage the hardware vendor of their choice in connection with VMware products.
This is necessary for Dell Technologies to secure high-margin software deals within VMware, even though it does have some potential to hinder Dell Technologies’ hardware portfolio.
Customers’ pursuit of openness makes this an essential piece of the vendor’s strategy.
TBR believes IBM’s pending acquisition of Red Hat will follow a similar pattern, with IBM embracing rivals, such as Amazon Web Services and Google Cloud, two of Red Hat’s technology partners, to maximise profits on its higher-margin portfolio pieces.
TBR anticipates more niche infrastructure vendors will follow suit with these co-opetive partnership tactics to remain afloat in a commoditising and cloud-centric market. It is possible that, in emerging markets such as quantum computing, leaders such as IBM will emerge as the clear choice for opportunities.
However, uniting smaller companies either through co-opetive partnerships or joint ventures will enable smaller companies to rise against the competitive pressures of incumbents.
Innovation will be reimagined by infrastructure vendors, as R&D is shifted to address the over-arching demand by customers to leverage their key IT vendor as a one-stop shop.
- Trend: Infrastructure vendors will lead conversations with services to land sales opportunities.
- Driver: The modern, fast-paced global economy is encouraging IT customers to adopt modern technologies as quickly as possible to keep up with their vertical competition.
- Result: This rapid pace of adoption, coupled with IT expertise shortages, is prompting customers to seek services-centric infrastructure opportunities to enable organisations with skills gaps to still capitalise on new infrastructure technologies. From an infrastructure vendor’s perspective, services are the higher-margin solution, so driving an infrastructure sale by leading with services not only helps seal the deal but also increases the profit value to the company.
Throughout 2018, hardware-centric companies have been investing in bolstering their software and services capabilities — through organic innovation as well as partnerships and acquisitions — to cater to customers’ evolving demands and create differentiation in an otherwise commoditising industry.
As we enter 2019 and cloud becomes a key focal point of the infrastructure vendor’s strategy, this transformation will need to accelerate for infrastructure vendors to maintain relevance.
However, a key challenge in the services space for smaller infrastructure-centric vendors is talent acquisition, as there is a well-known shortage of highly skilled IT personnel.
Vendors such as IBM that have a strong existing services arm, can play to their own portfolio strengths to tie hardware, software and services together for customers, but smaller vendors will have to pursue more strategic avenues to achieve similar success.
TBR anticipates crossovers between services and infrastructure vendors that will work together to capitalise on emerging trends, such as cloud and Internet of Things (IoT).
Security will also play a role in this evolving trend as customers increasingly seek to lean on their infrastructure vendors for all their IT needs.
Customers seek to work with fewer vendors to reduce the complexity of their environments, which will be another driver behind rising investments in services capabilities through acquisitions, partnerships and innovation by infrastructure vendors.
Emerging infrastructure technologies reshape customer demands, placing increasing emphasis on new ways of computing and managing data.
- Trend: Infrastructure vendors continue to invest in emerging infrastructure technologies, such as nonvolatile memory express (NVMe), GPUs, quantum computing and the edge.
- Driver: Rising security concerns emerging in part from commoditisation are reinforcing the value in hardware differentiation, while technological advancements place greater emphasis on new ways of handling data, such as edge computing.
- Result: Customers will seek new hardware capabilities to enable modern computing, such as quantum computing and the edge.
Emerging infrastructure technologies will lay the foundation for how companies compute and store data in the future.
Use cases such as artificial intelligence and machine learning are leading to the rapid creation of data, and data centre infrastructure vendors are tasked with the job of innovating to develop ways to harness the power of this data for their customers.
Vendors are innovating around emerging technologies, such as NVMe and GPUs, to handle the growing volumes of data being created and to enable computing on the edge so that customers can harness the power of their data faster once they are able to take the many disparate pieces of unstructured data and manage them.
The notion of moving the compute to the data rather than the data to the compute will enable these faster insights and has the potential to create greater value out of unstructured data.
TBR believes 2019 will see an influx of innovation around edge computing as well as data-centre- infrastructure-enhancing capabilities, such as NVMe and GPUs, as customers increasingly demand infrastructure that facilitates their desired business outcomes.
Quantum computing falls into another category entirely in the emerging infrastructure technology realm, as its innovation will have a far greater impact on the computational world than technologies such as NVMe and GPUs, which enhance existing capabilities.
That said, the emergence of commercial- grade quantum computing will make the last half-century of Moore’s law advancements seem quaint by comparison.
If classical computing transformed the record-keeping function of traditional manufacturing businesses, quantum will accelerate the advancement of knowledge businesses and accelerate the global economic shift from manufacturing to knowledge work and the resulting economic disruption.
There will be an exponential advancement in compute to apply against the world’s most complex algorithms aimed at solving intractable business problems. Work today rests on bridging the existing body of digitised IP to the new world of quantum computing.
By virtue of a one-to-many scale, forward-looking enterprises and technology firms work to build the API connectors and policy rules around algorithm development for bursting specific queries over to quantum computing and then returning the results to the classical computing form factors.
Given the performance boost quantum has the potential to provide, firms that have not at least built tiger teams to begin learning the new tools and methodologies available now from firms such as IBM (QisKit) and Microsoft (Q#) could find themselves at a distinct competitive disadvantage once quantum computing can outpace classical computing.
When the tipping point will occur remains open to debate; that the tipping point will occur should not. 2019 will see continued announcements of quantum breakthroughs.
2018 saw various innovators around quantum release papers signalling breakthroughs that have advanced the initiatives, and TBR expects similar occurrences in 2019 that should narrow predictions of when quantum will be a commercially viable alternative to classical computing.
Unknown is how many enterprises will be caught by surprise when quantum arrives, which will trigger economic extinction events.