Software business has long way to go in cloud era, says TBR

The cloud components market is expected to grow at a CAGR 12 percent to an estimated $44 billion by 2020, Technology Business Research (TBR) said.

This market segment encompasses the foundational building blocks for on-premises cloud environments.

The research firm noted that innovation, mergers and acquisition activities are widespread in the Cloud Components Market as vendors bolster their portfolios.

Emerging technologies in this market segment include hyperconverged platforms, software-defined networking and hybrid cloud solutions. These are expected to drive long-term growth.

While hardware will remain the largest segment,TBR expects software to grow considerably faster over the long term as orchestration and management of hybrid IT environments become more commonplace.

The recent announcement by networking giant Cisco to shift its business to a software-centric underlines TBR’s statement.

“There is significant opportunity for cloud components vendors to gain market share in areas such as orchestration, operations management and security as these segments provide key tools for supporting hybrid environments,” said TBR Research Analyst Sanjay Medvitz.

That being said, customers will continue to focus their hardware budgets on cloud data center build-outs that are based on modular, standards-based and more open server, storage and networking equipment.

However, software-driven commoditization will dampen the hardware cloud components CAGR through 2020.

In this environment, hardware providers will turn to key growth areas — notably hyperconverged platforms — to maximize revenue growth.

“The advent of hyperconverged platforms marks a newfound opportunity for on-premises infrastructure deployments to compete with public cloud services around cost-effectiveness and agility,” said TBR Data Center Senior Analyst Krista Macomber.

“As a result, customers are heavily leveraging hyperconverged platforms to support private cloud deployments. This creates an inroad for systems vendors to retain core enterprise workloads on premises.”

In the first half of 2016, Hewlett Packard Enterprise (HPE), IBM and Cisco held top market share among vendors leveraging core legacy strengths and install bases alongside evolving portfolios.

Over the next four years, TBR says, the cloud components market will consolidate and experience leadership shuffling as larger vendors such as IBM, Microsoft and VMware improve components capabilities with niche acquisitions and others such as Dell and HPE divest noncore assets to refine strategies and portfolios.

While the top share of the market remains well-established, TBR expects competitive entrants that are native to disruptive technologies will continue to emerge.

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