Data Center Market Growth in SMB Sector

There has been a clear move by data center providers recently to target the enterprise market for not just large scale opportunities, but many have also developed service offerings for the SMB market.

Many data center providers recently have developed service offerings for the SMB market. While the data center industry as a whole is still expanding, operators have identified that growth trajectory for the biggest data center consumers – Internet, cloud, system integrator and financial services – is not indefinitely sustainable. Public data center companies in particular have been touting this strategy with investors through their earnings calls and new service offerings.

Data center research from Infiniti Research underlines these findings, as the firm’s study, Global SMB Spending on Data Centers Market 2014-2018, noted that small to mid-size businesses will allocate increasing percentages of their technology budgets for data center services. This practice will contribute to considerable expansion in the sector, likely leading to a compound annual growth rate of 18.39 percent from 2013 through 2018.

Driving Growth Factors
A larger number of SMBs are requiring infrastructure and facilities that allow for rapidly scalable resources, which can be increased as the business grows. These needs, along with the increasing trend of outsourcing data center services to vendors, are the main factors driving this sector growth.

One analyst noted that many small and mid-size businesses are experiencing challenges when it comes to the management and maintenance of internal computing infrastructure. In response to these needs, a number of vendors are making cost effective data center resources available that address the unique demands and can benefit SMBs.

“With the increasing complexity of enterprise computing infrastructure and the increasing demands from the enterprise businesses, there is a need for better management and maintenance services to be provided,” the analyst said. “To reduce the burden, the enterprises are opting for outsourced services from third-party service providers that are providing the services at lower prices compared to internal management of services.”

In this way, the choice between on-premise and outsourced services has become more of a practical decision based on what is best for the organization’s management and maintenance of computing resources. Autotask vice president Patrick Burns noted that this is a departure from how decision makers previously made these choices.

“IT used to be a religious debate: cloud versus on-premise,” Burns said. “[But] it’s not that anymore. It’s a practical discussion.”

Conservative Growth Predictions
Industry expert Mark Cattini said the growth predictions found in the study are conservative figures. Cattini noted that the sector is rapidly expanding and growth would likely come at a 50 percent CAGR in the next three to five years.

“To be honest, I’m surprised the growth numbers were as low as they were,” Cattini said. “Nobody wants to own anything anymore. [That’s] the whole managed services concept.”

Opportunity for Service Providers
Furthermore, Jason Bystrak, Ingram Micro cloud and managed services director, pointed out that the current growth in data center spending can provide an important opportunity for vendors. These groups can utilize the sector expansion as a means to boost revenues and help more clients migrate content to the cloud.

“As more of the end users IT departments go to the cloud, in order for those MSPs to be relevant they need to manage those solutions,” Bystrak said.