Public cloud giants' use of ODM datacentre kit continues to soar, Synergy Research shows

Cisco, Dell EMC and HPE’s collective hold on the $11bn cloud infrastructure market appears to be weakening, as the public cloud providers’ use of original design manufacturers’ (ODM) datacentre hardware continues to grow. 

Synergy Research Group’s first quarter look at the cloud infrastructure sector tracks how sales of the hardware and software used to kit out hyperscale datacentres are faring, as the demand for public cloud services continues to grow.

Its findings suggest the traditional, big-name legacy technology suppliers are finding their share of the market increasingly under siege from the ODM (or white-label) supplier community, as the hyperscalers favour lower-cost, commodity hardware to kit out their server farms. 

As such, Synergy’s research shows the ODM manufacturers are growing their share of the public cloud infrastructure market by around five percentage points a year, and now account for around 30% of the overall market.

As direct result, the opportunities available to the likes of Cisco, Dell-EMC and HPE to grow their collective share of the cloud infrastructure market are shrinking and being “squeezed hard”, claims Synergy.

“ODMs, in aggregate, continue to run away with the market and now account for almost 30% of total revenues,” said Synergy, in a research note.

“They are followed by Dell EMC, Cisco and HPE, each with a 5-10% market share. The next highest ranked vendors in Q1 were Microsoft, Huawei and VMware.”

The ODM community is particularly strong in the server and storage market, said Synergy, while Cisco continues to dominate in the networking space, and Microsoft and VMware remain the ones to watch in the cloud infrastructure software segment.

Overall, the hyperscale cloud giants are continuing to ramp up the amount of money they spend on their datacentre kit, with Synergy’s data confirming a 32% year-on-year uptick in Q1 spend.

Its data also suggests the amount being spent on public cloud-enabling infrastructure per quarter now exceeds $11bn.

“This is the highest growth figure seen in nine quarters, during which year-on-year growth has typically been in the 10-20% range,” said Synergy. “The first quarter usually sees a sharp drop off after a seasonally strong fourth quarter, but first quarter spending was down just 2% from Q4.”

John Dinsdale, chief analyst and research director at Synergy Research Group, said the data highlights just how strong the demand for public cloud services continues to be, and is likely to remain for a long time to come.

“Our forecasts show that IaaS, PaaS, SaaS and public cloud workloads generally are all going to continue to grow rapidly over the next five years, which will continue to drive ever-increasing levels of spending on datacentre infrastructure,” he said.