Clouds, Datacenters, Virtualization and the Disruption of the Server Market

Almost everybody was raising their eyebrows a few years ago when Amazon announced that it was opening up its data center infrastructure to others. Since, it has grown by leaps and bounds and supposedly contains more than 40,000 servers available for rent at this time (each of which hosts more than one virtual server). Many competitors have sprung up whose growth is not shabby either.

Recently Netflix announced that it would move its own not insignificant web operation entirely onto the Amazon infrastructure. This may well be a watershed moment in the adoption of virtualized servers-to-rent.

By 2020, it seems safe to say that most servers will be operated virtually in massively scaled data centers like Amazon’s. More and more people are already pronouncing that they will not ever buy a server again. The reason is simple: why should I have to worry about adding or replacing disk drives? Fixing broken power supplies and all the other things that go wrong with servers? Massive server farm operates can do that at a fraction of my cost. And they enable me to operate servers on three continents, if I want to, without ever leaving my office; something impossible before.

The most obvious impact: sales channels for servers. So far, most servers have been sold in small batches: “I have a new site / I have a new app in my enterprise, let’s buy some servers for it.” In 2020, the number of server-buying customers will be much smaller: just the set of cloud operators. Like Google, they might even build their own servers. Margins will come down in any case. Not a market I’d want to be in.

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