Webscale network operator revenues soared by 21% in 2017, putting the sector near the US$1 trillion mark
Chandler, Arizona (USA), March 27, 2018– Revenues for the tech & social media companies operating the world’s largest, “webscale” data centers soared by 21% in 2017, to US$848 billion. That represents a surge over the 2016 growth of 8.5%. Big gains in the stock market valuations of most of these companies also occurred in 2017, even if several (notably Facebook) have fallen a bit recently.
This diverse group of companies has one thing in common: all have invested in “webscale” (or hyperscale) data centers to support operations & drive growth. All self-develop portions of the technology (hardware & software) to run their clouds, working with manufacturers like Quanta and Inventec to manufacture. While that dictates some proprietary technology, most WNOs do lean towards open source, open networking-based solutions when available.
Within this collection of webscale network operators (WNOs), 2017’s standouts include:
- Apple: had the highest revenue total in 2017 ($239.2B or 28% of the market),
- Amazon: contributed most to growth (with a $41.9B revenue gain in 2017),
- Alibaba: fastest revenue percentage growth, at 63% (due in part to acquisitions),
- Facebook: highest capital intensity, i.e. capex/revenues ratio, andTwitter: highest level of R&D spending, as % of revenues.
Total spending on R&D by this market segment reached $91.7B in 2017, or 10.8% of revenues (2016: also 10.8%), Capital expenditures in the webscale sector totaled to $63B in 2017, or 7.4% of revenues (2016: 7.6%). (Figure, below)
This enormous volume of tech spending has had ripple effects worldwide as the sector has grown. Not everyone has benefited, clearly; non-Chinese vendors of communications infrastructure, such as Ericsson & Nokia, continue to struggle. While the WNO sector will not sustain its recent 20%+ growth, and new government regulations could constrain the companies, the ripple effects will continue. Important drivers for change include the globalization efforts of China’s top 3 (Alibaba, Tencent, and Baidu), and ongoing efforts by WNOs to branch into (or help create) new sectors like self-driving. Sometimes these two forces will converge, as with Baidu’s aggressive entry into global auto markets with its Apollo platform.
The Baidu car project calls to mind some other headlines in the news recently. The Trump administration is pushing for tariffs on Chinese companies. This is early but one of many political trends to watch. Recent concerns about webscale companies like Facebook mishandling customer data add to this, and will be even more serious in Europe.
MTN Consulting provides independent research & strategic support to the telecommunications, cloud, and IoT marketplace.
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